Top 20 Tax Filing Mistakes to Avoid

Tax season can be a stressful time, but avoiding common mistakes can make the process smoother and less daunting. In this simple guide, we’ll walk you through the top 10 tax filing mistakes that taxpayers frequently make and provide tips on how to steer clear of them. Whether you're a first-time filer or a seasoned pro, understanding these pitfalls is essential for ensuring accurate filings and maximizing your tax benefits.

1) Missing deadlines

Many taxpayers fail to file their tax returns or pay their tax bill on time. This results in penalties, which increase the longer the delay continues. The key self-assessment deadline in the UK is 31st January for online submissions, and 31st October for paper submissions.

2) Incorrect or Incomplete Information

Filing a return with missing or incorrect information, such as entering the wrong National Insurance number, tax code, or income details, can lead to fines or delays. Small errors like transposing numbers can also cause issues.

3) Not Declaring All Income

Some taxpayers fail to report all their income, especially from multiple sources. Common oversights include rental income, dividends from investments, and foreign income. The HMRC has strict guidelines on what constitutes taxable income.

4) Claiming Ineligible Expenses

Many taxpayers mistakenly claim personal expenses as business expenses, or overestimate their allowable deductions. For instance, not all home office expenses can be claimed, and certain items like entertainment costs are not deductible.

5) Failing to Claim All Eligible Reliefs and Allowances

Taxpayers often overlook claiming available tax reliefs such as pension contributions, charitable donations (through Gift Aid), or the Marriage Allowance. They may also miss out on reliefs for capital gains tax or entrepreneurial reliefs.

6) Misreporting Dividends or Interest Income

Incorrectly declaring income from dividends or interest can be a frequent error. With changing thresholds and tax-free allowances for savings and dividends, taxpayers often miscalculate the amount they owe.

7) Forgetting to Register for Self-Assessment

New freelancers or those with side income often forget to register for self-assessment with HMRC. They are required to do so if they earn more than £1,000 outside of PAYE.

8) Not Keeping Adequate Records

Taxpayers are required to keep detailed records of income, expenses, and other relevant tax documentation for at least five years. Failing to do so can make it difficult to substantiate claims or respond to an HMRC inquiry.

9) Overlooking the Requirement for Payments on Account

Some self-employed individuals overlook the payments on account requirement, which are advance payments towards the following year's tax bill. This can lead to cash flow problems when they’re unexpectedly hit with a large tax bill.

10) Misunderstanding VAT Rules

Business owners sometimes make mistakes when filing their VAT returns, such as not applying the correct VAT rate, incorrectly claiming VAT on non-qualifying expenses, or misunderstanding VAT thresholds.

These mistakes can lead to penalties, over payments, or missed opportunities for tax savings, so working with a trusted tax advisor can really help to mitigate these errors.

Look out for part 2 of our blog next week.

Capital Gains Tax Expertise: The Tax Faculty LLP Managing Partner Charles Tateson Named UK Capital Gains Tax Advisor of the Year 2023

The Finance Monthly Taxation Awards recognises the achievements of tax professionals from around the globe.

Winning such an award is no small feat. It is a reflection of hard work, extensive knowledge, and an ability to navigate the intricacies of the UK tax system.

Read more about Charles and the award here.

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