Filing a self-assessment return for the first time can be daunting. There are scores of facts and figures to get right, with the threat of fines or accidental overpayment looming over you if you get it wrong.
When we surveyed 400 people who'd submitted a tax return before in November 2023, a third said 'worrying about making a mistake' was the aspect they disliked most about filing a tax return.
Here, we run down some of the most common mistakes people make when filing tax returns, and the best ways that you can avoid them.
1. Missing the registration deadline
mostIf you haven't already registered, we've got bad news: that deadline passed on 5 October 2023.
Thankfully, there's not a specific penalty for missing it. But if you haven't registered yet, you might struggle to get everything in order in time to file your return on 31 January.
To complete a tax return, you need to have a Unique Taxpayer Reference (UTR) number. This can take around 10 days to arrive in the post. After that, you'll need a separate activation code, which can take another 10 days.
That potential 20-day delay will take you past the 31 January filing deadline. HMRC has been known to give extensions to people who register late, so you should contact them if you fall into this group. If you don't get an extension, you could face a fine for missing the deadline, and further charges for late tax payment.
Find out more:2. Forgetting to declare all income sources
Self-assessment forms aren't just for money from self-employment. You need to declare any and all potential taxable income on them. That includes employment and self-employment, but also rental income, profit (or 'capital gains') made from selling valuable possessions, investment income and potentially even savings interest.
Make sure you give HMRC the full picture of what you earned over the year, so they can make an accurate calculation of the tax you owe.
Find out more:3. Ignoring your tax-free allowances
If you simply enter all your income for the year and send off your form, you might end up paying more tax than you need to.
Instead, look into the tax-free allowances you could benefit from before you hit send.
Perhaps the most important of these are business expenses. Costs for things like travel for business trips, equipment you've bought just for work, and a proportion of your energy bills (if you work from home), can be deducted from the profits you declare, which means you won't pay tax on them.
Find out more:4. Missing the filing and payment deadline
This is the big one if you want to avoid fines. If you file your tax return just one day late, you'll incur a £100 penalty immediately. After three months, if you still haven't filed it, you'll pay an additional £10 per day for up to 90 days.
The fines only build up from there, and you could also be charged interest on any tax you owe.
Your best bet is to set all the reminders you need to make sure you file, and make your payments, on time.
Find out more:5. Not keeping records
There are two reasons you need to keep records of your taxable earnings. Firstly, you need to be able to declare them on your tax return. But you also need to have them ready for if HMRC asks you for proof of what you've declared.
HMRC can ask to see your records for up to five years prior to your latest tax return. If this is your first tax return, that's impossible. But it's still important to keep receipts, invoices, bank statements and other key documents on file in case you need to share them in the future.
Find out more:6. Forgetting to budget
With all this attention on filing your return, don't forget what this is all about: paying taxes.
Your first tax bill could be larger than you imagine, even if you've put time into working it all out.
nextYou'll usually only be charged a payment on account if you've worked a full tax year before you file your return.
There's a second payment on account deadline later in the year, on 31 July. The idea is that by January 31 next year, you'll have already paid last year's tax and you'll now only pay the first payment on account for the following tax year.
All this means in the long term, payments should be manageable. But your first tax bill might be higher than you're expecting – 50% higher to be precise.
If you didn't already know that, and you haven't got enough money saved, you should contact HMRC for help. Which brings us to our next point...
Find out more:7. Failing to seek help when you need it
Some of the rules and penalties might sound scary, but if you think you'll struggle to pay your tax bill, or file your return in time, you can contact HMRC for assistance.
You might be able to get a Time to Pay arrangement, which spreads your tax bill into smaller installments over time. Just bear in mind you will still incur interest on money outstanding after the payment deadline.
There's no 'typical' Time to Pay arrangement. Instead, your payment timeframe will be decided based on your circumstances.
Try the Which? tax calculator
It can help you get to grips with your tax liabilities and allowances.
The tool provides clear, no-nonsense explanations about the different types of taxable income, plus suggestions for allowances you might have missed. You can even use it to file your return directly to HMRC.
source https://www.which.co.uk/news/article/7-mistakes-to-avoid-on-your-first-tax-return-in-2024-a7Hmi7C8GjX0