10 Common Tax Return Mistakes to Avoid

Tax filing season can be a stressful time for many, but avoiding common tax return mistakes can make the process much smoother.  In this article, we’ll highlight common mistakes people make when filing their taxes and show you how to avoid them.

1. Missing the Filing Deadline

One of the most frequent mistakes is failing to meet HMRC’s deadlines. The UK tax year runs from 6 April to 5 April of the following year, with these key deadlines for self-assessment taxpayers:

• 31 January: Deadline for online submissions and payment of tax owed.
• 31 October: Deadline for paper tax returns (except for specific cases).

Penalties for Missing Deadlines:

• Initial Penalty: £100 for late filing.
• Additional Penalties: £10 daily fines (up to 90 days) and escalating charges for prolonged delays.

How to Avoid It:

• Mark deadlines on your calendar and set reminders.
• Prepare your return early to avoid last-minute stress.
• Work with an accountant for timely and accurate submission.

2. Missing the Self-Assessment Registration Deadline

Failing to register for Self Assessment is another common error for individuals filing for the first time. HMRC requires first-time taxpayers to register by 5 October of the tax year. 

Missing this deadline can lead to delays, fines, or difficulties in submitting your return on time.

How to Avoid It:

• Check whether you need to register for Self Assessment, particularly if you are newly self-employed or have untaxed income.
• Visit the HMRC website and complete registration before the 5 October deadline.
• If you miss the deadline, register as soon as possible to avoid penalties.

Please note: While the 5 October deadline itself doesn’t carry an immediate financial penalty, filing your tax return late may result in charges.

3. Incorrect Reporting of Income

Inaccurately reporting income is a frequent issue for businesses, especially sole traders with multiple revenue streams. HMRC requires accurate reporting of all income earned during the tax year, including dividends and additional earnings. Misreporting income can lead to fines and impact your financial credibility, affecting your ability to access loans or mortgages.

How to Avoid It:

• Use your unique taxpayer reference (UTR) to track and report all income accurately.
• Maintain detailed records throughout the year to minimise errors.

4. Forgetting Deductions and Reliefs

Many businesses fail to claim eligible tax reliefs, such as pension contributions, R&D credits, or business expenses. Overlooking these can result in paying more tax than necessary.

By failing to claim these benefits, you’re missing out on potential tax savings that could be reinvested into your business, used to pay off debts or put towards other financial goals.

For example, you can claim tax relief on various items, including business equipment, charitable donations, and pension contributions. Claims can be made for expenses up to four years previously.

How to Avoid It:

• Consult an accountant to identify deductions you’re entitled to.
• Regularly review HMRC’s guidelines to stay updated on deductions.
• Keep detailed records of expenses for at least 6 years.
• If self-employed, claim tax relief when filing your self-assessment tax return.
• For employed individuals, use form P87 for claims under £2,500 or self-assessment for claims over £2,500.

Remember, the amount of tax relief cannot exceed the amount of tax paid in that year.

Visit HMRC’s website to learn the latest information about tax relief.

5. Not Checking Your Tax Code

Your tax code determines the amount of tax HMRC deducts from your earnings. Errors in your code can lead to overpayment or underpayment. For example, if you are assigned the basic rate instead of one reflecting allowances like the tax-free personal allowance, 

How to Avoid It:

• Verify your tax code annually or after significant income changes.
• Contact HMRC if your code seems incorrect.

6. Mismanagement of Business Expenses

Claiming personal expenses as business costs or vice versa is a frequent error that can trigger HMRC scrutiny. HMRC’s fundamental rule is that expenses must be “wholly and exclusively” for business purposes.

How to Avoid It:

• Keep separate accounts for personal and business finances.
• Use accounting software to categorise expenses and maintain accurate records.
• Retain all receipts and invoices for at least 6 years.
• Understand HMRC’s “wholly and exclusively” expense rules.
• Apportion expenses with mixed personal/business use.
• Consult a tax professional when uncertain about expense claims.

7. Failure to Include the UTR Number

Your Unique Taxpayer Reference (UTR) is a 10-digit unique identifier that HMRC uses to process your tax return. Forgetting to include it or incorrectly entering it could delay processing or lead to a rejection. It is always listed in your letters from HMRC.

How to Avoid It:

• Double-check your return to ensure all fields, including the UTR, are completed and accurate.
• Keep your UTR secure but accessible for filing purposes.

8. Failure to Hit Payment Deadlines

The deadline for paying tax owed is 31 January, following the end of the tax year. For those making advance payments (payments on account), there is an additional deadline of 31 July.

