5 Common Tax Mistakes to Avoid When Filing in the UK: a guide for self-employed traders

common mistakes

Being aware of the common tax mistakes to avoid when filing in the UK is one of the best pieces of knowledge to master if you are stressed out because you have to file your tax return. Are your worried you included something wrong with it or that you have not claimed the right expenses ?

As a sole trader you are required to be registered as self-employed and submit your self-assessment tax return every year at the latest on 31 of January.

In this article we will address the most common tax mistakes to avoid when filing in the UK if you are a sole trader registered with HMRC as self-employed.

1. Not having your paperwork ready

This is one of the most common mistakes sole traders do. They don’t have their paperwork neatly organized, they don’t have all their receipts, invoices and other relevant pieces of documentation kept together in one safe place. In other words, their bookkeeping is not attended to or their bookkeeping is messy and untidy.

When the time comes for submitting your self-assessment tax return, you run here and there trying to find all the papers that you need. Chances are you won’t find all of these in time and you will incur higher accountancy fees because your accountant will have to tidy up your one year worth of bookkeeping for you. Chances are also that you won’t have all your receipts and will not be able to claim all the expenses that you should, which in turn will cause you to spend more money on taxes.

Our best advice is to have your bookkeeping neat and tidy, so that when the time comes for submitting your tax return, all the information is readily available.

2. Not claiming all the allowances to which you are entitled

2.1. Personal Allowance

The allowance that almost all tax payers are entitled to is the personal allowance, which for the tax year 6 APR 2023 – 5 APR 2024 is £12570. This means that if your income from all your sources is below £100,000 you will only pay tax on the earnings which are above £12570. If your total income is above £100,000, then for every £2 that you earn above £100,000, the Personal Allowance reduces by £1. This effectively means that if you earn a total income of £125,140 or more, your personal tax allowance is reduced to zero.

2.2. Marriage Allowance

If you are married or in a civil partner relationship and one of you was born before 6 April 1935, you are eligible to get Married Couple’s Allowance which may help you pay less tax. If both of you were born after 6 April 1935, you may be eligible for Marriage Allowance which allows you to transfer £1260 of your Personal Allowance to your spouse.

2.3. Personal Savings Allowance

This allowance refers to money you are saving. All basic rate tax payers have a Personal Savings Allowance (PSA) of £1000. This effectively allows you to not pay tax on the first £1000 of interest from your combined (you and your spouse’s) savings interest.

3. Not including the child benefit charge

In the UK, all children are entitled to the Child Benefit regardless of how much their parents are making. But if you are a parent with an income of above £50,000 and are still in receipt of Child Benefit, you must include this amount on your tax return as ”High Income Child Benefit Charge”.

4. Not writing your UTR or your NIN correctly

Many people lose their UTR number because they are not aware it’s a very important piece of information. The UTR (Unique Taxpayer Reference number) identifies you with HMRC. People may have the same name and even same date of birth, this is why they are given a UTR when they register with HMRC as self-employed, so that HMRC knows exactly who they are and does not mistake them for someone else. You will find your UTR number on every piece of correspondence you receive from HMRC. Keep it safe in a place you know so that when it’s time to file your self-assessment tax return, you have your UTR ready to be entered on your return. The UTR is a 10 digit number. It is also highly advisable that strangers not have access to your UTR.

Your NIN (National Insurance Number), also sometimes referred to as NINo by HMRC, is made up of 9 letters and numbers. If you were in the UK attending school when you turned 16, you will have received your NIN in the post. As with the UTR, it is very important to keep this number in a safe place, because it is unique to you. In the UK, you will not be able to work without this number.

Any errors with your NIN or your UTR numbers can cause a delay in processing your tax return, and sometime can cause you to start receiving penalties even though you have submitted your return!

5. Not including expenses that can be claimed to reduce your tax

There are expenses that you can claim to reduce your taxable income, which in effect means you will pay less tax. It is very important to keep all your receipts, invoices, etc so that allowable expenses can be claimed.

You are also required by law to keep these records for at least 5 years, in case HMRC decided to run an audit of your accounts.

How can LAS Accounting help ?

LAS Accounting Ltd can help you with all your accounting needs, from bookkeeping to taxes, saving you time and money to focus on doing what you do best – running and growing your business. We can also help you understand your business finances, monitor your cash balances, plan for future tax liabilities and pinpoint trends to help support important business decisions.

Now might be the ideal time to engage the services of an accountant to do all the work for you and provide you with all the accounting advice you need.

Don’t hesitate to get in touch for any further enquiries at: info@las-accounting.co.uk

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