Things to look out for in tax returns as 100,000 people issued with penalties

Every year millions must complete a self-assessment return for HM Revenue & Customs. More than 12.2 million taxpayers were expected to file a tax return last year and of those 10.2 million did so by the 31 January deadline. Anyone who needs to complete a tax return for 2021-22 tax year must file by 31 January 2023 to avoid incurring late penalties.

As well as penalties for late filing there are also penalties for mistakes. HMRC can fine taxpayers for up to 30% of the tax due for careless inaccuracies – but if they believe the error was deliberate, then it could hit them with a 50% to 100% charge.  The penalties are harsher if the mistake involves offshore income or gains.

These are the 5 common areas that mistakes are easily made:

1. Pensions
2. Property Income
3. Foreign Income
4. Covid support payments
5. Child Benefit

Although many taxpayers believe that the state pension need not be reported, there will be tax to pay for anyone receiving a total income (including their state pension) higher than £12,570. If you have any queries about pensions, please get in touch with the Old Mill Pensions Team.

A key mistake made by taxpayers, is the belief that mortgage payments are deductible against rental income, but since the changes made in April 2020, landlords are no longer able to deduct mortgage interest payments to reduce their profit, but they can still be utilised. If you have any questions about your property income, please get in touch with our expert Tax Team, who can help to resolve your issues.

Foreign income, such as money made through renting out property abroad or interest from an overseas account, need to be paid particular attention by taxpayers.

A UK resident is normally taxed on the ‘Arising Basis’, so they are subject to UK tax on their worldwide income and gains, and must report this to HMRC, there may be ‘Double Taxation Relief’ available to you if income or gains are reported to both HMRC and a foreign tax authority. If you are a taxpayer who receives foreign income, and have any questions, please feel free to contact our expert Tax Team, who can guide you, and help you create a plan.

Even if you disclosed these in your most recent tax return, you might not be exempt from taxes on any payments you received under coronavirus support programmes. This is because the schemes finished on 30th September 2021, and you may have received payments between 6th April 2021 – 30th September which will need to be reported on your 21/22 tax return. Again, if this applies to you, or you have any further questions on Covid Support Payments, please get in touch with the Old Mill Tax Team.

Many parents who are claiming child benefit are unaware that the benefit is clawed back at 1% for every £100 they earn up to £60,000 after they earn over £50,000. The applicable persons must declare this liability on their tax return, HMRC has identified 180,000 families who it believes have not reported the tax liability on their self-assessment return in recent years, and as HMRC have a tendency to not be lenient with their penalties, those affected should be aware.

If you feel like any of the issues in this article may affect you, or if you need general advice for your tax return, please feel free to contact our expert Tax Team or click here…