Mistakes to avoid on your first self-assessment tax return

We know that completing your first tax return can be a daunting process. If you’re not experienced with keeping accounts, it’s understandable to be worried about making mistakes. At Mazuma we have your back – check out the five point list we’ve put together to help you feel confident going into next year’s self-assessment tax return.

Not getting yourself registered

In order to successfully complete your tax return you need to first register for the Self Assessment service. You can do this via the HMRC website or you can fill in the form on your computer, print and post it to HMRC. After you register you will be sent a unique taxpayer reference (UTR) number which you’ll need to submit your first, and all subsequent tax returns – so make sure you keep a note of it!

Not claiming all your expenses

Many people forget to claim a bunch of expenses and end up paying hundreds of pounds in tax that they don’t need to. No one wants to pay more tax than they have to! You can claim for a whole host of business related expenses such as travel costs, stationery, advertising and training. If you’re not sure what you can claim as an allowable business expense take a look at the handy HMRC page all about self-employed expenses. Be sure to keep all receipts and bills relevant to the expenses that you claim as these records could be requested by HMRC up to 5 years later (6 years for limited companies). The total amount of expenses incurred are then subtracted from your income to give your final profit – the amount that is liable for taxation.

Not including salary and benefits from another job

Are you a superhuman who works multiple jobs? Well, if you have another job in addition to running your own business, you need to include this in the employment pages on your tax return. First, grab your P60 form – this will show you the total income earned in that tax year as well as how much tax you paid on it. If your employer also provides you with other benefits such as paying for expenses you will also need to grab your P11D form. As if that wasn’t enough forms already you may also need your P45 on hand when doing your tax return if you’ve changed jobs in the tax year in question.

Not including interest from your bank account

As well as income and expenses from your business, your tax return also needs to include details of interest received on all of your bank accounts. This includes interest received on business bank accounts, joint bank accounts and personal bank and building society accounts. Exceptions to this are accounts like ISAs where the interest is paid tax-free.

Not preparing for payments on account

So you’ve done calculations, budgeted for the tax you will owe and are ready to pay, great! But have you budgeted for the payments on account too? Payments on account are an extra tax payment you make towards the following year’s tax return and they are due on 31st January alongside your regular tax bill. The amount you will be charged for your payment on account is 50% of the tax that would have expected to be due for the year which means that in your first year you will effectively pay a 150% tax bill. That sounds pretty scary, and if you haven’t budgeted for it it could be a bit of a shock! You will then have a further payment on account (another 50%) due on July 31st. The upside is that the following January you will simply have to either settle any extra tax due (if your earnings increased) or you will receive a refund (if your earnings decreased).

Not including supplementary pages

You will need to include supplementary pages for additional income not covered by the main tax return.

Additional information may include:

• Interest from gilt edged and other UK securities, deeply discounted securities and accrued income profits
• Life insurance gains
• Stock dividends, non-qualifying distributions or close company loans written-off
• Post cessation receipts
• Income from share schemes
• Foreign earnings not taxable in the UK
• Taxable lump sums from overseas pension schemes
• Certain employment deductions
• A claim to age-related Married Couple’s Allowance
• Other tax reliefs not found in the main part of your tax return
• Loss relief claims
• Income from property

Not including the correct National Insurance (NI) and Unique Tax Payer reference (UTR)

These need to be correct.  The UTR is a ten-digit reference number unique to you that will be on any correspondence you receive from HMRC. It’s important to include these and to get them right.

Not submitting your tax return on time

The deadline for submitting a paper return is 31 October following the end of the tax year.

The deadline for filing your tax return online is 31 January after the end of the tax year. So a tax return for the 2020/21 tax year would need to be submitted online by 31 January 2022.

If you miss the deadline, you will have to pay penalties which increase the longer you delay. You can find more on the self assessment tax deadlines and penalties on this page of the HMRC website.

Not keeping complete and accurate records

You need to keep complete and accurate records (if they are relevant)

• P60, P45 and P11D
• Expense records
• Benefits including maternity/paternity pay, statutory sick pay, job seekers allowance
• Pension records
• Bank statements
• Property income
• Foreign income including evidence of tax already paid abroad
• Capital gains
• Employee share schemes
• Student loan payments

For the self-employed, you will need to maintain business records such as:

• Cash books
• Invoices
• Mileage records
• Receipts
• Bank statements
• Records of all sales and takings, purchases and expenses
• Money taken out of business for personal use (if any)
• Personal money put in to the business (if any)

What do I do if I make a mistake on my self assessment tax return?

If you do make a mistake on your tax return you’ve normally got 12 months from the submission deadline to correct it. This is called an ‘amendment’.