Common mistakes on tax returns

Every year, as the 31 January approaches, there is a frantic rush to beat the Self Assessment filing deadline. Because of this, the same common mistakes on tax returns appear time and time again. These mistakes may have serious implications.

Common mistakes on tax returns

Obviously you want to avoid any late filing penalties if possible. However, arguably it's better to file a correct tax return late, than to file an incorrect tax return on time just to avoid a penalty.

Although these common mistakes on tax returns may be innocent, potentially they can have a highly negative impact:

  • You could miss out on valuable claims and reliefs. These may cost you far more than a £100 penalty. You also may have to wait longer for HMRC to repay any money if you've amended the return at a later date.
  • If HMRC open an aspect enquiry into your tax return at a later date and spot a mistake this could result in additional penalties being charged. Additionally you'll have the unwelcome distraction of an HMRC enquiry. An accountant's fees can be significant and the enquiry itself could last several years.

Bearing this in mind, we'd thought we'd highlight some of the more common mistakes on tax returns. That way you can take steps to reduce any risks to you or your business.

Common mistakes on tax returns:  Omitting cryptocurrency gains

If you've read our blog on cryptocurrency transactions you'll realise that the tax implications cannot be ignored. There's been a huge amount of publicity surrounding crpto-currencies recently and you can guarantee HMRC have been watching with interest. As there's little tax guidance available (other than from us of course!) you could overlook your cryptocurrency transactions when submitting your tax return.

Common mistakes on tax returns:  Forgetting to include child benefit and student loans

This is another mistake that's easy for HMRC to spot as this information is readily available to them from other government departments.

If your annual earnings exceed £50,000 you are potentially caught by the child benefit tax charge.  Because child benefit is normally dealt with under the benefits system, you could forget to include it on your tax return even though there's a box provided for these details.

Similarly if you took out a student loan some time ago you may now be required to make repayments via Self Assessment because your earnings exceed the threshold

The matter of student loans sometimes gets overlooked particularly when there's a change in circumstances - for example when someone moves from full time employment to freelancing or contractor work.

Common mistakes on tax returns: Not using the additional information box to explain unusual transactions

If you know something unusual has happened it's far better to explain it - that way HMRC are less likely to open an enquiry. For example, if an amount of business expenditure is higher than usual, or you sold a second property which is covered by the main residence exemption.

There's no need to go over the top - just set out the facts plain and simple.

Common mistakes on tax returns:  Not showing private use adjustments on the self-employed pages

The taxman is always on the lookout to disallow any expenditure that relates to private usage. So where you have restricted expenditure for private use (for example motor expenses) it is always better to show any adjustments separately, rather than netting them off. That way it's clear to HMRC that the adjustments have been made.

Common mistakes on tax returns:  Lack of focus on risk areas

HMRC know that opening an aspect enquiry into the following items has the potential to yield results:

  • legal and professional expenses
  • repairs and renewals
  • entertaining expenditure
  • provisions and accruals
  • termination payments

The above list is by no means exhaustive and, if necessary, make use of the 'additional information' box on the return to explain any unusual items.

Common mistakes on tax returns:  Forgetting about non-UK income

If you have foreign income or capital gains this is an area where you need to be particularly careful. Many individuals are under the mistaken impression that if they have income arising overseas or it is not brought into the UK, there is no need to disclose it to HMRC. 

This has been in such a common oversight that the law was changed to make this error a criminal offence. The matter of foreign income can be a complex area and if in any doubt seek the advice of a suitably qualified tax adviser.

Therefore when completing your tax return always proceed with caution - especially if you are leaving things to the last minute!


For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at richard@tfaaccountants.co.uk.

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