Millions of self-employed Brits warned over five tax mistakes that could cost up to £900
MILLIONS of Brits could be caught out by some simple tax mistakes that could cost up to £900.
More than five million people are still yet to fill in their tax return, with just weeks left before the January 31 deadline.
People who miss the self-assessment deadline face a penalty of £100 if their tax return is up to three months late.
Further fines of £10 a day are applied after three months, up to a maximum of £900.
To make sure that you're not slapped with a hefty fine, you'll want to ensure that all your financial information is in order.
Trusha Shah, tax manager at accountancy firm HW Fisher, said: "The deadline for filing paper tax returns has passed, and so those who are yet to file their self-assessment must do so online - and we recommend they do so as soon as possible.
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"Too often individuals leave it too late and make simple, costly mistakes in their haste to complete it on time.
“Completing your tax return on time is crucial."
Filling out a self assessment tax form can be confusing, so we've outlined five common mistakes Brits make - and how to avoid them.
1. Give yourself plenty of time
"Gathering paperwork takes long than you think," Trusha said.
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Gather all of the expenses and documents relating to your income.
Having these to hand will help you race through the process.
This includes your 10-digit Unique Taxpayer Reference (UTR) and your National Insurance number.
The form also includes include bank statements and details of untaxed income from the year, which might involve finding your P60 (if you earned more than £8,500), your P11D (which has information about expenses and benefits), and payslips.
If you're self-employed, you'll need records of your income and receipts for expenses.
You will also need interest statements from banks and building societies, and details of pension contributions made.
Trusha added: "If you need third parties to provide you with statements and documents, you should contact them right away as this can take time."
2. Tax relief on pension contributions
You can claim tax relief on your pension at your marginal rate and over time this can make a significant difference to how much goes into your pension.
But in some cases, you will need to claim on your tax return to get the full amount you are entitled to.
Basic rate tax relief is usually added to your contribution but if you are a higher or additional rate taxpayer you may need to claim the extra 20% or 25% tax relief through self-assessment.
You won’t need to put in a claim if your pension is set up as a salary sacrifice arrangement.
If your pension is set up under a net pay arrangement, then the correct tax relief will also be taken.
But if your pension is set up under what is known as relief at source then you will need to claim the extra tax relief via self-assessment
Trusha said: "Keep records of any pension contributions you make to claim the appropriate tax relief."
3. Include charity gift aid payments
Trusha said: "Have you sponsored a friend to run for charity?
"HMRC provides some tax relief on charitable donations, which can be included."
Donations to charity from individuals are tax free. You can get tax relief if you donate:
- through Gift Aid
- straight from your wages or pension, through Payroll Giving
If you pay Income Tax above the 20% basic rate, you can claim back the difference between the tax you’ve paid on the donation and what the charity got back when you fill in your Self Assessment tax return.
4. Keep a copy of your completed tax return
If you are employed or a pensioner, HMRC advises that you keep all paperwork for 22 months after the end of the tax year.
Meanwhile,self-employed people or landlords should keep all paperwork for five years and ten months.
5. Take advantage of your personal savings allowance
Trusha said that the personal savings allowance can be applied to interest earned on your savings.
The personal savings allowance lets you earn a chunk of interest before paying tax.
Basic rate taxpayers get £1,000 and higher rate taxpayers get £500.
The interest you receive on your savings could be tax-free up to £5,000 per year.
What happens after you've submitted your self-assessment?
Once you’ve submitted your tax return, you will be told how much tax and, if you’re self-employed, National Insurance Contributions (NICs) you will need to pay.
HMRC accepts your payment on the date you make it, not the date it reaches its account - including on weekends.
If you can’t afford your tax bill, you should still file your return, as the fines for late payment are lower than the fines for late filing.
You might also be able to avoid penalties and set up a payment plan to pay in instalments, but .
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You can do so by calling the Business Payment Support Service on 0300 200 3835.
Martin Lewis reminded employees to check their tax code to avoid being overcharged hundreds of pounds.