5 Self-assessment mistakes that could prove costly
Updated: Jan 22
Error #1: Failing to register for self assessment
You need to register with HMRC for self-assessment within 6 months of the end of the tax year in which you started to receive untaxed income. So, if you received the income before 5th April, you need to register for self-assessment by the 5th of October.
HMRC may fine you if you don’t register in time, but they usually waive this - so long as you register before the end of the tax year; get your self-assessment tax return done by the deadline and pay your tax bill on time (however - we always recommend that you register within the stated timescales to avoid running the risk of the fine).
Untaxed income can include:
Income from self-employment (sole trader)
Income from a business partnership
Company director income not taxed at source
Tips and commission
Income from savings, investments and dividends
Income from selling things, for example at car boot sales, auctions, or online
Income from casual jobs such as gardening, food delivery or babysitting
Charging other people for using your equipment or tools
Renting out property or part of your home, including for holidays.
Error #2: Not leaving enough time to register for self-assessment
Registering for self-assessment takes time. If it’s January and you still haven’t registered, you may not be able to submit your self-assessment return by the end of January deadline.
There are different ways to register if you’re:
A partner or partnership
1. To file a self-assessment tax return, you need a UTR (unique tax-payer reference). 2. To get a UTR, you need to register for self-assessment and wait until HMRC sends a UTR to you. This can take 10 days 3. Once you have your UTR, you can register to do your self-assessment online (via a government gateway account) 4. You then need to wait for HMRC to post you a code to activate your account. This can take another 10 days. 5. Once you have a UTR and a government gateway account, you are ready to GO!
[If you have an agent/accountant, they can use their own government gateway agent account to file your return, so it doesn’t matter if you don’t have your own gateway account. However, your agent will need your UTR, so that is a critical bit of information].
Error #3: Missing the self-assessment deadline
Deadline for paper returns: Midnight 31st October
Deadline for online returns: Midnight 31st January
If you miss the Oct deadline, you don’t need to do anything - just make sure you file an online return by the end of January instead, and join the other 93% of people that file online returns.
If you miss the Jan 31st deadline, you’ll get a penalty of £100 if your tax return is up to 3 months late. You’ll have to pay more if it’s later than this.
👉 You will get fined for a late submission, even if no tax is due.
👉 You will get fined for a late submission, even if you paid the tax bill on time.
Of the 10.4 million people that filed a self-assessment return online last year:
Nearly 1 million people missed the end of Jan deadline & were fined
700,000 people took a risk and filed the return on the last day of Jan
26,000 people nearly missed the deadline by filing between 11pm and midnight on the 31st of Jan.
If you hate doing the return that much, or simply don’t have the time, get someone else to do it for you. A good agent will chase you RELENTLESSLY for the information so you avoid the penalties.
[If HMRC sends you a notice to file a self assessment tax return, you can ask them to withdraw the notice if you don’t think you need to submit a return. However, unless HMRC confirm that they have withdrawn the notice, you should submit a return in order to avoid a late filing penalty].
Error #4: Failing to pay the tax bill on time
Any tax due must be paid by midnight on the 31st of January. If you miss the payment deadline, you will get a fine and interest will be charged as well.
If you can’t pay your tax bill:
We strongly recommend that you contact HMRC before the 31st of Jan deadline, rather than waiting for them to chase you.
HMRC can support people who cannot afford to pay the tax bill, e.g. by agreeing a payment plan.
Call the Self Assessment Payment Helpline:
Telephone: 0300 200 3822
Monday to Friday, 8am to 4pm
Apply for a Payment Plan online:
Error #5: Making avoidable mistakes on the return
1. Don’t rush it;
2. Check through it;
3. Then submit it.
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If you make an error you may get fined.
If HMRC decide your error was a deliberate, concealed error, your fine could be 100% of the tax due, or £300 - whichever is the greater amount.
….So, if your tax liability is £500, you can end up paying £500 in tax plus a fine of £500
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Common self-assessment mistakes to avoid:
1. Marriage Allowance: Don’t claim marriage allowance relief on your tax return, unless your partner has made an application to transfer the marriage allowance from them to you (e.g. via online/phone call/ letter).
2. Amendment: Don’t submit your self-assessment return as an amendment, unless it is an amendment. HMRC will only process an amended return if an original return has already been submitted.
3. Income sources: If you receive income from different sources in any tax year, make sure that you declare all sources, and that each source is in the correct section. Don’t assume income has been dealt with under PAYE - check to make sure. Deliberate omission of any income can lead to prosecution.
4. Self-Employment income. Don’t declare self-employment income as “other taxable income”. It needs to be in the Self-Employment section so National Insurance and available reliefs are calculated correctly.
5. Interest. A common oversight is not declaring interest from savings. This includes interest earned from loans or lending, interest from building society accounts and bank accounts (including your share of interest from joint accounts), dividends from UK companies. The exception is interest from an ISA which does not need to be declared.
6. Income not received. Unless you use the cash-basis to prepare your business accounts, you need to declare all income for all sales/work completed in the tax year, regardless of whether you invoiced it or received payment.
7. Unpaid expenses. Don’t forget to declare all allowable expenses, including those that incurred during the tax year but which remain unpaid (unless you are using the cash-basis to prepare your accounts).
8. Non-cash benefits. Don’t forget to record any non-cash benefits (benefits-in-kind). You should have a record of these on your P11D form.
9. Tax year. Make sure that the information you submit is for the correct tax year. The self-assessment return with the submission deadline of midnight on the 31st of January 2021 covers the tax year 6th April 2019 - 5th April 2020.
10. Incomplete returns: Make sure your return shows 100% completion before you try to submit it. You will get a receipt number for reference when you have submitted it.
11. Incorrect expenses: Make sure that you understand what is and is not allowed, as claiming expenses that are disallowed can be a costly mistake.
12. Incorrect personal information. Check everything - name, date of birth, UTR, National Insurance number, tax code etc.
13. Incorrect calculations: Check and double check your numbers. (If you do submit a return, which you subsequently discover has a mistake in it, you have 12 months from the filing deadline to submit an amended return).
A Final Word
If you get a penalty for missing a deadline, you can appeal it if you have a reasonable excuse.
Coronavirus has been added to the list of reasonable excuses.
You will need to explain how you were affected by the virus, and HMRC will take that into account when considering your appeal.
A Final, Final Word
If you have read this far, you deserve some light relief:
and other great excuses for missing the self-assessment deadline 😆
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