Payments on Account:

• These are estimated payments, each being half of the previous year’s tax bill.
• Do not apply if your tax bill is less than £1,000.
• Do not apply if you’ve already paid at least 80% of the tax you owe.

Penalties for Late Payment:

• Interest accrues on unpaid taxes (currently Bank of England base rate plus 2.5%).
• Escalating penalties apply:
  • 5% of tax outstanding after 30 days.
  • Another 5% after 6 months.
  • A further 5% after 12 months.

Time-to-Pay Arrangements:

If you cannot pay by the deadline, contact HMRC before 1 March to arrange a payment plan. While interest will still apply, this can help you avoid additional penalties.

How to Avoid It:

• Set reminders for both payment deadlines (31 January and 31 July).
• Budget in advance to meet payment obligations.
• Maintain accurate financial records.
• Consider consulting an accountant to help manage tax liabilities.
• If facing financial difficulties, contact HMRC proactively.

9. Overlooking PAYE Code Adjustment for Self-Assessment Tax

Self-assessed taxpayers often miss the opportunity to have HMRC collect owed tax through their PAYE code. If your self-assessment tax liability is under £3,000, you can request this adjustment instead of making a lump-sum payment. 

The deadline to submit your online return for this option is 30 December, following the tax year.

How to Use This Option:

• Ensure you submit your online tax return by 30 December if you wish to use this adjustment.
• Contact HMRC early to verify your eligibility and discuss PAYE code adjustments.
• Be aware that the tax will be collected in the tax year after next through your PAYE code.

10. Not Filing Paper Returns When Required

Some taxpayers, such as trustees of registered pension schemes or non-resident companies, must file paper returns. For these specific cases, the deadline is 31 January, unlike the standard 31 October deadline for other paper returns.

How to Avoid It:

• Verify your filing method and specific deadline with HMRC.
• Submit paper returns by the appropriate deadline (31 January for trustees of registered pension schemes and non-resident companies, 31 October for most others).

The Importance Of Avoiding Tax Mistakes

Tax return errors carry significant risks for businesses, including financial penalties, delays in refunds, and even HMRC audits. Missing the filing deadline, for instance, incurs fines starting at £100, with escalating penalties for extended delays.

For senior leaders and business owners, errors like reporting inaccurate income or failing to claim tax reliefs can disrupt cash flow and complicate financial reporting. By prioritising accuracy when you file your self-assessment tax return, you demonstrate professionalism, maintain compliance, and avoid unnecessary stress.

Fixing Tax Filing Mistakes After They’ve Been Submitted

If you discover an error after filing, act quickly. HMRC allows amendments to self-assessment returns within 12 months of the original deadline. 

For the 2023/24 tax year, corrections are allowed until 31 January 2026.

Delays in addressing issues can result in interest charges on unpaid taxes or additional scrutiny from HMRC.

Steps to Correct Errors:

1. Wait at least 72 hours after filing before making changes online.
2. Log into your HMRC account to make the necessary changes. For paper returns, download the form, write “amendment” on each page, and include your name and UTR.
3. Provide explanations for adjustments, especially for income or expenses.
4. Seek professional advice to ensure your corrections are accurate.

Additional Information:

• Your bill will be updated based on the changes reported.
• You may need to pay more tax or be eligible for a refund.
• For amendments beyond the 12-month deadline, you must contact HMRC in writing.

Expert Tips For Avoiding Tax Filing Mistakes

Plan Ahead

Waiting until the last minute to file your self-assessment tax return increases the risk of errors. Instead, plan ahead by maintaining detailed financial records and staying on top of income and expense tracking throughout the year.

Use Professional Advice

Accountants are invaluable for navigating the complexities of tax filing. They can help you identify common mistakes, claim eligible tax reliefs, and ensure accurate reporting. Businesses with complex structures or significant tax liabilities benefit most from expert guidance.

Invest in Software

Tax software streamlines calculations, tracks expenses, and ensures compliance with HMRC’s guidelines. Combining these tools with regular professional reviews minimises the risk of filing errors.

How Professional Accountants Can Help You Eliminate Errors

At J. Dauman & Co, we understand the challenges businesses face when paying tax and meeting HMRC obligations. Whether it’s staying ahead of the 31 January filing deadline, avoiding common tax return mistakes, or claiming the right tax relief, our expert team is here to help.

Why Choose Us?

• Expertise in handling intricate tax scenarios for medium to large businesses.
• Personalised advice tailored to your specific needs.
• A proactive approach that ensures compliance and minimises risks.

Partnering with us ensures your tax affairs are managed efficiently and accurately, giving you peace of mind.

Contact J. Dauman & Co today for tailored tax solutions and expert guidance on tax filing.