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15 Most Common Mistakes People Make on Their Tax Returns, And How to Fix Them


With HMRC constantly churning out new tax rules, it’s no surprise that some people trip at the final hurdle of filling out their tax returns. However, WCC are here to lend a hand and to help you navigate the shadowy waters of self-assessments using this essential guide.

  1. Frantic rushing to avoid penalties.

We know that in an ideal world, getting your tax return done before the deadline would happen every time. However, in the real world it might not be so simple. If you’ve left things ‘til the last minute, consider that paying the £100 late filing fee could give you the extra time you need to complete your tax return at your own pace, so you are less likely to make mistakes. There’s no point rushing through it to avoid paying £100, when you could miss out on reclaims worth far more.

  1. Moving the same expenses to different boxes every year

During the rush to get your return done, making sure you’re putting your expenses in the same boxes as the previous year may not be your main priority. However, moving expenses to different boxes each year can create huge variances that HMRC will expect explanations for. It’s always a good idea to keep copies of your previous tax returns on hand for comparison, so you can keep such variances to a reasonable minimum.

  1. Not researching high-risk areas

The following areas have been known to raise more enquires than any other areas, and it is important to read up from various sources on how to be compliant with the tax laws related to them. When in doubt, ask an accountant!

  • drawings
  • employment expenses
  • entertaining
  • legal and professional expenses
  • pensions
  • provisions and accruals
  • repairs and renewals
  • research and development
  • stock
  • termination payments
  1. Failing to show private use adjustments separately

Once your return has been submitted, HMRC will scour it for personal expenses they can disallow. If you have already adjusted for personal/private usage, make sure to show these adjustments separately that HMRC know that adjustments have already been made. This will also make it less likely for them to raise an enquiry.

  1. Claiming for invalid expenses

For those submitting their own tax returns, tread with care when figuring out which of your expenses can be reclaimed. As a general rule, expenses should be “wholly and exclusively for the purpose of trade”. When in doubt, either seek extra guidance or research the tax implications yourself. Remember to tread carefully, it might not be quite as straightforward as you may think.

  1. Not explaining unusual variations to HMRC

If you’re looking at your figures and you know something seems usual about them, explaining this in the boxes provided will make HMRC far less likely to start an enquiry. If you are submitting figures that may seem incorrect to someone who has no context, you’d better be prepared with a reason for doing so.

It is essential that either you or your account fills in these sections if they are relevant to the situation. On the other hand, keep in the mind that there’s no the need to write them an essay. Keep it brief, straightforward, honest and simple.

  1. Not including income or gains made from using Bitcoins

Despite cryptocurrencies being a fairly new concept to most, Bitcoins have been making the news for being a quick and easy way to make some extra money. There is, however, very little guidance on their tax implications, which makes it easy to ignore any income or gains made from Bitcoins. We suggest looking at HMRC’s policy titled; “Bitcoin and other cryptocurrencies”.

  1. Not remembering the new £7,500 rent a room relief

In the mayhem of trying to complete their returns, many tax-payers are likely for forget about to the rules regarding rent. For those of you with lodgers, it’s important to remember to claim the new £7,500 rent a room relief instead of the previous £4,250.

  1. Failing to appeal against previous penalties

If you receive a carelessness penalty from HMRC for errors made on your previous tax returns, it’s vitally important to consider asking the taxman to suspend the penalty. This is only a viable option if the suspension period will be used to help you avoid becoming liable to paying more penalties due to similar inaccuracies, however if that is the case your penalty could be suspended for up to 2 years.

  1. Double-reclaiming termination payments

Remember to keep an eye out of you have taken the £30k termination payments out already through payroll, and given tax relief at source. It is an incredibly common mistake for tax-payers to claim it again during their tax returns without realising. Keep in mind that should it cause a tax tribunal, you could be asked to pay on average £3000 in carelessness penalties.

  1. Forgetting to claim the full mortgage interest relief

Yet another new rule HMRC have put into place is regarding mortgage interest. These new rules were effective from April 2017, and many tax-payers are forgetting to include mortgage interest on their returns. Basic tax rate payers are not affected by these new rules, but for higher tax rate payers it’s probably worth reading up on the matter on HMRC’s website to avoid excluding mortgage interest altogether.

  1. Not checking tax code notices

Almost every tax-payer is entitled to an annual free tax allowance, which is usually reflected as a tax code that employers use to deduct the right amount of tax from their employees. Depending on your tax code HMRC may add or remove certain items, such as pensions or benefits. As your tax code is subject to change, not checking it could lead to an incorrect tax return.

  1. Forgetting about child benefit clawback or student loans

This tip is regarding those who have taken out a student loan, and are now making repayments through their tax return because their earnings exceed the threshold. As your student days may be long behind you, it can be incredibly easy to miss this on your tax return.

Another classic mistake relates to child benefit clawback, which affects higher income earners who receive child benefits and earn over £50,000.

In essence, the amount of child benefit received is taken back under the “high income child benefit charge”. Despite there being a box provided for this on the tax return, many people forget about it because it’s usually dealt with under the benefits system.

  1. Assuming no tax is due on Box 1 (unremittable income)

For tax-payers with foreign income, this is likely to be an area you will need to seek extra advice and guidance for.

To avoid receiving daunting letters from HMRC enquiring about your overseas income, try to avoid assuming what is or isn’t the correct course of action. Many people with overseas income assume that by failing to remit foreign income to the UK, and by ticking Box 1, that they do not need to pay tax on their foreign income. If your train of thought has been similar in the past, it’s best to seek professional advice on the legality of the situation.

  1. Not including foreign income

It is now a criminal offence to not include foreign income on your tax return, regardless of whether it is in error or deliberately. If you are unsure whether your income requires you to complete a tax return, your best bet to get a reliable answer is using a checklist like the one on HMRC’s website. Alternatively, to avoid running such high risks, you could entrust a professional to help you to complete your return.

Even with the rise of electronic tax returns, there is still plenty of potholes you could run into when completing your tax return. If you feel confident in submitting the return yourself, remember to tread carefully and use all the resources available to you. Remember that if you’re ever in doubt, seek the help of a professional.

If you are interested in employing White Collar Consultants to complete your tax return, please feel free to contact us by phone at 01952 780220, or by email at accounts@wcc-ltd.co.uk.

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