Interactive Investor

Self-assessment: these common mistakes could cost you dear

1st November 2019 10:40

Laura Miller from interactive investor

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As HMRC warns against leaving your tax return until the last few weeks before the 31 January deadline, here are five self-assessment slip-ups to avoid.

With less than 100 days left to go before the cut off, the tax office is encouraging individuals to get their self-assessment affairs in order to beat what it says is a rush over the festive period.

Submitting tax returns early can alleviate some of the last-minute stress associated with filing while also preparing for Christmas and New Year.

- Four tax clever tricks that work a treat

Angela MacDonald, HMRC’s director general for customer services, says: “The deadline for completing self-assessment tax returns is less than 100 days away, yet so many of us wait until January to start the process. 

“Avoid the last-minute rush by completing your tax returns on time and then enjoy the upcoming festive period. Starting the process early and giving yourself time to gather all the information you need will help avoid that stressful, late rush to file.”

Most UK taxpayers have their taxes deducted at source from their wages. Everyone else – the self-employed, business owners, or those with additional untaxed income – must submit a self-assessment return each year.

As well as those groups, anyone liable for the High Income Child Benefit Charge – those with income over £50,000 who receive child benefit, or whose partner gets it –  may need to file a tax return. 

The deadline for submitting paper tax returns is 31 October 2019 and 31 January 2020 for online versions. Late submissions can attract a £100 penalty. Any tax owed must be paid by 31 January 2020. 

Five self-assessment slip-ups to avoid

Hargreaves Lansdown, the investment firm, has compiled a list of the most common mistakes that taxpayers make when filing their tax returns – which can be all the more likely if it is done in a rush in between opening presents and Christmas dinner.

1. Forgetting pension tax relief

Higher-rate taxpayers are entitled to 40% tax relief on pension contributions. Savers into trust-based workplace schemes get the full 40% automatically, likewise if you pay pension contributions through salary sacrifice.

However, group personal pensions, group SIPPs and stakeholder pensions, where contributions are paid out of taxed income, are treated in the same way as personal pensions: you automatically get tax relief at 20%, and need to reclaim the difference on your tax return.

Use gross contributions on the form - the total of everything you paid in, plus tax relief at 20%.

2. Not claiming gift aid

Basic rate taxpayers usually get this automatically by ticking a Gift Aid box – so if you make a £10 donation, the charity gets £12.50. If you’re a higher rate taxpayer, you’ll need to reclaim the rest through your tax return.

3. Holding too much cash

Make a charity donation now and you can claim it on your tax return for 2018/19. This is particularly useful when you’re a higher rate taxpayer in one year, and a basic rate taxpayer the next. 

Enterprise Investment Schemes also offer 30% tax relief – which can be claimed on this tax return against income for 2018/19. 

4. Neglecting to divide joint accounts

If you have a joint stocks and shares, when you do your tax return, split the total dividends by the number of account holders, and each put it on your own return. This may help you stay below the £2,000 dividend allowance that kicked in in 2018/19.

5. Failing to fix mistakes on previous years

If you realise that you’ve made a mistake on past returns, you can claim a refund for the past four years. Write to HMRC making a claim for ‘overpayment relief’, include proof that you’ve paid the tax, confirm you’ve not already reclaimed it, and add a signed declaration saying that the details are correct and complete.

- This article was first written by our sister magazine Moneywise.

This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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