10 most common tax return mistakes

If you are self-employed, a sole trader, a landlord, or a business owner, it is critical to ensure you complete, submit, and pay your income tax correctly.

Getting your Self Assessment tax return right is extremely important to avoid penalties or a higher tax bill. Knowing how to prevent Self Assessment tax return mistakes will ensure you get it right first time and pay the right amount of tax.

This blog explores the ten most common tax return mistakes and also covers some of the basics around Self Assessment tax returns.

What is a Self Assessment tax return?

If you earn income that isn’t taxed automatically by your employer, you will be required to complete a Self Assessment tax return to declare that income to HMRC and pay the appropriate amount of tax.

HMRC in the UK use Self Assessement to collect income tax from individuals who are self-employed or generate income that isn’t taxed through their employment and Pay As You Earn (PAYE).

A Self Assessment tax return is a form individuals use to declare their income to HMRC. From the information on the form, HMRC can calculate your tax liability for that tax year. It requires you to declare income from all sources.

Who needs to file a Self Assessment tax return?

You will be required to complete a Self Assessment tax return if you:

• Are self-employed or receive self-employed income.

• Earn property income. This could be as a landlord with a property portfolio of many properties or even if you rent out a single property.

• Are part of a business partnership.

• Qualify to pay the High Income Child Benefit charge.

• Are a company director whose income is not covered under the PAYE system.

• Want to claim tax relief on employment expenses (expenses above £2,500 in a tax year).

• Earn foreign income.

• Owe Capital Gains Tax (CGT) from the sale or disposal of assets.

• Earn interest/income via savings, investments or dividends.

Self Assessment deadlines

If you don’t complete and submit your tax return on time, you will incur a penalty for missing the filing deadline.

If you have not completed a tax return before, you must tell HMRC by 5 October if you need to complete a tax return.

You will need to register for Self Assessment online at the HMRC website.

UK tax year dates

The tax year in the UK starts on April 6th and ends on April 5th of the following year.

Deadline for submitting a paper return

For paper tax returns, the submission deadline is midnight 31 October for the previous tax year.

The deadline for submitting an online return

For online tax returns, the submission deadline is 31 January for the previous tax year.

Can I complete my own Self Assessment tax return?

The simple answer is yes you can complete your own tax return. However, the form can often be complex for people to understand and it’s easy to make mistakes that could lead to you paying more tax. It’s advisable to use a qualified accountant and tax adviser such as dns accountants to complete your tax return form and submit it on your behalf.

Qualified accountants and tax advisers will know which expenses you can deduct from your income, which additional tax relief is available, and which tax-free allowances are available.

10 most common Self Assessment tax return mistakes

Mistake 1: No Government Gateway user ID

HMRC verifies your identity when using online services through the Government Gateway. You need a Government Gateway User ID before setting up an online Self Assessment account. Keep your Government Gateway User ID safe at all times.

If you haven’t registered previously with HMRC and don’t currently have a Government Gateway account, you can register on the HMRC website here. You can recover your User ID online via HMRC at the GOV.UK website.

Mistake 2: Not using the right Unique Taxpayer Reference (UTR)

A UTR (unique taxpayer reference) is a 10-digit number given to and unique to UK taxpayers.

Before filing your first tax return, you must set up a Self Assessment account with HMRC to be allocated a Unique Taxpayer Reference (UTR).

If you have lost your UTR number, you could look at previous correspondence from HMRC or contact HMRC directly to request it.

Mistake 3: Incorrect or incomplete information

Many people lack the knowledge on how to complete a tax return correctly. This can lead to people entering incorrect figures when adding up their income and costs and leads to incorrect figures being entered into their Self Assessment tax return.

Another common mistake is when people miss important questions or sections on the tax return. In these cases, HMRC will request information about any omissions in your tax return. This can lead to additional time, unnecessary delays, or higher-than-expected tax bills or HMRC penalties.

Having records of all income and expenses and other relevant financial documents is essential. Although these won’t need to be submitted with your tax return, they may be requested by HMRC later or if you are subject to a tax investigation by HMRC.

TIP: It’s important to minimise your tax bill to check tax reliefs and allowances. Ensure you claim all allowable expenses against your income before completing your tax return. Don’t forget to include things like pension contributions and charitable donations. Use a tax professional to seek advice.

Mistake 4: Not declaring income from all sources

For your tax return to be complete, you must declare income from all sources for the tax year. See the list below of income that must be declared on your tax return.

Most employees who only have income from a paid job do not need to complete a tax return as they will be taxed at source by their employer via PAYE. However, if you have a job and have additional income from other sources, you’ll be required to complete a tax return.

TIP: Some information can be generated on your tax return automatically. However, we would suggest that you check this against payslips, etc, since the auto-generated figures are not always correct. This can be done via your P60 or P11D.

Seek professional advice if you are unsure what you need to declare.

