Filing your tax return or self-assessment can be a challenging task, but it’s a necessary part of financial responsibility. Accurate and timely filing ensures that you meet your tax obligations while avoiding penalties and unnecessary stress. To make the process smoother and less stressful, let’s explore some of the most common tax return and self-assessment mistakes to avoid. The deadline to complete your online return is 31 January.
This isn’t personal advice, so if you’re not sure what’s best for you, you should seek professional advice.
Missing the Filing Deadline
One of the most fundamental mistakes to avoid is missing the filing deadline. In many countries, there is a specific date by which you must submit your tax return or self-assessment. Failing to do so can lead to penalties and interest charges. Make sure you are aware of the deadline for your jurisdiction and file your return on time. If you need more time to complete your return, request an extension if possible.
Not Reporting All Income
Failing to report all sources of income is a critical mistake. This includes not only your primary employment income but also income from freelance work, side jobs, rental properties, dividends, investments, and any other source of earnings. Tax authorities often receive information about your income from various sources, and discrepancies can lead to audits or penalties.
To avoid this mistake, keep detailed records of all your income and cross-reference them with tax documents provided by your employers, financial institutions, or clients.
Mathematical Errors
Simple mathematical mistakes can lead to discrepancies in your tax return, which may trigger an audit. To avoid this, double-check all calculations, whether you’re filing manually or using tax software. The use of tax software often reduces the risk of mathematical errors.
Neglecting Deductions and Credits
Tax deductions and credits can significantly reduce your tax liability, but many taxpayers either forget to claim them or do so incorrectly. Common deductions and credits include those for education expenses, mortgage interest, childcare costs, and retirement contributions. Research the available deductions and credits, and ensure that you qualify for them before claiming them on your return.
Incorrectly Reporting Business Expenses
For self-employed individuals or small business owners, incorrectly reporting business expenses is a common error. Ensure that you keep accurate records of all business-related expenses and that you understand the tax rules governing their deductibility. Mistakes in this area can result in over- or underreporting of income.
Misplacing your unique taxpayer reference (UTR) number
Your UTR number should’ve been sent to you when you registered for self-assessment or set up a limited company. You’ll need it to complete your tax return. If you’ve misplaced it, don’t panic. You should be able to find it on previous tax returns or in your Personal Tax Account if you’re registered for Self-Assessment. It’s a ten-digit number and can also be called a tax reference number.
Giving up if you don’t have all the paperwork
It can be easy to lose heart if you’ve not yet got all the paperwork you need. But don’t give up.
To avoid paying a fine, you can submit an estimated tax return and update it later on when the paperwork arrives. You can normally make changes to your tax return for up to a year after the filing deadline.
Not declaring pension payments
Remember to include details of any pension contributions you made in the tax year on your tax return. Again, it’s important to get these figures correct. Make sure you put the value you’ve paid in, plus the basic-rate tax relief of 20% from the government. This is also known as the gross value.
If you pay tax at a higher rate than the basic rate, it could make a big difference in reducing your tax bill. If you’re a Scottish taxpayer, please note different tax rates and bands apply.
Filing your tax return or self-assessment accurately is crucial for your financial well-being and for avoiding the stress of dealing with tax authorities and penalties. By avoiding these common mistakes and taking steps to prevent them, you can navigate the tax season with confidence. Whether you choose to use tax software, engage a professional tax preparer, or file manually, meticulous attention to detail and double-checking your information are essential for a successful tax return or self-assessment.