Tax Return Mistakes And How To Avoid Them

We all know that making mistakes on official HMRC documents can result in hefty financial penalties. Self assessment tax returns are no different. Possible accusations of tax evasion or avoidance are particularly worrisome. This creates a situation where some taxpayers end up over paying income tax because they are so concerned about not paying enough, which simply isn’t fair.

How many people make tax return mistakes?

The consumer protection group Which? surveyed a number of people who submitted self assessment tax returns. Their analysis shows that 19% think that they made a mistake on their tax return that meant they lost out financially. If you apply this to the almost 11 million people that file a tax in total, that’s nearly two million forms containing errors.

Generally, they said that errors were mainly due to not completely understanding the tax return document.

A deeper look at the survey’s results highlights key areas that those surveyed find the most difficult, including income from:

Savings: particularly regarding the applicable allowances and rates
Dividends
Pensions
Property

Head of Which? Money Online, Gareth Shaw, said: “The thought of completing a lengthy, complex tax return form full of jargon is off-putting and understandably confusing for many. It’s not surprising to see that property and investment taxes come out high in the list of what baffles consumers – these have been tinkered with continuously in recent years. If you put your tax return off and file late or make a mistake, you’ll face a fine from HMRC. Our online tax calculator will help make completing a tax return less taxing.”

How can I avoid making mistakes on my tax return?

Leaving your tax return submission until the last minute can look like you have not given it due care and attention. This is something that affects the severity of any fines that may be imposed.

Technical Tax Manager for ICAEW, Anita Monteith, says: “Gather all your important documents before you start, together with a copy of your previous year’s return and always check through your self-assessment before submitting to avoid these common errors.”

Savings: If your savings amount is large enough, you will need to pay tax on the interest. And if you are a higher rate taxpayer, this will be at 40%. So if you’ve had the basic 20% automatically deducted, you will need to pay the remaining 20% to fulfil your tax liability. If you earn less than the tax free Personal Allowance, you might be due a tax rebate on your savings interest payments.
Pensions: your pension provider can help you with identifying which contributions are eligible for tax relief. For example, you cannot claim ta relief on life insurance premiums. But you can get tax relief on the majority of registered pension schemes.
Gift aid: include your gift aid donations. This is particularly relevant if you are an additional or higher rate taxpayer. The tax relief you can claim is the difference between the basic rate on your donations and the actual rate of tax you pay.
Declare everything: you must declare all Capital Gains and income, or risk very large fines. This means the specific details of all your income for that year, including dividend receipts and sales of all assets.
Wrong numbers: Use last year’s return as a checklist to make sure you have remembered everything and double check all your calculations before you hit send. In fact, make that triple check all your calculations.
Supplementary pages: A range of supplementary pages are available to cover all the possible income streams you could have. If you’ve earned income, HMRC will have a supplementary page so you can declare it on your tax return. Remember to include everything.

If this tax return looks considerably different to the previous year, it’s a good idea to explain why in the white space boxes. It just saves HMRC the step of having to get in touch to query your change in circumstances.

How do I correct a mistake on my tax return?

The self assessment system is designed to incorporate a way for taxpayers to amend their tax return after it has been submitted in order to correct mistakes.

An HMRC spokesperson said: “Taxpayers can amend their returns within 12 months of the original deadline. There is lots of help available online. Anyone who needs help should get in touch with us.”

Self assessment tax return late filing

Unfortunately, there is an automatic £100 fine for missing your 31^st January tax return filing deadline. You can appeal to have this fine revoked, but your excuse must be on HMRC’s ‘reasonable’ list. This does not include your tax return eaten by the dog, or a fire on your yacht. Yes, these are genuine excuses previously received by HMRC.

Forgot to declare some income or claim an allowance?

Forgetting to declare part of your income will probably mean that you need to pay more tax. Not claiming an allowance means that you will probably be owed some tax relief. Either way, the quicker you get this sorted out with HMRC the better.

Corrections can be made to your tax return as long as you are within a year of its original filing deadline. You can still sort out discrepancies after these 12 months, if you write to HMRC with all the relevant information and explain the situation in full.

The way you update your tax return depends on whether it is on paper, or online

Paper filing

You must print off a new tax return, make the necessary changes and send the whole lot off to HMRC. You must include your Unique Taxpayer Reference number, full name and write ‘amendment’ on every page

Online filing

If you filed your tax return online, then any amendments must be made within your HMRC account. You simply go into the year of the tax return you need to change, make your corrections and refile it. Navigation to the correct area of your account is: More self assessment details, At a glance, Tax return options, click on the relevant tax year.