How to Avoid HMRC’s £100 Fine

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How to Avoid HMRC’s £100 Fine

Did you know that all self-employed individuals need to submit a self-assessment tax return by Friday 31st January 2020, even if they don’t think they owe any tax? Failing do so is very likely to land you a £100 fine, which is no way to start the new year.

In fact, HMRC is set to make £70 million from last year’s 700,000 late submissions, many of which were just one day (or even a few hours) overdue. Don’t be part of this figure – make sure to submit your return as early as possible, as leaving it until the final few hours is never a good idea. Just imagine filling in your online form on 31st January, only for your computer to crash, the website to freeze or certain information you need being missing. Being prepared not only gives you peace of mind, it can also save you a very unwelcome late submission fee.

If this is your first self-assessment tax return or your memory of the last one is fuzzy, we’ve put together some tips that will help to make it as smooth and painless as possible.

Have your UTR number ready

Your unique tax reference, or UTR, is required in order to file your tax return. Similar to a National Insurance number, this 10-digit reference never changes and is yours alone. If you’ve forgotten it, it can be found on any postal correspondence from HMRC and also on the HMRC website when you log into your account.

If in doubt, call HMRC on 0300 200 310, or if you’re outside the UK it’s +44 161 931 9070.

Have all of your documents to hand

HMRC needs a lot of information in order to accurately calculate the amount of tax you owe. Depending on your circumstances over the previous financial year, you may need a P60 or P45 from any employers, your student loan annual statement if you want to make a payment, and all of your invoices, bills and receipts connected to your business.

Take note that HMRC can launch investigations whenever it suspects fraud, with paperwork up to twenty years old being required, so keep all of your records safe for the foreseeable future.

Don’t forget tax-free allowances

On a happier note, there are certain expenditures that are exempt from tax. The most notable is your personal allowance, which for 2019-20 is £12,500 (up from £11,850 in 2018-19). If your earnings fall below this figure you won’t have any tax to pay, but you still need to submit a self-assessment tax return.

Meanwhile, if you’re married or in a civil partnership and at least one of you earns below the personal allowance, you may be eligible to claim marriage allowance. Plus if you make income from trading activities (such as selling products online) or from your property (e.g. hiring out your garden for events), the first £1,000 is also tax-free.

The allowances that you can claim are entirely dependent on your exact circumstances, which can sometimes make a significant difference to the amount of tax that you have to pay.

Log all valid expenses

Similar to allowances, suitable expenses can also reduce your tax payments. Working from home, vehicle usage, using public transport for work and accommodation during business trips are the most common expenses that self-employed people submit to HMRC, which can really add up over the course of a year.

Needless to say, you’ll must keep the receipts for all of these transactions long-term so that you can present them as proof to the tax man if the situation arises.

Hire TreyBridge to do it for you

Whilst we’ve tried to explain self-assessment tax returns in no-nonsense language, the process of submitting one can still be very time-consuming, stressful and complicated. If you’d rather we take the hard work off your hands, get in touch with our friendly team on 01482 235575 and find out how we can help.