The 5th April has now passed and it is time to start thinking about the dreaded Tax Return submission. There are clients who chose to prepare their own tax returns. However, the answers to common questions they ask, often make them change their mind and pass the task over to me.
Here are a few of the mistakes that are made:
- Not using or carrying forward losses
Certain types of losses can be offset against certain types of income in the year of the loss or earlier years, which can lead to overpaying tax
- Ignoring tax coding notices
Tax codes sometimes contain pensions, tax underpaid in previous years or benefits in kind, which are then ignored in the main body of the return
- Not entering foreign income
Dividends from foreign investments, income from holiday rental properties and other foreign income is sometimes forgotten. UK taxpayers are taxed on their worldwide income, with double taxation relief available in certain circumstance
- Not adjusting child benefit tax
If you earn over £50,000 and receive child benefit, there is likely to be an adjustment required to the tax payable to clawback benefits. This mistake leads to an underpayment of tax
- Private use adjustments
Clients often forget to adjust expenditure for private use, such as telephone or motor expenses
- Claiming expenses that are not allowable
Entertaining, legal fees and repairs are areas where clients often make mistakes in claiming expenses that are not tax deductible. Of course, there are also expenses which can be claimed that are missed by clients, such as use of home as office
- Property rental tax changes
The rules have changed on what relief can be claimed in respect of mortgage interest on property rentals. Rent a room relief could be available and this has increased to £7,500. Wear and tear allowance is no longer available on furnished lets. All changes that can easily trip up the “same as last year” type approach to completing returns
- Resisting penalties/interest
If you make a mistake and it was genuine (ignorance is no defence), then don’t assume that the penalty imposed by HMRC stands. Penalties should only be imposed if the mistake was careless, or worse. It is, however, much better to make sure your tax return is correct and suffer the £100 later filing penalty, than send in a rushed return on 31st January. The cost of any errors could be far worse than £100
- Ticking the wrong boxes
HMRC provide a guide to completing returns that will help here, but this is an easy mistake to make, which may give HMRC the ammunition to raise a penalty.
- Getting your Unique Tax Reference (UTR) wrong
HMRC may have difficulty matching your payment with the return or the processing of the return may get delayed leading to a delay in any repayment due. Either way, trying to sort this out over the phone at a time when everyone else is chasing could be a hassle.
My advice – speak to an expert and get it right first time! Two Rivers can prepare your self-assessment return for a competitive rate.
Please note: All rates and allowances are correct at the time of writing