With a week to go until the deadline for filing your online tax-return, panic's setting in. Stay calm, check you haven’t made any of these mistakes and it’ll all be fine....
1. Leaving it too late
To those of you reading this on 31 January, I can only apologise. You’ve already made mistake number one.
To everyone else, I say “Step to it!”
If you’re a newbie you need to register as self-employed to receive your Unique Taxpayer Reference (UTR) number, without which you can’t complete the return. HMRC send this out to you by post, so factor that in. Miss the deadline and late-payment fines kick in, starting at £100 for one day, increasing an additional £10 a day up to £900 over the next three months, and going up again after six and then 12 months.
The more time you allow yourself to complete your return, the less inclined you are to get flustered and mistake-prone. Set aside an afternoon free from interruptions. Make sure you’ve got everything you need to hand, including your UTR, online password, P60, invoices and spreadsheets for the previous financial year.(UK tax years run from 6 April to 5 April.)
Please try to refrain from live-Tweeting the whole damn thing. It’s distracting for you and tedious for everyone else.
2. Failing to declare EVERYTHING
Been diligently putting money towards your student loan each month? Received redundancy pay recently? Tell them.
HMRC need as full a picture as possible of your situation, to be able to assess how much tax you should – or shouldn’t – be paying. Missing vital information such as this could mean you’re slapped with a big fat tax bill for money you don’t actually owe.
3. Not claiming for expenses
You can claim tax allowances and relief for travel undertaken and certain items needed to carry out your job, such as equipment or specialist clothing. Being an idiot, when I filed my tax return a couple of years ago I didn’t claim for any expenses at all. Since I was earning next-to-nothing, it probably didn’t make much difference – but it might do for you.
Remember, these expenses are offset against the amount you're taxed on, not taken off the tax you owe. So for example, if you earned £20,000 before tax and are claiming £1,000 for a camera as a business expense, this means you’re now paying tax on only £19,000.
4. Forgetting to include PAYE earnings
Boy, have I heard some horror stories about this one... One freelancer received a whopping £1,768 rebate, only to discover months later that she was liable to pay it all back. Don’t let a similar fiscal fate befall you.
As well as freelance jobs, many self-employed creatives also do casual work for companies that pay them through PAYE. As per point two, these earnings must be included on the tax return. And simply putting down your PAYE employers’ name, your job title and the tax code from your payslip won’t cut it. You need to write down how much you earned before tax and the amount of tax deducted too.
5. Making a mistake and doing nothing about it
You file your return thinking everything’s peachy – but a week later wake up in the middle of the night with the sickening realisation that you’ve fluffed it. What to do? Firstly, don’t freak out. It’s not great – but it’s not the end of the world. There’s a whole section on the HMRC website about how to correct your mistakes. Read it.
Check out our article on freelancing and HMRC.
Visit the HMRC website for more information.
Image: Rage against the machine by Reid Rosenberg on a CC BY-NC-SA 2.0 license.
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