After a decade of dealing with 100s of tax returns and assisting clients with tax enquiries, that there are 10 very common mistakes people make when filling in their personal tax return in the rush for 31 January.

These mistakes, however innocent can lead to additional enquiries and even investigations by HMRC. At the very least they may mean paying too much tax or waiting longer than necessary for a refund.

So here are the top 10 mistakes that many people make:  

1. Not using the white space to explain unusual variations

If you know there is something unusual, explain it.

HMRC is then far less likely to start an enquiry. It is crucial that you or your accountant do this, although often it doesn’t seem to happen especially if your accountant is snowed under with lots of last minute returns to prepare.

For instance, if your net profit seems too low to support someone above the poverty line, be prepared for give a plausible explanation. However, there’s no need to go overboard or be over generous in the information you give. Keep it straight, honest and simple.

2. Entering the same expenses in different boxes each year

In their haste to get the return filed, many taxpayers and sometimes even their accountants do misclassify the expenses on the return.

For example, a driving instructor putting their fuel cost in the cost of sales figure one year and then in motor expenses the next, will produce large variations that the computer will want further explanations for.

3. Not claiming eligible pension reliefs

This can happen by entering the net figure of employee personal pension premiums instead of the gross figure on the return.

This means that you are claiming insufficient relief where higher rates of tax are payable.
While this may not lead to an enquiry, it’s a common mistake that could cost you money.  

4. Lack of attention to risk areas and hot spots

HMRC knows that enquiries into the following expenditure areas are likely to produce some interesting results:

• legal and professional expenses
• repairs and renewals
• entertaining
• stock
• provisions and accruals
• research and development (R&D)
• drawings
• pensions
• employment expense
• termination payments

The taxman has been known to raise more enquiries into the above expenses than any other areas. For instance, where drawings are comparatively low, HMRC may wonder whether there have been undeclared cash sales which have been used to fund your living expenses.

5. Not showing private use adjustments separately on the self employment pages

HMRC will always be looking to disallow any private use of items. So where you have already restricted say motor expenses for private use, you will avoid questions if you show the adjustments separately rather than netting it off so that it’s clear to the taxman that adjustments have been made.

6. Claiming for expenses that cannot be claimed

The rules on what expenses can/cannot be claimed is not as straightforward as you may think. You should proceed with care or appoint a good accountant or tax adviser.

For instance, you might assume that an actor who rented accommodation in Scotland during a film shoot for his business could claim the cost of the accommodation against his income right? Wrong.

HMRC denied the expenses and won the tax tribunal case. It was decided that the expenses did not meet the so called ‘wholly and exclusively for the purpose of the trade’ test.

7. Claiming termination payments twice

This happens where an employer has already taken the £30,000 termination payments into account through the payroll and given tax relief at source, but taxpayers innocently claim it again on their tax returns.

This is very common and a classic mistake that has led to a number of tax tribunal cases. The effect being that taxpayers are asked to pay, on average, £3,000 in carelessness tax penalties.

8. Forgetting about student loans or child benefit clawback

This is another area that gets picked up very often by HMRC and leads to a letter saying ‘your tax return was inaccurate… you may have to pay inaccuracy penalty’.

So this is where you have taken a student loan a while ago but you are now having to make repayments through the tax return because your earnings exceed the threshold. Because the loan was taken a while ago, it is so easy to miss this on your return.  

Child benefit clawback is another classic mistake, and is becoming more common among higher income earners who are receiving child benefits and who earn over £50,000. Essentially the amount of child benefit is clawed back under what is called the high income child benefit charge (HICBC). Because child benefit is normally dealt with under the benefits system, it is easy to forget to include it on the tax return even though the return does provide a box for this.

9. Ignoring tax code notices

Nearly all tax papers are entitled to an annual tax free allowance. This is usually shown as a tax code to enable employers to deduct the right amount of tax. Sometimes the taxman will add or deduct certain items from your tax code. For example, benefits in kind, or pensions or tax underpayments.

By ignoring the tax codes, you risk not adding or reflecting these items on your return leading to an incorrect tax return.

10. Forgetting about foreign income

This was such a common oversight that the law was changed to make this error a criminal offence. Please proceed carefully and use the checklist (a basic one like the self-assessment checklist can help) to take greater care of your return. Or instruct a professional.

Tax can be tricky – so, if in doubt, seek professional advice. That said, you can certainly do it yourself and use HMRC’s site or other online platforms, but do take extra care, use a checklist and don’t leave it to the last minute.

About the author

Jonathan Amponsah CTA FCCA is managing partner of The Tax Guys and is an award winning chartered tax adviser and accountant who has advised many clients over the last decade on tax and has successfully defended clients against HMRC at the tax tribunal. Jonathan is the founder and CEO of The Tax Guys. He is also the co-founder of Easy Tax Returns (a tax return app).