Busting Self Assessment Tax Return Myths

HMRC has clarified Self Assessment Tax Return myths to help taxpayers understand their liabilities or responsibilities. These myths may mislead taxpayers and individuals into thinking they can avoid certain taxes or deadlines. So, it is important to identify the tax myths and get a general understanding of the facts.   

Myth 1: I’m Not a Sole Trader, So I Don’t Need to File a Tax Return.

Self Assessment is not just for sole traders. Self Assessment Tax Return must be filed if you fit into a set of specific conditions. You must file a tax return if you are self-employed or earn more than £150,000 annually.

However, if you are the director and owner of a limited company, you also need to file a return:

• Earn taxable income from savings or investments
• Pay yourself a dividend income of more than £10,000
• Claim allowable expenses
• Receive a director’s loan
• Receive taxable payments from a pension
• Receive any foreign income

Filing a tax return is not just for the self-employed. You may need to report your income through Self Assessment on many other grounds.

Myth 2: It’s Fine to File My Self Assessment Return at the Last Minute.

 Filing tax returns at the eleventh hour is very common. In the tax year 2022/23, 778,068 people filed their tax returns on 31 January 2023. According to an HMRC press release, 61,549 were filed between 4-5 PM and 32,958 between 11 PM and midnight.

You can and should submit your Self Assessment early. Running strongly and smoothly helps avoid delays and penalties. Early filing reduces stress during tax season.

Myth 3: I Can Claim All My Expenses Back Through Self Assessment.

Allowable expenses for self-employed individuals include the following:

• Travel
• Staff
• Office, property, and equipment
• Reselling goods
• Unpaid invoices
• Legal and financial costs
• Marketing
• Training

Limited companies can claim multiple expenses. They are:

• Charity Donations
• Employee and director eye tests
• Staff entertainment
• Business mobile phone purchases and contact costs for you and your employees
• Certain business gifts

So, be aware of your business expenses before committing to certain costs, assuming you can claim them in your Self Assessment Tax Return.

Myth 4: HMRC Can’t Make Me Pay Tax If I Don’t Submit a Tax Return.

It is an individual's responsibility to file a Self Assessment Tax Return if needed. Even if you don’t file, HMRC estimates your tax liability using data from various government sources. Similarly, HMRC can investigate your tax affairs and calculate what you owe.

Failure to file can lead to serious fines and penalties. So, to avoid additional charges, submitting on time and paying the right amount is necessary.

Conclusion

Many individuals in the UK file a Self assessment tax return at the end of the year. However, many confusions and myths about the tax return can lead to people making mistakes. These mistakes can cost the taxpayers as HMRC can penalise mistakes and corrective measures. So, knowing your tax liabilities and getting professional help whenever needed is important.