In the UK, the Her Majesty’s Revenue and Customs (HMRC) is the authoritative body responsible for deducting income tax from peoples’ wages, savings and pensions. HMRC Self-assessment is a system implemented by the HMRC wherein business owners are required to report their total earnings in a particular tax year as well as the sources of these earnings. Individuals are required to report their tax returns online via an HMRC self-assessment form. It is called self-assessment because it is the responsibility of the business owners to report their total income to the HMRC.
While filing their self-assessment tax return online, individuals have to disclose a wide range of information, including the wages and dividends received, and other earnings such as savings, bank interests, property rental income and income from the overseas. Individuals who receive director’s income are also required to file a self-assessment, and any withheld PAYE should also be reported. However, filing tax returns online can be a challenging and complex process, especially if one is new to tax returns. There are several rules and deadlines that need to be followed, and if individuals don’t know which exact steps to pursue, they might face many issues.
Listed here are the top issues individuals might face when filing their HMRC self-assessment tax return online. Or you can look at few self-assessment tax return outsourcing services providers as well.
Missing the deadline: It is essential for businesses to follow every deadline issued by the HMRC and ensure all information is submitted on time for the self-assessment. There are strict guidelines with penalties for businesses who miss the deadline for filing self-assessments. The penalty for a missed deadline can be as high as £100 for returns that are filed even one day late. Thus, businesses should always be on the lookout for deadlines, such as tax year end date, registration date, deadline for filing returns online, deadline for paying the balancing payment, etc.
Not registering with the HMRC: To file a self-assessment online, businesses will first have to register themselves with the HMRC. Many business owners aren’t aware that without registration, online self-assessment is not possible. Registration with the HMRC takes at least a few weeks for activation, as the PIN usually arrives via post, and this confidential information is not revealed by the HMRC on call. Therefore, it is extremely important to first register with the HMRC so that the self-assessment is not delayed, which will lead to a certain late penalty.
Making simple errors: It may seem foolish, but this is one of the most common errors individuals make while filing their self-assessment. Businesses, unintentionally, miss out on the simplest of details. For instance, they will calculate every business expense and organise their payslips and bank records, but they will forget to add their sign and the date. Therefore, it is extremely important to ensure all details and information are duly filled out and accurate, so as to avoid a penalty or rejection.
Skipping the details: With self-assessments, the HMRC intends to receive and access a complete overview of a business’ total earnings and income sources. It expects that all the details provided should be accurate to the minutest level; therefore, skipping over details is something businesses should absolutely avoid. Only exact figures and accurate numbers should be divulged, without much beating around the bush.
Getting the sums wrong: This is another very obvious error that most businesses tend to make while filing a self-assessment. If the form asks for an exact number, it is wise to enter the exact figure, not an estimate or a guess. Therefore, businesses should simply enter the accurate figures and even double check them for accuracy.
Mistaking the important details: There are certain details that businesses cannot afford to make a mistake with. For instance, when it is about the National Insurance Number or the Unique Taxpayer Reference (UTR), companies cannot make a mistake else their self-assessment will become invalid and inaccurate. Thus, they should be extra cautious while filing these important details.
Making incorrect calculations: Claiming correct expenses is an integral of filing self-assessments online. The HMRC has strict rules for what are considered under the different expense heads on a tax return form. Therefore, making incorrect calculations will not be entertained by the HMRC. When people claim things that aren’t permitted, it reduces the accuracy and validity of the tax return they’ve filed. However, this can work both ways. Many companies do not claim expenses that they should and are entitled to, thereby losing out on potential benefits and paying more than what they should.
Not filling in all the details: The self-assessment tax return form is pretty length and exhaustive, with a lot of boxes and blank spaces, all of which are to be filled in by the applicants. Since financials are always complicating, it takes a lot of time and effort to successfully complete an accurate self-assessment. Businesses should not skip out any information even though they need to enter a lot of numbers and figures. In fact, they should remember that correctly filling in all the information will actually save them money or may also qualify them for tax benefits. Moreover, the tax returns form has a separate space for “additional information”. Though many companies simply tend to ignore this section thinking they have already given too much information, correctly using this space to explain the details of things not covered in the form, might lead to tax relief. Therefore, laziness while filing self-assessments is absolutely not allowed.
Not being prepared: As already explained before, filing a self-assessment tax return is a quite tiring and complex task that involves a lot of paperwork and tracking of records. Right from the sources of income to the total number of miles travelled, business owners have to fill in complete and accurate details in their self-assessment. Therefore, keeping track of all business records is essential. The HMRC is only interested in the actual figures a company is dealing in—rough estimates and approximations won’t do the job. If expenses are claimed, receipts are required, and if clients are being billed, invoices are needed. The self-assessment has to portray a completely transparent picture of the business, with no scope for doubts or second guesses. All of this requires thorough and prior preparation, as it is not a one-day task. In an ideal situation, companies should have at least 22 months’ worth of records at the end of any tax year, and self-employed individuals should maintain business records for a minimum of five years. Thus, complete preparation is needed so that businesses can justify and have substantial proof if questioned by the HMRC.
If a company has realised that it has made a mistake while filing the tax returns, it should act quickly. Generally, the HMRC allows a period of 12 months to rectify any mistakes made during self-assessments, but it is always a better idea to consult a professional like Outbooks.co.uk, which is a self-assessment tax return outsourcing services provider Come have a chat with us, and we will review your financials to offer better solutions that will improve your tax returns, even if you have already filed it. Let us do all the hard work, and sit back while we deal with the HMRC on your behalf. Outbooks strives to not only save the hard earned money of our clients but also ensure that the HMRC is fair in its dealings.