Leaving a tax return to the last minute means you are more likely to do it in a hurry. There are still six million people in Britain who have not yet filed their self-assessment tax form, HM Revenue & Customs said this week – and time is running out ahead of the 31 January deadline.
Leaving it to the last minute means you are more likely to do it in a hurry and therefore more likely to make careless errors.
Filing online is a good way of avoiding mistakes because calculations are done automatically and there is on-screen help if you need it. But it is still easy to trip up, due to carelessness, not being organised enough, or lack of knowledge. Here are the five most common errors:
• Don't leave things out. "Probably the most common mistake of all is the omission of a source of income, typically the interest arising from a bank or building society account, which in some cases can be quite substantial," says Giddens. So before you start, gather together the documents relating to all your savings accounts and investments – statements, passbooks etc.
You have to include the interest you receive on bank, building society and other savings accounts, and on any loans to individuals or organisations, including those made via "peer-to-peer" lending websites such as Zopa.
You must also include interest received from credit union and friendly society accounts. And if you have enjoyed a payment protection insurance (PPI) compensation payout, any interest included in the payment must be declared, too. You don't have to declare interest from Isas.
You must also include dividends from UK companies and unit trusts, open-ended investment companies and investment trusts.
• Don't get your numbers in a twist. Another common error is, including the gross amount of interest instead of the net amount after tax that is being asked for.
For example, with box 1 on page TR 3, relating to taxed UK interest, you need to put in the net amount – the interest etc after tax was taken off. Some account statements will explicitly give this figure; others just show gross interest and tax taken off.
• Is your tax code wrong? Now's the time to check. Thousands of taxpayers may well be paying too much (or too little) tax as a result of having the wrong tax code.
In some cases people have received refunds running into thousands of pounds after belatedly spotting that they have been paying too much for years.
Your tax code can usually be found on your payslip – it's typically three digits followed by an L, such as "744L", and it tells your employer how much to deduct from your pay packet.
If your employer provides you with company benefits, such as medical insurance or a car, you will probably have to pay tax on them.
Last year, analysis has found that a quarter of all taxpayers may be paying the wrong amount of tax due to incorrect codes, and added that pensioners appear to be particularly vulnerable to problems.
To check you're on the right tax code, try moneysavingexpert.com's online code checker.
• Don't forget gift aid. You can tell the taxman about donations by filling in the section "gift aid payments". Gift aid boosts the value of donations by allowing charities to reclaim basic rate tax on your gift: £10 using gift aid is worth £12.50 to the charity.
If you pay higher-rate tax, you can claim extra relief on your donations, says Chas Roy-Chowdhury, head of taxation at ACCA (Association of Chartered Certified Accountants). For example, if you donated £100 using gift aid, the total value of your donation to the charity was £125 – so you can claim back £25 if you pay tax at 40%, or £37.50 if you pay tax at 50%.
When you're asked about gift aid payments made in the year to 5 April 2012, enter the actual amounts given – don't add on any tax relief that you think the charity will obtain.
• Don't forget to pay what you owe! As well as pressing the button to send your form, you must pay what you owe by 31 January – this applies whether you filed a paper or online return.
So in conclusion most self employed people are so busy working that they just don't have the time needed to make sure that they are getting all the tax relief that they are entitled to. Many pay the wrong amount of tax and many more are late with their submission or payment. That's why its always better to consult a qualified accountant like Tax Affinity Accountants who can save you a lot of stress, time and money in the long run.
Tax Affinity Accountants provide Tax Return services and throughout the UK, and are based in the London Borough of Kingston upon Thames.
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