We are heading towards January which can only mean one thing for most self-employed people, yes it’s tax return time. In the spirit of festive giving I’ve listed below 5 of the most common mistakes people make when they do their own returns.
You must include all interest received on your bank accounts for that tax year. This should include interest you have received on business accounts except limited company ones, and your share of the interest received on joint accounts. By doing this you may be entitled to claim back tax you have already paid on this interest if you are not a higher rate tax payer (over £41,450 for 13/14)
Gift aid payments
If you are a higher rate tax payer (40%), you are able to claim back the additional 20% tax paid on the donations. For example if you donate £100, not only are the charity able to claim an extra £25 but you will be able to claim an extra 20% tax of the £125 gross donation, effectively reducing your tax by £25. Therefore it is highly recommended that you record any gift aid payments on your tax return form.
On your tax return form you should include both occupational and personal pension payments. The government encourages you to save for your pension and therefore you are given a tax relief on the money you contribute up to your marginal rate, so potentially up to 45%. The limit on the gross pension payments on which you can claim tax relief is £50,000 for the tax year 13/14, reducing to £40,000 for 14/15.
Rental income – Claiming wear and & tear allowance and Mortgage interest
People often forget that you can claim a wear and tear allowance of 10% on furnished lettings. In addition, you are also able to claim for any mortgage interest incurred during the year however you cannot claim for the the capital element of the repayments.
Under/over payments from last year
If in the previous year you over/underpaid your tax and you requested it be adjusted through PAYE you will have received a notice of coding from HRMC confirming this. In your tax return form you will need to record this over/under payment in the tax adjustments sections. Failure to do so will mean that your tax calculation will be incorrect and this will complicate your tax payments in the future.