Most self-employed beginners make some common self-assessment mistakes that lead to penalties. Self-assessment tax return filling is a necessary step if you are self-employed in the UK. However, the most crucial thing is to ensure accuracy in filling out the self-assessment tax return to prevent the penalty by HMRC. In this article, you will not only know about the common self-assessment mistakes but also that their solution is also provided that ensures your business growth and success.

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What are the Common Self-Assessment Mistakes?

There are some common self-assessment mistakes that you must be aware of for running a business smoothly. Additionally, analyse the solution to all these errors that ensure the right alignment for standing out the business. Read them carefully and prevent yourself from penalty.

1. Not Keeping Proper Records

The top mistake in tax filing is not keeping all records of income and expenses accurately. If you forget all the vital financial details, it may lead to incorrect tax filing. The cause of errors is that you may miss important information about the financial cases to add in the filing.

Strategies to adopt:

Following are some strategies enlisted for this mistake of tax filing:

• Must use spreadsheet and accounting software for all the financial information.
• Consistent and regular updating also helps you keep records of all earnings and expenses.
• Hiring an accountant is also a good strategy to ensure the collection and recording of all financial data.

2. Confusion about Allowable Expenses

Paying tax is affected due to misinterpretation of the valid business expenses by many self-employed. Simply incorrect claims of personal expenses lead to errors in the filling.

Strategies to adopt:

You can adopt these strategies for filling out the tax to prevent these types of errors.

• You must be aware of all the expenses that HMRC allows.
• If you are not sure about your expenses, go through the guidelines of the HMRC.
• Record the expenses efficiently and go for consultation with an expert in financial management and tax filing.

3. Missing Deadlines

Filing tax returns on time is very crucial because missing the deadline leads to penalties. Missing the deadlines is one of the most common self-assessment mistakes that causes you to pay extra charges and impact the business cash flow.

Strategies to adopt

The best strategies to fix this self-assessment mistake of missing deadline are the following:

• Use a calendar to mark all the tax deadlines to never forget the tax submission date.
• Reminders in advance for the tax filing dates also ensure that you fulfill the HMRC requirements deadlines.
• Collaborate and build consensus with accountants to not miss the deadlines.

4. Not Claiming Tax Relief and Allowances

Many self-employed individuals pay more tax because they are not aware of how to take advantage of the available tax reliefs and allowances. The tax liabilities can be reduced through two different ways: 1) pension contribution deduction and 2) inventory allowance. But due to the lack of knowledge about it and the uncertainty of their eligibility, it becomes the reason to overlook these advantages. Understanding these reliefs is important to manage all the finances and comply with the tax laws.

So, instead of overpaying, is it best to be aware of all the updates on tax reliefs provided by the HMRC?

Strategies to adopt

Preventing this mistake is very important for sustaining your financial cash flow in the business. For this, you should follow the below-mentioned tips that can prevent you from overpaying.

• Keep updated about the new tax laws and regulations because every year, HMRC provides new tax reliefs and allowances.
• Consultation with the expert individual helps you to save money and predict all the financial deductions accurately. Tax professionals can also help you to understand your financial situation and offer the best strategies for managing tax.

5. Forgetting to Declare Other Income

Most people do not inform about other sources of income, such as investment, online earning, or second jobs; this tax leads to unavoidable tax bills and penalties. So, forgetting to declare multiple sources of income is also a common mistake while running businesses. Hence, all earnings from different sources, including a secondary job, investments, and online income, need to be reported to the government to prevent tax problems.

To stay compliant, first check what income needs to be reported based on HMRC guidelines. Using HMRC’s checking tool can help determine your tax obligations quickly and accurately. Keeping clear records of all earnings and consulting a tax professional when needed ensures you file correctly and avoid unnecessary fines. Proper tax reporting keeps your finances in order and stress-free.

Strategies to adopt:

To stay compliant and avoid this mistake, you should use these strategies:

• Learn all the guidelines provided by HMRC to mention which source of income or not for fulfilling the government requirement.
• Determination of tax obligation is crucial for this; use HMRC checking tools to ensure accuracy.
• Consultation with the tax professionals and recording all the financial information help you in accurate filing.
• Tax reporting on time is also considered the best approach that eliminates your stress regarding financial management.

6. No Government Gateway User ID

A significant number of individuals overlook the necessity to sign up for Government Gateway accounts since they also lose their user IDs. Your inability to file the self-assessment tax return becomes inevitable once you do not have this account because delays near the deadline could earn you a penalty fee. Basically, the Government Gateway serves as an identity authentication system for HMRC services, where self-assessment functions among these services. A Government Gateway user ID is a necessary requirement for starting account setup.

You can register by visiting the HMRC website, where they will need your National Insurance number, your UK address, recent pay stubs or P60s and a supported UK passport. The activation code will be sent to your registered address through postal mail by HMRC, and the delivery may require up to 10 days.

Strategies to adopt:

If you forget to register for a Government Gateway account or lose your Government Gateway user ID, then use these strategies for management:

• You can recover them on the GOV.UK website. In case you are not able to access your registered email, create a new account and wait for a new activation code.

7. Losing your Unique Taxpayer Reference (UTR)

This is one of the most common mistakes made by many self-employed people, as this number is very crucial for first-time self-assessment filling. However, before 20 days of filing the tax deadline, you should have applied for the Unique Taxpayer Reference (UTR) number.

Strategies to adopt:

• Checking past tax returns and HMRC letters helps you find your UTR number.
• Moreover, you can also find it in payment reminders.

Conclusion

Consequently, it is very important to learn from the mistakes that most self-employed people make to take vital actions for the smooth running of your business. Steps you can take that prevent the common self-assessment mistakes include keeping detailed records, learning tax rules, and filling out tax returns on time. Moreover, seeking guidance and taking consultations from tax experts or accountants is also the best approach for the management of finances.

Reach out to our intelligent and clever-minded guys to get the answer to your queries in the UK, we will get to your answers quickly. We will help to decide how to deal with your tax implications.

Disclaimer: The information about the common self-assessment mistakes provided in this blog includes text and graphics of a general nature. It does not intend to disregard any professional advice.