Top 12 Mistakes When Completing A Tax Return

 These aren't necessarily in any order.

1. Forgetting your Child Benefit Charge
   1. If you are a high earner, with income over £50,000 and are still in receipt of Child Benefit, be aware you need to include this on your tax return as ” High Income Child Benefit Charge.

2. Missing some Income (We are talking genuine mistakes here…)
   1. Rental property is often one of these,
   2. Interest from investments, accounts
   3. Income for claims like PPI

3. Excluding Expenses that could be claimed
   1. Remember, HMRC does not check the validity of expenses claimed
      1. Get this wrong and some big penalties can be applied
   2. Not claiming expenses or allowances
   3. There are other automatic tax-free allowances you should be aware of, too. For example, you can get up to £1,000 per year in tax-free allowances for any income you generate from trading and property, known as the Trading Allowance and Property Allowance. If you have both types of income you will be eligible to £1,000 for each.
   4. However, there are some really helpful tax-free allowances that aren’t applied automatically — and so you should do a bit of research to find out what these are and if you’re eligible.
   5. Examples of tax-free allowances you need to apply for include:
   6. The Blind Person’s Allowance – if you or your spouse is registered blind you can claim £2,600 per year https://www.gov.uk/blind-persons-allowance/what-youll-get
   7. The Marriage Allowance lets you transfer unused Personal Allowance to your partner https://www.gov.uk/apply-marriage-allowance
   8. The Rent a Room Scheme allows you to earn up to £7,500 tax-free if you let out a furnished room in your home https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme
   9. Remember, there are a lot of tax-free allowances HMRC offers. Before filing your tax return, make sure you do your homework so that you’re not missing out on any schemes that could substantially lower your tax bill.

4. Failure to keep good records
   1. Simple rule – “Prove It” – you need to keep the information to prove the transaction.
   2. Remember to keep for 5 years after the submission deadline.

5. Getting your UTR or NI wrong
   1. National Insurance number, it should be 9 letters and numbers.
   2. UTR – Unique Tax Reference is a 10 digit number.
      1. If you get these wrong it can cause serious delays processing your tax return.
      2. You could even get penalties for not submitting your return.

6. Failure to correct mistakes
   1. You can correct mistakes up to 12 months after filing
   2. Do not leave a mistake uncorrected, if you do it can be deemed Willful instead of Careless and carry higher penalties.

7. Forgetting to add supplementary pages
   1. Not a problem for online filing
   2. Paper filings normally fall into this trap

8. Missing the Deadline
   1. No excuse really – but you can plead one and may get a penalty waived.
9. Registering to late to complete a return
   1. This will be deemed late, you can appeal but it rare to get it repealed.
   2. Not registering on Government gateway in time
10. Failure to give your accountant sufficient time to complete your return
    1. There are only so many hours in a month…even accountants need sleep

     11. No planning for payments on account

1.   One of the top mistakes taxpayers make when filing their Self Assessment return is not planning for payments on account. So, just what are payments on account? 

         Simply put, a payment on account is an advanced payment HMRC asks you to make towards your           next tax bill. This includes any Class 4 National Insurance contributions if you’re self-employed.

        After filing your Self Assessment, you’ll have to make two payments on account every year. Each            payment represents half of your previous year’s tax bill — and payments on account are normally          due by midnight on 31 January and 31 July each year.

That being said, it’s important to bear in mind you won’t need to make payments on account if:

• your last Self Assessment bill was under £1,000, or
• you’ve already paid over 80% of all tax you owe

If you want to avoid getting the fright of your life when you see the next tax bill, you will need to plan accordingly. You should do your best to start tucking away funds for your payments on account so that you’ve got it to hand when it’s time to pay your bill.

It is worth remembering that if your business is expanding you will generally have higher payments on account – so be prepared!

12 Claiming ineligible expenses

 There are many allowable expenses you can legitimately claim to reduce your tax bill. Allowable expenses are essential business costs that are required to keep your business up and running. They are tax-deductible, which means HMRC allows you to offset those expenses against your annual tax bill.

Examples of allowable expenses you can claim are:

• office costs – office, property, equipment, stationery
• travel costs – car, van, fuel, parking, train or bus fares
• clothing expenses – protective clothing, uniforms
• staff costs – salaries, bonuses, pensions, or subcontractor costs
• things you buy to sell on – goods for resale, or raw materials
• financial costs – accountancy costs, insurance, bank charges
• costs of your business premises – rent, rates, utility bills, business rates
• advertising or marketing – advertising, entertainment, subscriptions, website costs
• training courses – related to your business

There are important rules that you must follow when claiming expenses and you should also keep records and receipts of all expenses claimed, as HMRC may want to see them one day.

An eligible expense must have been incurred ‘wholly and exclusively’ for the purposes of running the business and be allowable for tax purposes. This means the costs should have been incurred while actually performing a business activity or trying to attract more business.

If in doubt as to what you can and cannot claim, check out HM Revenue Helpsheet HS222 How to calculate your taxable profits, which includes a table of the most common allowable and disallowable expenses.

Claiming ineligible expenses may have serious consequences. Apart from paying interest on the underpayment of tax, if you deliberately under-declare tax payable, you could receive a penalty of up to 100% of your tax bill. In practice, penalties of 10% to 30% are more common.