6 Common Tax Mistakes And How To Avoid Them
If you are looking to submit your tax, it is important you have filed it on time and most importantly without any errors. If you are not able to submit your tax on time, you will have to face penalties and there are chances that you may have to pay a fine as well, in the event where HMRC believes you were not enough careful in completing it.
As far as the guidelines go, paper tax returns should be submitted by 31st October and online tax returns should be submitted by 31st January. I will be discussing how to get started with the tax return, what the common mistakes are, and how you can avoid them.
Not Disclosing All Income Sources
If you have failed to disclose all relevant income sources then you will have to face severe penalties for that. If there are any deliberate errors found such as skipping an income source on purpose, then you could also be prosecuted for that.
Following are some of the types of income/capital gains you need to disclose –
- Pension income
- Property income
- Dividends
- Employee share schemes
- Income from employment
- Capital gains
- Various benefits such as statutory sick pay, job seekers allowance, paternity/maternity pay
Though, you can exclude some items from your Tax Return Income such as –
- Any winnings from gambling, premium bond, and National Lottery
- Terminal bonuses and interest from Save as You Earn Schemes
- Bonuses or Dividends or Interest from tax excused investments
Not Including Student Loans
This is another common mistake committed by the taxpayers. If HMRC finds out that you haven’t mentioned the student loans, you may receive a letter mentioning your tax return was inaccurate and what is worse you have to even pay an inaccuracy penalty as well.
Yes, there is a probability that it’s been a while since you have taken a loan and now you have to repay it via tax return since your earnings exceed the threshold.
It is quite easy to miss this on the return as the loan was taken a few years back and may no longer be your first priority.
Overlooking Tax Code Notices
Almost, all the taxpayers are entitled to an annual tax-free allowance. Usually, this is revealed as a tax code that facilitates the employers to deduct right amount of tax.
At times, the taxman will be adding or deducting certain items from your tax code such as – tax underpayments, benefits in kind, or pensions. If you ignore the tax codes, you will risk not adding these items on your return causing to an incorrect tax return.
Not Arranging Time To Pay
If you have not kept some funds aside, you don’t need to bury your head in the sand. Instead, you should be brave enough to call HMRC and ask more time to pay.
HMRC will surely understand and listen to your request. There is no denying that some interest will be added but it is far better than paying penalties. If you are unsure about any aspect of the tax return, make sure you have taken expert’s help.
Lack Of Attention To The Risky Areas
You should be aware of the fact that HMRC gives more stress on areas like entertaining, legal or professional expenses as compared to other areas. If the drawings are comparatively low, HMRC may speculate whether living expenses are being funded by undeclared cash.
Not Remembering About Foreign Income
Probably, one of the major mistakes committed by the taxpayers is to forget to mention about the foreign income. These people are unaware of the fact that the government will consider it as a criminal offence if you are not declaring your foreign income.
So, make sure you have holistic knowledge about the tax payments and you have included all the important things.
It is important you have not left yourself exposed while you are submitting your tax – avoiding these errors can cost you and the cost could be huge.
The best way is to take the services of an experienced tax advisor or a qualified accountant. He/she has all the right experience to guide you properly and where you can go wrong.
Author Bio
Sophia tries to live her life like the sun – setting her sights high and vowing to always rise up again. Always game for an adventure, Sophia loves widening readers and her own expectations of our vast, beautiful world. As a journalist, Sophia writes to inform. As a creative writer, Sophia strives to inspire. Overall, she hopes to captivate. She currently writes for Fixithere.
Category: Taxes
