If you’re a limited company contractor, before 31st January next year you are likely to have to sit down and get to grips with your Self Assessment Tax Return (SATR). Unsurprisingly, this annual task is rarely a popular one, and errors are easy to make if you are unprepared.
In this article, we highlight some common SATR mistakes to avoid, by focusing on the ‘what not to do’ when it comes to filing your return.
If you are submitting your return yourself, you should double-check all the figures you use – typically your salary, dividend and ‘other income’ data. If your accountant is filing on your behalf, you are still ultimately responsible for the accurancy of the data, so you should check the draft SATR before signing it off.
Unsurprisingly, you should never deliberately record inaccurate figures, as this could lead to significant penalties.
Missing the filing deadlines
After going to the work of filling in all your details, don’t forget to press ‘send’! Government systems allow you to save your form and come back to it at a later date, but you must ensure you don’t forget about the process and miss the boat. You have until 31st January after the tax year’s end to submit online, but failure to do so promptly could result in penalties being issued. For more information on deadlines and the penalties for missing them, visit this HMRC page. The 31st January is also the deadline to pay any tax you may owe – in cleared funds.
Not dating and signing!
If you’re one of the growing minority to subimt a paper return, you might be in a rush to get it sent off in order to beat the deadline (31st October), but whatever you do, don’t forget to sign and date the document, as failure to do so could result in the invalidation of the form. Your accountant will be able to confirm that failure to sign tax documents in general is one of the most common mistakes committed by clients.
Missing supplementary pages
You are often required to send / submit supplementary pages to include information on additional income which is not part of your main tax return, so don’t overlook these. These include:
- Interest from gilt-edged and other UK securities, deeply discounted securities and accrued income profits
- Life insurance gains
- Stock dividends, non-qualifying distributions and loans written-off
- Business income receipts taxed as income in a previous tax year
- Share schemes, employment lump sums or compensation payments from your previous employer, etc.
- Other tax reliefs (e.g. if you’ve invested in Venture Capital Trust schemes, or EIS)
Mis-recorded Unique Taxpayer Reference (UTR) or NI number
You could invalidate your SATR by incorrectly recording either your UTR or National Insurance number.
You can find your UTR on previous correspondence from HMRC if you have previously filed online, and if not, you (or your accountant) should register for Self Assessment, allowing 10 working days at least for HMRC to send you your UTR.
Your NI number will have been issued to you when you started working (and will be present on any number of old tax documents in your possession).
Failure to declare all income
Whether it is the relevant income or capital gains, you must declare all of it on your income tax return. If you omit information for any reason, you could be face penalties, particulary if you are subsequently found to have deliberately under-represented your income.
The following types of income must be declared on your tax return:
- Salary from all types of employment during the year
- Dividend income
- Any Government benefits
- Income from pensions
- Income from letting out properties
- Interest on any savings
- Any foreign income (you will need proof if tax has already been paid overseas)
- Employee share schemes
- Any capital gains
Certain types of income you may have received do not have to be reported, including ISAs, National Savings, Premium Bonds and prize winnings.
Poor record keeping
You should keep all relevant paperwork in a safe place to ensure you have everything you need to complete your SATR accurately, as per the list above.
Here is a list of some typical documents a typical contractor will need:
- Salary and benefit-related HMRC paperwork, including P60, P11D and P45
- Records of any student loan payments paid
- Records of any payments into a pensions scheme
- Records of any payments into an employee share scheme
- Details of all income derived from property, such as rentals and any allowable expenses
- Any child benefit received throughout the year
- Bank statements showing any interest paid (and any basic rate tax already deducted)
- Any charitable gifts made during the tax year (to claim tax relief)
- Dividend tax vouchers (from your own company, and any others)