If you have decided that you are going to do your own taxes, you need to make sure you do so with care. Doing your own taxes is a great way to save money because you will not need to use the services of an accountant, and we all know how expensive they can be! However, if you do not file your taxes correctly, you could end up costing yourself more money in the end because HMRC may fine you. This is the last thing you want to happen! Don’t worry, though, as this is not said to put you off – simply to make sure you are careful and cautious with your approach. With that being said, read on to discover some of the common mistakes that people make when doing their own taxes so that you can avoid making them.
1) Paying more money on your taxes than you should
This is a common mistake that a lot of people make because they do not realise that they are eligible for a number of tax breaks or deductions. This guide explains the tax breaks you should not miss in further detail, and so it is a great reference for those who are unsure. It is important to be aware of the fact that you can deduct everything from your office supplies for your travel expenses. Not only this, but if you work from home, you can deduct a portion of your rent and bills as well. How much you deduct will depend on whether you have an office in your home solely for work or not. Some of the costs you can claim as allowable expenses are as follows: marketing or advertising, costs of your business premises, financial costs, things you but you sell on, staff costs, clothing expenses, travel costs, and office costs. In terms of capital allowances, you can claim for the following: business vehicles, machinery, and equipment.
2) Not understanding your tax liability
A lot of people today earn money in various ways. For example, you may earn funds via your main job and then use a service such as https://www.robomarkets.com/ to enhance your income. When doing anything like this, it is important to understand your tax liability across the board.
3) Failing to keep your records properly
There are a number of different records that you may need to keep in order to complete your tax return. If you are self-employed, the business records you need to maintain include the personal money you put into your company, if you do, as well as any cash taken from the company for personal use, if any. You also need to record all expenses, purchases, takings, and sales, as well as bank statements, receipts, mileage records, invoices, and cashbooks.
4) Not filing your tax return by the deadline
There is no excuse for not handing in your tax return on time, especially when you get plenty of notice. However, you would be surprised by just how many people missed the self-assessment deadline. If you miss the deadline, you will be subject to a fine. This article explains late Self Assessment penalties and fines in further detail. The self-assessment deadline is January 31st for online returns and October 31st for paper returns. The main reason why people miss the deadline is that they leave it too late and then they find themselves confused by a certain element of the return and they need assistance. The best thing to do is start your tax return at the earliest opportunity so that this does not happen.
5) Ticking the wrong box
This is easily done. After all, the tax return process is long and tedious. It is not uncommon for people to tick the wrong thing by mistake. However, to ensure that these errors do not make your final tax return, once you have finished your return, save it, but don’t submit it. This means you can go over everything at a later date to make sure it has been done correctly.
6) Not enclosing supplementary pages
If you have added income that is not covered by the tax return process, you are going to need to include supplementary pages to support this. Some of the additional information that may be needed includes those pertaining to income from property, loss relief claims, other tax reliefs that have not been found in the main part of your tax return, a claim to age-related Married Couple Allowance, specific employment deductions, taxable lump sums from overseas pension schemes, and compensation payouts or lump sums from your employer. In addition to this, you may also need supplementary pages of foreign earnings not taxable in the United Kingdom, income from share schemes, post-cessation receipts, stock dividends, life insurance gains, and interests from UK securities, including gilt-edged securities.
7) Trying to claim expenses you shouldn’t
While there are a lot of people that miss out on expenses they should have claimed, there are also those that attempt to claim for expenses they aren’t allowed to. If you are unsure, contact HMRC or head to the UK government website before you list anything on your return.
Finally, to make sure you pay the right amount of tax, you should check your calculations several times. Even if you make a genuine mistake, there is always the risk that HMRC may assume it was deliberate, and this could result in a fine.
So there you have it: some of the most common mistakes that people make when they are doing their own taxes. If you can avoid the errors that have been mentioned above, you can give yourself the best chance of getting your taxes right the first time around so that you do not cost yourself any money in the future or miss out on important tax breaks that could save you money now.