Sources of income to report via Self Assessment

An individual could have several income sources during a tax year. The following is a list of income you must declare on your tax return:

1. Employment income.

2. Self-employment income.

3. Interest from savings.

4. Rental income.

5. Pension contributions.

6. Share dividend payments.

7. Capital Gains from disposal or sale of assets.

Mistake 5: Missing out on tax-free allowances

Every individual has a tax-free allowance called the personal allowance. The Personal Allowance is £12,570, which is the amount of income you can earn before you have to pay tax.

Your Personal Allowance may be more if you are eligible to claim Marriage Allowance or Blind Person’s Allowance. However, if your income is over £100,000, your personal allowance will be reduced.

You don’t need to apply for the personal allowance, but you may have to apply for other allowances.

Other allowances to be aware of are:

• Dividend allowance.

• Trading allowance.

• Savings allowance.

Because of the complexities of tax allowances and reliefs, it’s advisable to employ an accountant such as dns accountants to file your Self Assessment tax return on your behalf.

Mistake 6: Claiming for disallowed expenses

Certain expenses can be claimed against income to reduce your tax bill. However, not all the expenses you incur are allowable. The expenses you can claim will differ if you are self-employed, a sole trader, or run a limited company.

Examples of allowable expenses you may be able to claim are:

• Using your home as your office.

• Business travel costs.

• Office stationery, supplies and equipment.

• Professional services such as accountants and legal costs.

• Business marketing, advertising and branding.

• Training and professional development.

A legitimate expense must have been incurred ‘wholly and exclusively’ to run the business.

You’ll need to keep accurate records, invoices, or receipts of all expenses you claim, as HMRC could ask to see them in the future.

Find out more about sole trader allowable expenses here.

Find out more about limited company allowable expenses here.

Mistake 7: Not paying or planning for payments on account

You must make advance payments to HMRC towards your income tax bill. These payments are referred to as ’payments on account’. Not planning or saving in advance for payments on account is a common mistake by people.

These payments are made in two instalments each year based on half of the previous year’s tax bill. Payments on account help people manage their finances and cash flow. The due dates for these payments are midnight on 31 January and 31 July each year.

You won’t be required to pay in advance if your last Self Assessment bill was under £1,000 or you’ve already paid over 80% of all tax you owe.

If you miss the payment deadline, you’ll be charged interest and may be subject to a financial penalty.

TIP: Put away money each month towards your tax bill. If you cannot afford your payment on account, you can arrange to make regular monthly or weekly payments by setting up a budget payment plan to help you spread the payments. Understand the HMRC payment options available to you, including online and phone payments.

TIP: If you earn significantly more this year than your last tax return, put more money away as you need to pay the balance of any tax owed.

Mistake 8: Missing deadlines

The online submission deadline is on 31 January every year. If your tax return is up to 3 months late, you’ll pay a late filing penalty of £100. If it’s later than 3 months, you’ll have to pay more and be charged interest on late payments.

Mistake 9: Not claiming tax relief on private pension contributions

Tax relief is available on private pension contributions.

You’ll either get the tax relief automatically, or you’ll have to claim it directly from HMRC. How you claim it will depend on the type of pension scheme you contribute to and the rate of income tax you pay.

You will be eligible to get this tax relief automatically if:

• Your employer takes workplace pension contributions out of your salary.

• You contribute towards a private pension and pay Income Tax at 20%, as your pension provider should claim the basic tax rate relief and add it to your pension pot.

If you are a higher rate taxpayer or an additional rate taxpayer, you can claim the extra 20% and 25% through your tax return. This relief may be given back in the following ways:

• As a reduction in your current tax bill.

• As a tax rebate.

• As a change in your tax code (i.e. you will pay less tax next year).

Mistake 10: Missing tax relief on charitable donations

Individual donations to charity or community amateur sports clubs (CASCs) are tax-free and can reduce your tax bill. This applies to sole traders and partnerships. There are different rules for limited companies.

Other Self Assessment mistakes

Above, we’ve listed some of the most common tax return mistakes. However, many other errors can occur when submitting tax returns, including:

Not understanding the High Income Child Benefit Tax Charge: If you or your partner have an individual income over £60,000 and you or your partner get Child Benefit or someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep, you may have to pay the High Income Child Benefit Charge.

Incorrect National Insurance number: Ensure you submit an accurate NI number on the tax return.

Ticking the wrong boxes: The tax return form contains many tick boxes and can be confusing. People often simply tick the wrong boxes, significantly affecting their next tax bill.

What to do if you make a mistake with your tax return

You have 12 months from submitting your tax return to correct any mistakes.

If HMRC finds problems with your return, you could pay too much tax, not enough, or receive a penalty notice.

HMRC may decide to undertake a tax investigation if there are inconsistencies in your returns over the years.

How dns accountants can help with your tax return

Are you unsure about how to file your Self Assessment tax return? At dns accountants, we offer expert services to ensure your tax return is accurate, compliant, and submitted on time. Whether you’re self-employed, a landlord, a company director, landlord or simply receive multiple incomes, we can simplify the process of filing your tax return, avoiding costly penalties and ensuring you only pay what’s required.

Contact us today on 0333 060 3321 can also e-mail us at enquiry@dnsaccountants.co.uk

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