Rushing to file your tax return? Avoid these common mistakes!
This article was first published on 23 January 2014 and was last updated on 7 December 2016.
The deadline for filing 2015/16 tax returns is almost upon us, and that could mean that you’re trying to finish yours in a hurry. Here are some top tips to help you avoid the most common mistakes people make in the rush to file before 31st January.
Remember to declare interest received on all bank accounts
The main section of your tax return must include the interest you received on all your bank accounts for the tax year in question (in this case, the tax year 2015/16, which finished on 5th April 2016). The only exception to this would be a bank account on which the interest is paid tax-free, such as an ISA.
When declaring interest received on bank accounts, be sure to include:
- interest received on a business bank account
- your share of interest received on any accounts you held jointly with another person
- interest received on personal bank and building society accounts
Don’t forget to declare business income not yet received
It might surprise you to hear that you must declare
If your accounting year end falls on the same date as the tax year end, for example, you would need to declare any income for work that you’d completed by 5th April 2016, but had not yet been paid for, in your 2015/16 tax return. If you still need to invoice or chase an unpaid invoice for any of this work, now’s the time to do it!
Remember to record unpaid costs
Just as you have to declare all income in your tax return, you need to record all costs from your last accounting year as well, even those that were unpaid by the business at your accounting year end date (again, unless you're using the cash basis to prepare your accounts). If the end of your accounting year falls on the same date as the tax year end, for example, you would need to record any unpaid costs that were incurred by 5th April 2016 on your 2015/16 tax return.
You will need to include two types of unpaid costs:
- costs that will be paid by the business after your accounting year end date (e.g. an office telephone bill)
- costs for which cash will never leave your business bank account (e.g. business use of home expenses and the cost of mileage for business travel)
Don’t forget to declare salary, benefits and repaid expenses from your job
If you have a salaried job in addition to running your own business, you will have received a form P60 for the 2015/16 tax year from your employer in April or May last year. This will show you how much you earned in wages and how much tax was deducted. You need to record this information on the Employment pages of your tax return.
If your employer provides you with any non-cash benefits (e.g. medical insurance), or reimburses you for expenses, you will also have received a form P11D which outlines these details. Be sure to record this information, in addition to your salary and tax deductions, on the Employment pages of your tax return. If the expenses you were reimbursed were all incurred for the purpose of doing your job, remember to include these in boxes 17-20 so that you don’t pay extra tax on the money your employer reimbursed you.
Remember to declare underpaid or overpaid tax from a PAYE Notice of Coding
If you are employed and, as a result of a change to your PAYE tax code change, you underpay or overpay tax, you will receive a letter called a Notice of Coding, which outlines the details of the underpayment or overpayment. If you have received a Notice of Coding which states that it relates to the tax year 2015/16, or that you need to declare it in 2015/16, you will need to include this information in the Tax Adjustments section of your tax return.
It’s worth checking this because leaving out details of underpaid or overpaid tax from a PAYE Notice of Coding in your tax return can cause problems further down the line. HMRC may try to make you pay any underpayment twice: once through your tax return and once through your tax code. There is also a chance that HMRC might refund you an overpayment twice, but this isn't as exciting as it sounds: they will realise their mistake eventually and will make you pay it back!
If you’re looking for even more last-minute help, check out our Self Assessment Checklist and video about how to file your tax return with FreeAgent. And as always, if you are in any doubt about how to fill in your tax return, talk to your accountant or call HMRC’s Self Assessment Helpline.
- Video: self-employed business expenses by HMRC
- Finance Bill 2017-19: Making Tax Digital back on the agenda
- A little goes a long way: pension prep for freelancers
- 4 ways to keep your business ticking over while you travel
- Business on the beach: five holiday reads for freelancers