It’s April and that can only mean one thing: tax return time! Yes, the old tax year has ended and the new tax year has begun, and it is time to pay what you owe. Unless you are a rich tycoon with ties to a Panama law firm, you can’t afford to make any mistakes. If you do, you will end up paying more than you owe. And, the worst thing about the British tax system is that it is a nightmare to get your tax back once they take it from you.
Just as bad is the fact that it is a complex system. Filing a tax return isn’t easy as it is hard for most people to understand. After all, you aren’t a tax expert. Obviously, you want the process to go as smoothly as possible. And for that to happen, you need to know what to do and what not to do when you file your return.
Not Hiring A Pro
Professional tax experts are expensive. That is the first thing that you should understand. However, the other thing to understand is that they will save you money in the process. In fact, a good one will also make you a bit of money on the side, legally of course. For the most part, they cost less than they save you in tax thanks to their skill and knowledge of the industry. If you think that they are too expensive, you underestimate their effect. Every individual should use a professional if they want to cut their yearly expenses.
Not Doing Your Research
Even with a pro by your side, you need to do your research so that you understand all the terms and conditions. At the very least, you want to understand what your accountant is doing and why. With that in mind, you need to find out what tax code you use and how it works. What does it entail? Am I in the right bracket? In Britain, the main tax code is 11000L, but there are others like BR and 0T. 11000L means that you have £11,000 tax-free for the year. For tax code 0t explained and BR tax code, visit the link. A little bit of research goes a long way with regards to tax.
The reason you need an expert is because you will miscalculate your entire tax return. And, it only takes one bad sum to skew the whole return as the numbers link together. The result can be anything from a low tax refund to you owing more than you should in tax. If the government catches your mistake, which they will, they will send you a correction notice. Although it was an innocent mistake, they won’t see it that way. They expect the worst in people when it comes to tax, which will make the process a lot more uncomfortable.
What do people turn to when they don’t trust their mental arithmetic? They turn to calculators or computers in this day and age. With the help of Excel or other math-based software programmes, you can let the programme do all the work. It sounds amazing, and it is when done properly. However, computers aren’t infallible and they will make mistakes. They especially make mistakes if you lack the knowledge to use them accordingly. Whether you are a pro with Excel or not, you should always check the sums afterwards. Then, you can catch any mistakes before you make your final return and send it off to the taxman.
Tax is mainly about numbers, but some words are important. Words such as your name and your address are vital. And, you guessed it, it is amazing how many people spell their name or address wrong on a tax return. This isn’t a huge problem because there is nothing untoward with a wrong name. What it will do is make you fill out your tax return again. Anyone that has filled out a return in the past will know that it takes a lot of time, and it is mind-numbingly dull. No one wants to have to do that two or three times in a row. Please make sure you check your return for errors just like you would double check the numbers.
Unless you get the money cash in hand, you need to disclose all of your incomings on your tax return. It doesn’t matter how insignificant they seem – they make a big difference. HMRC want to know exactly how much money you earn to the penny. That way, they can change your tax allowance accordingly. Anyone that lies on their tax return tends to get found out quite quickly. All it takes is for a few numbers not to add up, and they will issue an audit. Once they do, you are in big trouble. Anything that you put on your form needs to be accounted for, which means you need all of your receipts. If you don’t, they can send you to jail or give you a fine. Lying on your tax return is a massive deal and one that can land you behind bars. In the interest of self-preservation, be as genuine as possible.
Being Too Honest
There is such a thing as being too honest. Okay, you don’t want a prison sentence or a big fine, but you don’t want to overpay. Anything that you can write off as a business expense, you should write off as a business expense. As long as it isn’t obvious it is a lie, the taxman won’t come knocking at your door. For example, claim your petrol costs. If you drive to work, that comes under a work expense because you wouldn’t be able to drive there otherwise. There are plenty of little claims that you can make, but you need to know which ones apply to you. If you don’t, that is when you end up in trouble.
No one enjoys having to file a return and pay tax. But, it is an essential part of adult life. As long as you don’t make mistakes, there shouldn’t be too many problems.