More and more, people are turning to self-employment as a way to get themselves out of debt and boost their futures. Some will start their own business ventures, while others will simply pick up a few side-hustle jobs to earn a little extra and pay down their credit card bill. Whichever camp you fall into, it’s important that you register to pay tax, and that avoid the common (and often costly) tax mistakes that could leave you out of pocket, as well as in hot water.
To help you with that, here are some of the most common mistakes and how to avoid them:
Not Including Every Source of Income
If you’re working multiple gigs to try and pay down debt or simply to make an honest living (perhaps as a freelancer) it can be pretty easy to forget one or more sources of income when it comes to filing your tax return.
If you do this, there is a chance that you will be investigated and this is a time-consuming process, which could lead to fines, and perhaps worse if it’s thought you were intentionally evading tax. That’s why it’s so important that you take the time to record every single penny that you earn, even if it’s only a couple of pounds’ income from your blog.
Not Adding Things Up Correctly
If your books don’t add up, it will raise the suspicions of the tax man, and again an investigation could be triggered. This is so unnecessary when there are tools like this piece of reconciliation software, which can help you to get things right first time. If you know an accountant, having them look over your return might also be a good idea.
Putting Identical Expenses in Different Boxes
This is something that’s so easy to do, but if you put the cost of, for example, the fuel you use to run your removal company side hustle in the sales of figure box this year and then place it in the motor expense category the next year, there will be a significant variation in your tax return and this could flag you up to HMRC.
Missing the Deadline
So many people miss the tax deadline needlessly each year and end up with a £100 penalty because they weren’t organised enough. This is pretty simple to avoid by making a note of the fact your tax return must be filed on the 31st October if you’re filing on paper and midnight 31st January if you’re filing online. Being aware of this, and ensuring that your taxes are up to date and in order well in advance of these deadlines will ensure you don’t lose even more of the money you’ve worked so hard to earn to the tax man.
Claiming for Unallowable Expenses
The rules of what can and cannot be claimed as an expense are tricky, but you should read up on them before filing your return because, if you do get it wrong, you could be investigated and even end up in the courts.If you’re in doubt about your expenses, it’s always a good idea to see a professional because it could save you time and money in the long-term.
Filing your taxes can be daunting, but if you make an effort to accurately record your incomings and outgoings, and you bare the above in mind, you shouldn’t have too much trouble.
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