As the Self Assessment season approaches, many individuals may procrastinate preparing their tax returns, particularly during the busy holiday period and the transition into the new year. However, timely preparation is crucial to avoid common errors that can lead to significant fines, penalties, and complications. Here’s a guide highlighting common mistakes to avoid when filing your Self Assessment Tax Return.
Common mistakes to avoid when filing Self Assessment Tax Returns
The deadline for submitting your online Self Assessment Tax Return is January 31 each year. This return covers the income and financial activities from the previous tax year. For instance, the Self Assessment Tax Return for the 2023/24 tax year must be filed by January 31, 2025.
You also have the option of submitting your tax return via post (a paper return), but it’s important to note that the deadline for paper submissions was October 31, which has now passed. If you haven’t yet filed your return, submitting it online is your remaining option.
1. Missing the tax deadline
One of the most common errors encountered by taxpayers in the UK is the failure to submit their Self Assessment Tax Return by the crucial deadline of January 31. Recent data from the UK government highlights a staggering statistic: more than 1.1 million taxpayers missed this important deadline in January 2024 alone. This oversight not only brings the stress of last-minute filing but also incurs an automatic penalty of £100.
We recommend you not wait until the last minute to file your tax return. Plan ahead and gather your records so you can submit your return before the deadline. If you don’t file on time, HMRC might fine you between £100 and 100% of the tax you owe for Self Assessment, depending on your situation. Many people don’t realise they can file their tax return for the previous year starting on the 6th of April, so they often wait until the night before the 31st of January.
2. Not declaring all income
The Self Assessment tax is designed to allow the UK government to review all sources of taxpayer income, helping to mitigate tax evasion. Failing to declare income from various sources—such as rental properties, freelance work, offshore companies, or investments—can have serious consequences. Keeping comprehensive records of bank statements, invoices, and other financial documents throughout the year can help ensure all income is accurately reported.
3. Incorrect personal details
Common mistakes in tax filing often stem from errors in personal information. Mistakes related to crucial details such as your National Insurance number, Unique Taxpayer Reference (UTR) number, or residential address can have serious consequences. These inaccuracies might lead to penalties imposed by HMRC, a potential rejection of your tax return, or even result in an overpayment of taxes.
To avoid these mistakes, it is vital to double-check that all the personal information you provide aligns with the records maintained by HMRC. Taking a moment to verify this information can save you a lot of trouble in the long run.
4. Not reporting Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is an essential consideration for anyone involved in selling significant assets, such as property or land. When you dispose of such assets, you may realise gains that are subject to taxation. Reporting these gains to HMRC within 60 days of the transaction is imperative to remain compliant with tax regulations.
Failing to include capital gains in your Self Assessment Tax Return can result in hefty penalties and legal repercussions. Given the complexities surrounding CGT and its regulations, we recommend you consult an experienced accountant who will help you navigate these challenges more effectively.
5. Not claiming all allowable expenses
Self-employed individuals can deduct various running costs from their taxable profits, thus potentially reducing their tax liabilities. Allowable expenses include office costs, travel expenses, insurance fees, bank charges, and more.
Failing to claim all eligible expenses can result in paying more tax than necessary. To avoid this, it’s essential to maintain meticulous records of all expenses and consult HMRC’s guidelines to ensure you are claiming everything permitted.
6. Missing supplementary pages
In certain situations, HMRC requires additional information to assess your tax situation better. This is often related to income that cannot be clearly addressed within the primary Self Assessment tax return. Supplementary pages provide detailed insights into specific income sources, expenditures, or calculations connected to Capital Gains Tax (CGT).
Overlooking the need for these supplementary pages is a common error that can lead to your return being rejected or incorrectly processed. To prevent this, reviewing HMRC guidance to confirm the inclusion of all necessary supplementary pages is highly recommended.
7. No Government Gateway User ID
One frequent mistake during the Self-Assessment tax return process is either forgetting or incorrectly entering the Government Gateway ID, which consists of 12 digits. Such errors can hinder your ability to file tax returns and may incur penalties if you attempt to file close to the deadline, January 31.
The Government Gateway grants access to various online governmental services, including completing your Self Assessment or paying VAT. To avoid any last-minute errors, we advise you to register for a Government Gateway user ID well in advance of the filing deadline.
8. Incorrect UTR or NI Number
Another common error is entering an incorrect Unique Taxpayer Reference (UTR) or National Insurance (NI) number or even forgetting to include them altogether. The UTR is a 10-digit number provided by HMRC upon registering for Self Assessment, and it is distinct from the Government Gateway user ID.
Using an incorrect UTR can prevent HMRC from recognising your identity, so it is crucial to double-check these numbers before submission. If you cannot locate your UTR, you can retrieve it online or by contacting the HMRC helpline.
Conclusion
Being aware of these common mistakes can facilitate a smoother Self-Assessment Tax Return process and reduce the likelihood of incurring stress, fines, or overpayment of taxes. Careful preparation is vital, so organise your records and verify your details thoroughly. Investing a little extra attention now can significantly ease the challenges of tax season. If you require assistance preparing your Self Assessment Tax Return, our professional team is here to help.
