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While self-employment comes with plenty of perks, it also comes with a lot of responsibilities. One of those responsibilities is filing a Self Assessment tax return every year.
We’ve put together some of the most common mistakes when completing a tax return – and, importantly, what you can do to avoid errors and set them right.
Not knowing your UTR
We’re a nation of procrastinators, and many people leave submitting their Self Assessments until there’s only a few days (or hours) left to spare. In those final moments, you can’t afford to be held up by searching for your login details or Unique Taxpayer Reference (UTR).
You can find your UTR on correspondence from HMRC, so have this to hand before sitting down to tackle your tax return.
As well as reporting money generated through your main business activities, you need to tell HMRC about taxable income from sources such as interest, dividends, rental properties and selling shares or cryptocurrencies. If you don’t, you could end up paying the wrong amount of Income Tax and be left picking up the bill at a later date.
If you’re unsure about what counts as taxable income – or where to put this on your tax return – you could get advice from an accountant or check out HMRC's hub of resources and support for Self Assessments.
Not claiming all your expenses
If you’re self-employed, you’ll almost certainly incur plenty of costs throughout the financial year. Some of these costs – such as business insurance and utility bills – are allowable expenses, which means they can be deducted from your income to work out your taxable profit.
Unfortunately, many people don’t claim everything they’re entitled to, so they end up paying more tax than they need to.To avoid making this mistake, get familiar with HMRC's list of allowable expenses.
Claiming the wrong expenses
On the other hand, some people end up over-claiming expenses. Allowable expenses can only be claimed for business costs – so if an expense is partially used for private purposes, you’ll need to adjust the amount you report on your tax return.
For example, you use your phone for both business and personal calls. Your total monthly bill is £100 – £80 was spent on business calls and £20 came from personal calls. You can claim £80 as an allowable expense.
Many people don’t think about their taxes until it’s time to submit a Self Assessment. But the key to stress- and mistake-free tax returns is being thorough, consistent and concise with keeping business records throughout the year.
So, plan ahead and develop a system or use specialist software for keeping all those important tax records in a central place. You’ll thank yourself when the deadline rolls around.
When you have so many things to keep track of, it can be easy to overlook a deadline. But you could be handed a fine if you don't register for Self Assessment, submit your tax return or pay your Income Tax on time.
To avoid getting a penalty, consider setting yourself reminders or marking key tax dates in your calendar. And make sure you leave yourself plenty of time – Self Assessments can take much longer than you think.
Even if you miss a deadline, try to get your return submitted as soon as possible as this could help you avoid the fine or reduce the amount you need to pay.
How can I correct mistakes on a tax return?
However careful and organised you are, mistakes can happen. Fortunately, HMRC gives you three days (72 hours) to make changes to your Self Assessment. The process of updating your tax return depends on how you submitted it:
- Online tax returns: sign in using Government Gateway and make any necessary changes through your online account.
- Paper tax returns: download a new SA100 form and send the corrected pages to HMRC. Make sure you write ‘amendment’ on each page.
- Returns using Self Assessment software: contact the software provider for guidance – if they can’t help, speak to HMRC.
If you miss the three-day deadline or need to correct a mistake on a previous year’s tax return, you’ll need to write to HMRC.
This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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