Steer clear of the pitfalls when doing your Self Assessment

If you are one of those lucky people who has to file a tax return for the tax year to 5 April 2013, it must be in by the end of January or you’ll automatically be fined £100 – even if you’re only a day late or you owe no tax.

So if you’re currently doing your Self Assessment, how can you avoid making mistakes that could either force HMRC to reject your return, or earn you interest and penalties for paying the wrong amount of tax?

Emily Coltman FCA, Chief Accountant toFreeAgent – which provides the UK’s market-leading online accounting system for small businesses and freelancers – gives her five most common tax return errors to avoid.

Using the wrong business accounts figures

Be careful when you’re adding up your income and expenses for your sole trader or partnership accounts.

You have to count income depending on when you did the work – not when the customer paid you.  Although this is a requirement that is changing for some businesses, the changes won’t be applicable until the period after 6th April 2013 – so remember to follow the original rule for this year’s tax return!

And there are also common mistakes for expenses, such as claiming the cost of all clothing that you buy to wear in your business.  You can only claim tax relief on the cost of clothing if it’s a) a recognisable uniform such as a nurse’s or policeman’s uniform, or b) if it’s protective clothing like a bricklayer’s overalls, or c) if it’s your costume and you’re an entertainer such as an actor, dancer, or children’s magician.

For more information on what you can, and can’t claim, check out our expenses whitepapers for sole traders, partnerships and limited companies –

Using the wrong reference numbers

You need to quote your unique tax reference (UTR) on your tax return.  This is 10 numerical digits long (e.g. 12345 67890) and you’ll find it on paperwork from HMRC such as a “Notice to Complete a Tax Return”.

If you don’t know your UTR, you can phone HM Revenue & Customs’ Self Assessment Helpline and ask them to post it to you.  They won’t give it to you over the phone.

Don’t confuse your UTR with your National Insurance number.  Sometimes HMRC put this number (which is always in the format AA 12 34 56 B) in the “Tax Reference” field on your Notice to Complete a Tax Return.  Don’t make the same mistake – put in your UTR when asked for your tax reference number.

Filing your return on paper

The deadline for filing paper Self Assessment tax returns passed in October, which means that all outstanding tax returns must now be filed online.  So not only will you need to make sure you have registered with HMRC so that they know you have to complete a tax return, you will also have to register for their online filing service.

Remember that if you don’t file your return online by 31st January, you will be fined £100 whether or not you owe any tax.

Not filling in all your information

If you have an accountant, make sure you give them all the paperwork that you think they might need.  If you’re not sure whether they need a particular piece of paper, or to know about a certain source of income, either ask them, or give them the information just in case!

If you don’t have an accountant, you can ring HM Revenue & Customs’ Self Assessment Helpline for advice.

Trying to do this all on your own

Unless your tax affairs are very simple, you could risk falling into a tax trap that you don’t even know is there!

For example, did you know that if you claim tax relief on business travel in your own car by using the mileage method, you can’t then claim capital allowances on the cost of buying the car?

And did you know that if you’re a sole trader or a partner, you can only claim tax relief on the cost of food and drink when you’re out and about on business if your business is itinerant by nature (e.g. you’re a long-distance delivery driver), or you’re away overnight, or your journey is outside your normal pattern of business?

If you’re in any doubt, you should speak to an accountant for help. They will be able to give you the correct information you need, which will save you from trying to do it yourself and potentially getting into a muddle!

Emily Coltman FCA is Chief Accountant to FreeAgent, which provides the UK’s market-leading online accounting system designed to meet the needs of small businesses and freelancers.

From January, sole traders will be able to “Fast File” their Self Assessment tax returns from within FreeAgent, rather than through HMRC Online. Try it for free