Completing a self-assessment tax return can be daunting, even for experienced taxpayers. As the January 31 deadline approaches, many individuals find themselves rushing to submit their returns, which often leads to common mistakes. Understanding these pitfalls and how to avoid them can save you from penalties and stress.
Common Tax Return Mistakes
1. Not Realizing You Need to File
It’s crucial to know whether you need to file a self-assessment tax return. For the 2024/25 tax year, the threshold for mandatory registration has increased from £100,000 to £150,000 for those earning through PAYE. However, if your income exceeds £125,140, you may still face a tax bill on any interest income due to the additional rate tax band. Always check if you need to register for self-assessment to avoid unnecessary penalties.
2. Omitting Income
When filling out your tax return, ensure that you report all sources of income. This includes:
- Bank interest (excluding ISAs)
- Freelance work
- Rental income
- Dividends and investment income
- State pension income
- Any cryptoasset disposals
HM Revenue & Customs (HMRC) receives data from various platforms and financial institutions, so failing to disclose all income can lead to serious consequences.
3. Missing the Deadline
Late submissions result in immediate penalties. For those filing for the 2024/25 tax year, missing the 31 January 2026 deadline incurs a £100 fine, with additional penalties accruing over time. To avoid this, start preparing your return early and keep track of important dates.
4. Incorrect Claims for Allowances
Be aware of the property allowance and trading allowance introduced in previous years. For example, you can claim up to £1,000 against property or trading income without needing to itemize expenses. Familiarize yourself with these allowances to ensure you’re not overpaying taxes.
5. Claiming All Relevant Tax Reliefs
Maximizing your tax reliefs can significantly reduce your tax bill. Common reliefs include:
- Pension contributions
- Charitable donations
- Blind person’s allowance
- Marriage allowance
Consulting with an accountant can help ensure you’re claiming all eligible reliefs.
Tips for Avoiding Mistakes
- Hire an Accountant
Accountants specialize in tax legislation and can help navigate the complexities of your self-assessment. They can also provide valuable advice on what documentation is needed. - Prepare Early
Starting your tax return well in advance allows ample time to gather necessary documents and reduces the likelihood of errors caused by rushing. - Double-Check Your Work
After completing your return, take a break before reviewing it again with fresh eyes. This practice helps catch mistakes that may have been overlooked initially. - Utilize Tax Software
Consider using accounting software designed for tax management. These programs often include features that help prevent common errors and streamline the filing process. - Stay Informed
Tax regulations can change frequently; staying updated on current laws and requirements is essential for accurate filing.
By being proactive and informed about common mistakes and how to avoid them, you can navigate the self-assessment process with greater confidence and accuracy this tax season.