Self-assessment tax returns: the common mistakes to avoid

Seven of the most common errors small business owners make when completing their self-assessment forms

As anyone who is self-employed or runs their own business will know, HMRC requires a full breakdown of expenses and taxes by the end of January.

For many, this means hours talking to their accountant and searching for lost documents. If there are mistakes in a return, then the whole process can result in hours and – in the worst cases – money wasted needlessly.

Here are the common errors people make when filing their self-assessment returns and how you can avoid them.

The common typo

The most common mistake made by small business owners or entrepreneurs is simple: not triple checking every last detail.

There are plenty of mistakes that can creep into your form, so, while it may seem like an obvious piece of advice, force yourself to look over it again and again until you are absolutely certain that every piece of information is recorded in the right place. When you are satisfied that the form is correctly filled in, check it again.

Not using an accountant

If you are still unsure about even the slightest element of your return, then ask your accountant. Accountants are the experts: they have the specialist knowledge to help you through the self-assessment process, and ignoring them is not advisable.

They may be a small, added expense, but when you consider that you incur an automatic fixed penalty of £100 if your return is late (not to mention the supplementary charges if you still don’t get your return in), it is clearly worth the outlay.

Ignoring your business

Accountants also have the added benefit of allowing you to focus on your business while they get on with all the paperwork! I would particularly recommend hiring an accountant to walk you through the forms if this is your first year of tax returns.

Failing to understand the financial year

It is also essential that you understand the financial year. The time you are recording is from 6th April 2012 until 5th April 2013. The crucial thing to remember is not when you were paid, but when you sent out the invoice – that is the information HMRC is interested in.

If you received your payment after the deadline, yet sent out the invoice within those dates, then make sure you include it on the return.

Not leaving time

Even if you work with an accountant, you will most likely still have to dedicate some time to the form yourself. Small business owners I have spoken to in the past have tried to juggle their time between running their business and completing their tax return.

I always advise them to put some dedicated time aside to concentrate on their return. If you are at home, squirrel yourself away; if you’re at work, lock the door to your office. It pays to avoid interruptions for a couple of hours to get it right first time. Rip off the plaster – it will be quick and painless, but don’t leave it until the last minute.

Not discounting VAT

VAT is an area that often trips up business owners who don’t use accounting software, but manually input their finances onto a spreadsheet. Those who have invested in accounting software will find that when they enter receipts, the programme will automatically make allowances for the VAT included in the expense and remove it.

However, if you don’t use this kind of software, make sure you remember to discount the VAT – if you don’t, your form will be returned and you run the risk of missing the deadline.

Not paying HMRC

Finally, do not forget to actually pay your return! It is not uncommon for small business owners to send in their returns and think they are done, but you still have to pay HMRC once the form is dispatched. There are a variety of ways to pay, including by cash or debit card, but check on the HMRC website to be certain of how you are eligible to pay.

Ultimately, this period need not be as stressful as is widely reported. Avoid the kind of pitfalls listed above, and if you are in any doubt about anything, enlist an accountant.

Bobby Chadha is the resident accountant expert at Intuit, provider of online accounting software, and ACCA qualified accountant. www.intuit.co.uk

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