Self Assessment – Mistakes to Avoid

Submitting your Self-Assessment Tax Return accurately and punctually is crucial to avoid penalties. Here are some key points to consider: 

Selecting the Correct Accounting Method: 

• HMRC offers two simplified tax schemes for smaller businesses (sole traders or partnerships): ‘Cash Basis’ and ‘Simplified Expenses.’ 
• Cash Basis: Record income and expenses based on actual cash transactions or accruals basis (when invoiced or billed). 
• Simplified Expenses: Self-employed businesses can use fixed rates for common expenses like mileage, using home for business, and private use of business premises. 

Maintaining Proper Records: 

• Keep essential records such as P60, P45, P11D, expense records, benefits, pension records, bank statements, property and foreign income, capital gains, employee share schemes, and student loan payments. 
• In case of an HMRC enquiry, lacking relevant documentation may result in penalties. 

Declaring All Income and Capital Gains: 

• Failure to declare all relevant income and capital gains may lead to severe penalties, and deliberate errors could result in prosecution. 
• Include income from employment, benefits, pension income, interest/dividends, property income, foreign income, capital gains, employee share schemes, and dividends. 

Correctly Reporting Income: 

• Ensure income is reported in the appropriate sections to avoid errors. 
• Misreporting self-employment income may impact national insurance contributions (class 2 and class 4). 

Consider Professional Assistance: 

• If your tax return involves multiple income sources or if you’re uncertain, seeking assistance from an accountant is advisable. 
• Professional help ensures accuracy, saving you time to focus on your business or other interests. 

Don’t underestimate the importance of a meticulous and timely tax return. If in doubt, consulting with professionals can provide peace of mind and help you navigate the complexities of tax compliance. For more information or assistance, feel free to contact us for an initial consultation.