There are still five million people in Britain who have not filed their tax return, the Telegraph reported earlier this week. The good news is not everyone needs to file a return. However, for those who do, there is the risk of making a mistake, either due to carelessness, lack of proper know-how, or just not being organised enough.
Here are the 12 most common mistakes to avoid:
- Not registering to submit your self assessment online in time
- Incorrect National Insurance (NI) or Unique Taxpayer Reference (UTR) numbers
- Adding vague information on the form
- Maths mistakes
- Forgetting employment benefits
- Wrong tax code
- Foreign income
- Leaving additional sources of income out
It can take up to 10 days to process your application to enable you to complete your self-assessment on line – so if you haven’t done that now – you had better get started.
Both the NI and UTR numbers are unique to you. The UTR is a 10 digit number and can be found on every correspondence you receive from HMRC. The NI number is made up of numbers and letters – it can be found on payslips or on your P60. Ensure that these are accurately included on the form.
Including notes on your form like ‘Information to follow’ or ‘As per my accounts’ is a total no-no. A form with such notes is not considered a completed document and will be returned to you.
Year after year, the most common error on tax returns is poor arithmetic or lack of attention to detail. Entering £5,800 when the real figure is £8,500 makes a lot of tax difference. Double check numerical entries as it’s important to be accurate.
This is probably the most common mistake. Things like company cars and private medical insurance may seem obvious but many taxpayers forget to include these. You should receive a form P11D from your employer which details benefits you have received from them like these and also gym membership and professional subscriptions which are taxable benefits too. You can find out about all the paperwork you’d need on our blog about Top tips for completing HMRC's self-assessment tax return online.
Thousands of taxpayers paid too little (or too much) tax as a result of having the wrong tax code. Now’s the time to check. Your tax code, which is typically 3 digits followed by an ‘L’, can be found on your payslip. It tells your employer how much to deduct from your pack packet.
Many taxpayers forget to declare foreign income on their tax return. Even though it may be a small amount, you must declare it.
This is probably the second most common mistake of all times. Taxpayers typically leave out:
- Interest you receive from a bank or building society and other savings accounts
- Interest on loans to individuals or organisations (includes those made via peer-to-peer lending websites
- Interest received from credit unions and friendly society accounts
- Payment protection insurance (PPI) compensation payout
- Dividends from UK companies and unit trusts, investment trusts and open-ended investment companies
Work through the form logically and pull together all your paperwork before you start – that should help you to remember those odd little sources of income.
Frequently a large number of taxpayers forget to include charitable donations on their return. You can let the taxman know about donations by filing in the section ‘gift aid payments’. Higher tax payers can claim extra relief on donations. For instance, if you donated £100 using gift aid, the total value of your donation to the charity was £125. If you pay tax at 40% you can claim £25, or £37.50 if you pay tax at 50%.
Last year close to 890,000 people missed the deadline and HMRC launched a consultation to scrap the £100 penalty for those that missed by a day or two. As things stand right now, the fine is still in place unless you have a reasonable excuse. The deadline for paper returns (31 October) is long gone by and the deadline for submitting online is 31 January. If you miss this deadline, you will be exposed to HMRC’s progressive late-filing penalty system. To find out more about this refer to point 6 on this article: Seven reasons you should file your Self-assessment tax return now.
Whether you file a paper or an online tax return, you must pay what you owe by 31 January. Failure to do so can result in penalties.
We think it’s perfectly possible to complete a tax return without the assistance of a qualified accountant, but hiring a professional will ensure that submitted forms are complete and free of mistakes.
What is the future of self-assessment tax returns?
Last year George Osbourne announced a series of measures to make self-assessment digital. The first batch of taxpayers were pushed into trialling the new system so they can see their tax position online. The new service is being phased in with HMRC aiming to have all taxpayers, both individuals and businesses, work through digital tax accounts by 2020. Till then, you will have to continue completing either a paper or online tax return.