It’s that time of year when the UK’s self-employed collectively remember why the date the 31 January is imprinted on their minds. That’s right – it’s self-assessment tax return time. If you’re yet to file your return then the good news is there’s still time. However, the bad news is that your self-assessment tax payment is also due on 31 January.
In the rush to get your self-assessment tax return in on time and avoid a £100 late filing penalty, there are a few common mistakes you might make. In this article, we’ll take you through some of the most frequent self-assessment filing mistakes to keep your tax returns in the very best shape.
1. Declare all the interest you’ve received
There are penalties for failing to declare all relevant income. One source of income that often goes undeclared is the interest received on money in the bank. In this case, it’ll be the interest received for the tax year ending 5 April 2016. When declaring interest, make sure you include:
• The interest received on business bank accounts
• Your share of any interest on joint accounts
• The interest on personal bank and building society accounts
Given the record low interest rates over the last couple of years and the potentially negligible amount of interest you have received, it can be tempting to leave these small details out. However, the only interest you do not have to declare is that paid tax-free, such as on an ISA.
2. Expenses you can claim
The rules that govern the expenses you can and can’t claim are a common source of confusion, and there may be penalties if you get it wrong. If you have any doubts as to whether a particular expense is allowed, just drop us a line and we’ll be happy to help. There is also likely to be a number of expenses you might be able to claim but are not. To help make sure you are being as tax-efficient as possible, here’s the government’s comprehensive guide to the expenses you can claim.
3. Recording unpaid costs and income yet to be received
As illogical as it might seem, you have to declare all income earned during the last accounting year, even if you are yet to receive the income or even invoice for the work completed. That is unless you’re using the cash basis accounting system.
The same principle applies to your costs. So, even those expenses you have incurred but are yet to be paid should be included in your allowable expenses. Examples include:
• Costs that are yet to be paid – Such as bills you receive after the accounting year end;
• Costs where cash never leaves your business – Such as business mileage or expenses associated with home office usage.
4. Including incomplete information
If you’re in a rush to file your self-assessment tax return on time, it might be tempting to write things like ‘information to follow’ or ‘as per accounts’ rather than including supplementary pages to account for additional income not covered by the main tax return. This could include income from things like share schemes, property or certain employment deductions. However, HMRC does not accept information like this. You must include all the information that’s required when and where it’s needed.
What should you do if you make a mistake?
If you make an honest mistake on your self-assessment tax return you’ll normally have 12 months from the submission deadline to correct it, so it’s not the end of the world. This is called an ‘amendment’. Your bill will be updated based on what you report. You may have to pay more tax or be able to claim a refund. Any amendments after 12 months can be made by writing to HMRC.
How can we help?
Prosper provides a comprehensive approach to accountancy, tax & business growth services for start-ups, SMEs and growing companies across the UK. We are your bookkeeper, accountant and finance director all rolled into one. Check out letsprosper.co.uk to learn more about how we can help your business.