7 easy mistakes to avoid on your tax return
A new year has begun, which means the deadline for submitting tax returns is fast approaching.
Based on previous years, around half of the 10 million-plus sole traders, business partners and high earners who are required to complete their Self Assessment will likely not yet have done so.
While those sending their returns to HMRC on paper have been able to relax since Halloween night, the bulk of digital filers are doomed to spend the days before 31 January with a cloud of calculations hanging over their heads.
Punishments for those who put it off too long can be crushing. Even those who need to file returns but have no tax to pay must submit theirs in time or face an initial £100 fine.
Fines are also handed out to those who file incorrect information, with a risk of prison in the most egregious instances.
Here, The Independent has covered the unfortunate mistakes taxpayers can easily make.
Remember the Child Benefit Charge
Taxpayers earning more than £50,000 per year who still receive Child Benefit will need to pay some or all of it back in tax – whether the benefit is given to themselves or a spouse.
They should be aware it needs to be included on a tax return as “High Income Child Benefit Charge”.
Register with HMRC in good time
HMRC must be informed well ahead of the deadline if you are self-employed or need to complete a self-assessment tax return in order to send your UTR (Unique Taxpayer Reference) in time.
It can take several weeks to receive your UTR from HMRC, so if you don’t have one, but will need to complete a tax return, apply online now.
Filing late gives HMRC more time to make an inquiry
HMRC has the right to open an enquiry into any return within 12 months of it being filed. However, for returns filed after the 31 January deadline, HMRC has an extended deadline of one year and three months after the date of filing.
In a tax enquiry, HMRC will check in detail that the information on a tax return is correct and complete.
Be careful when declaring state pension
Those in receipt of a state pension must remember to include not the amount they actually receive in the tax year but their pension entitlement. This is 52 times the weekly amount.
There are complex rules governing which expenses you can deduct, and there are costly penalties for incorrect claims.
It is not HMRC’s responsibility to check through all your expenses, to work out which ones are valid and which are not. You need to be aware of the rules, and apply them to your tax return. HMRC lists some of the valid tax-deductible expenses here.
Enclose supplementary pages
For additional income not covered by the main tax return, you will need to include supplementary pages. Additional information which may be relevant includes:
Lump sums or compensation payments from your employer, or foreign earnings not taxable in the UK
Taxable lump sums from overseas pension schemes
Certain employment deductions
A claim to age-related Married Couple’s Allowance
Other tax reliefs not found in the main part of your tax return
Stock dividends, non-qualifying distributions or close company loans written-off
Interest from gilts and other bonds and accrued income profits
Life insurance gains
Loss relief claims
Income from property
Signature and date
Paper returns must be signed and dated before submission. A photocopy will not be accepted. This is a simple mistake, but people do forget to sign their tax returns.
Check then check again
Looking over the figures repeatedly might just lead to a taxpayer noticing that their calculations do not add up.
Perhaps they are due to pay lots more tax this year, despite their income and outgoings being the same as last year.
Any deliberate wrongdoing can result in prosecution.