Running a business can be stressful even without the pressure of the 31 January self-assessment tax deadline.  It’s imperative to set aside the time to get it finalised but tax really doesn't have to be taxing says Jonathan Amponsah.

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An expert tax adviser, Jonathan has helped many clients over the past decade and has successfully defended clients against HMRC at the tax tribunal. Jonathan is the founder and CEO of The Tax Guys (thetaxguys.co.uk). He is also the co-founder of Easy Tax Returns (a tax return app to help tax payers avoid stress, penalties and find their peace). 

Here are 10 common mistakes to avoid:

1) Lack of attention to hot spots/risk areas

There are expenditure areas where HMRC raises queries about more often than others e.g. repairs & renewals or entertaining. Where drawings are comparatively low, HMRC may wonder whether some cash sales have not been declared and perhaps been used to fund your living expenses.

2) Not using the white space to explain unusual variations

If you know there is something unusual, explain it.  For example, if your net profit seems too low to support someone above the poverty line, be prepared to give an explanation. However, there’s no need to go overboard or be over generous in the information you give. Keep it honest and simple.

3) Claiming for expenses that cannot be claimed

The rules on which expenses can/cannot be claimed is not as straight forward as you may think. Expenses must meet the so called “wholly and exclusively for the purpose trade” test.

4) Entering the figure of capital expenditure in the wrong box on Self Employment pages instead of the Capital Allowances section

This is a common error that means you are claiming excessive relief. It happens because the tax payer doesn’t understand the tax rules on revenue and capital expenditures. Get this right to avoid an HMRC red flag.

5) Not showing private use adjustments separately on the self-employment pages

HMRC will always look to disallow any private use of items. For example, where you have already restricted motor expenses for private use, you will avoid questions if you show the adjustments separately rather than netting it off.  The key is to make any adjustments clear to HMRC.

6)  Forgetting to add Class 2 NIC to the tax bill

This is a new requirement so remember to include your Class 2 NIC on your return if you are self-employed and are required to pay it or have opted to pay it.

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7). Forgetting about Student Loans

If you’re now having to make Student Loan repayments through the tax return, because your earnings exceed the threshold, remember to include this.

8) Forgetting about Child Benefit clawback

This mistake is becoming more common among higher income earners receiving child benefits and earning over £50,000. The amount of child benefit received is clawed back under what is called the ‘High Income Child Benefit Charge’.

9) Failing to declare or forgetting to include all sources of income

Remember HMRC knows if you have an interest earning account or perhaps an offshore bank account. So they will be asking; "Is this where you have filtered away undeclared profits?"

10) Not arranging time to pay

If you need extra time to pay you also need to be courageous and call. HMRC can be helpful. Some interest will be added but this is a far better option than incurring additional penalties.

Jonathan Amponsah CTA FCCA