HMRC provide advice on self-employed tax returns
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Self-employed people will have to undertake a number of administrative errors which come hand in hand with their work. Indeed, some suggest being self-employed is like being one’s own accountant, as there are a number of financial issues it will be important to consider on a fairly regular basis, to stay on top of one’s affairs. Britons who are self-employed will need to keep track of what goes in and out of their account, alongside other issues such as telling HM Revenue and Customs (HMRC) what has been spent, and indeed, for what purpose.
Sometimes this can be a challenge, but it will be vital to stay abreast of these issues regularly, as they could easily snowball out of control for the self-employed.
Nowhere has this been more evidenced than the Self-Employment Income Support Scheme (SEISS), which came to a conclusion yesterday. The scheme offered vital support but only to those who had the ability to prove they were entitled. Record-keeping and administration therefore played an important role here.
When it comes to filing taxes, there are a number of mistakes a person can make. In fact, there are “common” errors which arise time and time again for the self-employed each year.
As a result, Online Money Advisor has offered tips on some of the most frequent mistakes which are made by the self-employed to help others get the process correct on the first try.
The first error which can often arise for self-employed people is failing to claim one’s expenses, a fact which could ultimately prove costly if it were to be forgotten.
Self-employed people will incur a lot of spending throughout the year which can be classed as an expense when filling out a tax return, but people may not actually be claiming the real amount they are entitled to.
As expenses can easily be missed, Online Money Advisor recommended self-employed individuals have a way of keeping track of all of their expenses throughout the year. This is likely to make the process a lot easier, and ensure Britons do not end up missing out on support they could have otherwise received.
In a similar sense, another error can occur when it comes to expenses, that is, claiming the wrong expense when embarking upon a process of tax filing. This is another common mistake that should always be avoided by the self-employed.
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On the flip side of failing to claim expenses, some individuals may make a mistake by attempting to claim too much, especially if they are claiming the wrong kind of expense.
Self-employed people must have their expenses incurred exclusively for their business, and so if an expense has been used for partially private purposes then it will need to be reflected as such when the individual is filing their taxes.
Another point which was stressed by Online Money Advisor is the matter of income – which can be key when a person who is self-employed is sorting out their tax affairs for the year.
A common error amongst the self-employed is omitting income – and this is particularly important to note as it impacts the amount of tax a person actually pays.
The organisation explained that in addition to business-related income, individuals may have also received taxable income from potential other sources throughout the tax year, in different forms.
This could be, for example, by renting out a property for someone else to use, or having an online store to sell products – common for self-employed individuals.
As a result, then, it will be vital for people to include all types of income on their tax return, as well as placing this in the right section to ensure their taxes are filed correctly.
A final common error which is often made by self-employed people when it comes to filing taxes is a failure to keep on top of one’s records – an issue which can quickly get out of control.
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With deadlines set at a certain time each year, many people will often put off thinking about their taxes until the all-important date looms over them.
It will then be a matter of rushing to try to fill one’s taxes before the deadline, or risk a hefty penalty as a result. But this can be a time consuming and stressful process for those who are involved.
It could also increase the chance of mistakes, something which will also impact a tax return once it is ultimately filed, and could also create further headache.
Consequently, Britons are urged to take the time to amply plan ahead and keep record throughout the tax year so that when it comes to sitting down to complete the form, everything will be in one place.
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