5 Common Errors on Self Assessment Tax Returns and How to Avoid Them

Filing your Self Assessment tax return can be a tricky task if you’re not accustomed to the process. Whether it’s your first time filing a Self Assessment or if you find that you’re prone to making mistakes, we’ve put together this helpful guide on the 5 most common errors and how to avoid them.

1. Incorrect Income Reporting

 One of the most common mistakes people make when filing their Self Assessment is failing to report all of the sources of income. For example, someone may neglect to include their freelance gigs or rental income, or they might overlook the interest that they’ve earned in the year. HMRC has recently announced a crackdown on unpaid tax earned from side-hustles such as people selling personal items on marketplaces such as eBay, Amazon and Etsy with any earnings over £1,000 annually needing to be declared and taxed together with other income. 

The easiest way to prevent errors in income reporting is to use comprehensive record-keeping systems. This includes cloud accounting software such as Xero and Quickbooks that can help you manage your finances more easily. It’s also important to be meticulous when it comes to reporting your income. Cross-reference your records with documentation from your bank, invoices, and other official documents to ensure it’s accurate.

 Imagine a scenario where an individual forgets to report on their income from a freelance gig. If the HMRC notices a discrepancy during an audit, then it can trigger inquiries and may potentially result in penalties and added stress. Accurately reporting your income avoids this, and it ensures compliance with tax regulations. 

2. Misunderstanding Allowances and Deductions

Another common mistake is misunderstanding tax allowances and deductible expenses. This can lead to you either under-utilising these options or over-claiming, which could potentially lead to penalties if the discrepancies are noticed. It’s a good idea to familiarise yourself with the HMRC guidelines regarding deductible expenses and how to determine your eligibility for various tax reliefs. 

There are a number of expenses you can claim if you’re self-employed. This includes: 

●     Office, property and equipment

●     Car, van and travel expenses for business purposes

●     Uniform expenses

●     Staff expenses

●     Reselling goods

●     Legal and financial costs

●     Marketing, entertainment and subscriptions

●     Training courses

If you’re unsure what you can claim for tax relief, we suggest checking the HMRC website for a full list of eligible expenses. Alternatively, hiring a professional account can be a good choice too if you prefer personalised advice. 

3. Inaccurate Financial Details 

Providing accurate financial details such as your bank account details and correct figures will result in smoother payment processes. Any incorrect details will lead to refund delays and unexpected tax bills from the HMRC. 

To prevent these types of issues, it’s important to double-check all of the information that you enter. Be meticulous here as it’s easy to neglect certain details, especially if you’re entering it manually. If possible, use accounting software to reduce the chances of human error. This will also speed up the process so you spend less time filling out forms. 

A common example of human error is entering incorrect bank account details. Someone might accidentally enter the incorrect numbers due to being tired or just forgetting to verify the information before submitting it. 

4. Missing Deadlines

Missing deadlines is another common error when filing a Self Assessment tax return and it can lead to disastrous consequences, with over 1.1 million tax payers missing the end of year self assessment deadline in 2024. Failing to submit your tax return on time leads to severe penalties which will impact your finances and cause unnecessary stress. To prevent these issues, it’s important to take proactive measures and plan in advance. 

Make sure you’re well aware of the deadline dates and aim to submit your tax return well before it. By organising all of your documents and gathering the relevant ones for your tax return, you can save a lot of time and complete your Self Assessment well in advance to prevent further stress or last-minute filings. In addition, electronic submissions are instant and will prevent issues that come with postal delays, so aim to do these online when possible. 

As mentioned by the HMRC, the deadlines for Self Assessment tax returns are as follows: 

●     Online Self Assessment: 31st of January

●     Paper Self Assessment: 31st of October 

If you’re a trustee of a registered pension scheme or a non-resident company, then the paper deadline is also the 31st of January.

5. Not Seeking Professional Help When Needed 

Not seeking professional help can lead to costly mistakes and lots of unneeded stress that takes away from the running of your business. Although there is a wealth of online resources and self-help tools to navigate complex tax matters, there’s nothing wrong with seeking the expertise of a qualified accountant to assist with your tax returns. 

Whether you’re unsure about tax relief options or need help calculating your income, Linggard and Thomas can help. Our team of accounting specialists can help relieve the stress from self assessment tax returns as well as other accounting and bookkeeping matters. 

Get in touch today to see how we can empower your business to succeed!

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