Self-assessment tax returns should be filed by professionals earning more than €1,000 through their businesses. The tax returns should be make before making any deductions via the business owners and their partners.
As a business owner, you even have to file tax returns if you’re gaining income by renting or trading real estate (apart from your primary business).
The procedure of filing the tax returns is pretty mind-boggling, especially for young entrepreneurs. Many business owners miss deadlines because of negative entries, inappropriate documents, missing invoices and receipts, and many other reasons.
Believe it or not, gathering the documents is pretty easy, but mentioning them in the tax returns is overwhelming. As a result, many people end up making mistakes while filing their self-assessment tax returns.
Below, we’re mentioning some common mistakes related to tax returns that taxpayers can avoid easily.
Struggling To Register For Self Assessment
Whenever you’re starting your new business or new venture, it’s your responsibility to provide the information to HMRC. HMRC would register a special UTR (Unique Tax Reference) for your business. UTR is required while filing the VAT returns in the UK. If you have a UTR, it means you’re eligible to pay the tax returns. So the time you’re eligible for paying the taxes, get UTR for your business and government ID.
Unable To Process The Returns Online
HMRC isn’t much entertaining the paper tax returns. As a result, don’t use the old school method to file the tax returns. It’s recommended to choose the online way because it is much easier and less time-consuming. As a result, get a Government Gateway ID necessary for accessing the dashboard and submitting your tax returns. All the ID numbers and passwords will be deliver by post. ID numbers and passwords might take some days to arrive at your doorstep. Thus, don’t wait until the final month to get your Government ID and password. Apply for them even when the deadline date of filing the tax return isn’t announced.
The online system will ask some important questions regarding your business and financial transactions during the application process. You probably know there are some penalties for the late submission of documents or returns. Some sort of interest is also charged if VAT returns in the UK are filed late. As a result, ensure you’re aware of the deadlines, and please adhere to them.
Incorrect Entries And Not Rechecking Them
Being a business owner, there are no limitations to your working hours. Above all, if you’re a solopreneur or new entrepreneur, making the payments and managing the business transactions is also your responsibility.
Even if you have a separate accounts department, you can’t just blindly rely on them. As a result, whether you’re or the accounts department are gathering the documents and putting the entries, ensure everything is sorted and accurate. Never forget to cross-check your calculations.
Whatever information is present in your corporation tax return should be 100% accurate. Even if one entry is negative, you either have to pay the penalty or repeat the entire procedure. HMRC can easily detect negative entries and further take legal actions against you.
Not Mentioning All The Taxable Income
Not mentioning all the incomes sources and adding fake business expenses is the old school tactic of decreasing the taxes. However, in this modern generation, none of the tactics will work. Thus, if you don’t know what type of income you should put in the corporation tax return, seek guidance from your accountant. It is recommend to mention all the incomes sources in the tax returns. Some income like employment and pension are already tax, but you can still mention them.
You can enter the reference numbers of the income which is already taxed at other sources. If you fail to mention all the taxable income sources, HMRC might launch a financial investigation and take legal action against you.
Claiming The Expenses That Are Ineligible To Get Claim
There are some rules set by the government you need to follow regarding which expenses should be claim. If you’re claiming expenses that cannot be claim, HMRC can take legal actions against your annual financial accounts. Above all, you even have to pay hefty penalties that will burn your pockets.
Before filing the tax return, if you feel some entries are irrelevant, have a chat with your accountant. You should check all the expenses that are claim in the tax returns. Above all, ensure you’re not overlooking the expenses that should be claim in your tax returns.
Some Tips You Should Follow For Smoother Self-Assessment Tax Returns
It’s an overwhelming situation when the deadline for filing your Self-assessment tax returns is near, and you’re still unprepare. Even the accountants charge higher because their workload increases before the deadline. Some business owners don’t require accountants to file tax returns; everything depends on the business type and financial transactions. So whether you’re filing the return or you’ve hired an accountant, you should follow the below-mentioned tips.
Stay Organized
Accountants always stay organized while filing the tax return because they have many clients under the belt. You also need to stay organized and start gathering the documents at least a month before the deadline. The earlier your documents are ready; you’re avoiding the last-minute hassles and filing the VAT return in the UK easily.
Never Throw Or Delete The Necessary Documents
See, not all the documents are necessary, but that doesn’t mean you’ll throw or delete the relevant ones. You must at least keep the relevant business documents of the last five years.
Don’t Forget Claiming The Tax Relief
When filing your self-assessment tax returns, never forget to claim the tax relief on your pension contributions. Tax relief on the pension contributions will undoubtedly help you in filing the VAT returns in the UK.
Make Best Use Of The Accounting Software
Having an automated accounting software will undoubtedly help you in filing tax returns. In our opinion, you should use accounting software to manage your business transactions constantly. When your business transactions are record, it becomes easier while filing the tax returns.
Always Adhere To The Deadlines
Apart from all the tips mentioned above, this is the most important one. Even if you have all the documentation handy, you still get late while filing the self-assessment tax returns. Never wait for the final deadline date to file your returns; start the procedure at least one month before.
Some clients still prefer tracking their expenses manually. The next time you meet your clients, ask them to link automated payroll software to their bank accounts for better efficiency. However, also ask them to adopt the habit of cross-checking the automated reports before making any decision.
Final Thoughts
Whether you’re new to filing tax returns or not, it’s better to always seek guidance from the accountant. You probably cannot manage all the transactions happening in your annual financial accounts. Even if you have made some mistakes while filing the return, your accountant is there to take further action. Whether you’re filing your tax returns or the accountant is doing it on your behalf, you need to follow the aforementioned tips. Never get late to file your tax returns, especially when it’s your first time. As a business owner, you should be very particular about filing tax returns.
