What Happens If You Make a Mistake On Your Self-Assessment Tax Return?
Self-assessment is the process of calculating and reporting your own taxable income to HM Revenue and Customs (HMRC) in the UK. If you make a mistake on your self-assessment, there can be consequences that range from financial penalties to potential criminal charges.
Mistakes on self-assessment tax returns can be either accidental or intentional, but either way, it's important to understand the potential consequences. If you make an accidental mistake, such as miscalculating your income, HMRC may ask you to pay additional tax, interest, and penalties. On the other hand, if you intentionally make a false statement, such as claiming expenses you haven't actually incurred, this is considered tax fraud and can result in criminal charges.
If you discover a mistake on your self-assessment tax return, it's important to correct it as soon as possible. You can do this by sending an amended return to HMRC. In most cases, if you correct the mistake within 12 months of the filing deadline, you will only be charged interest on the underpaid tax. However, if you wait longer than 12 months, you may also be charged penalties.
It's worth noting that HMRC has the power to investigate and prosecute individuals who deliberately make false statements on their self-assessment tax returns. If convicted, you could face significant fines, jail time, and a criminal record.
In order to avoid making mistakes on your self-assessment tax return, it's important to keep accurate records of your income and expenses throughout the year. This includes keeping receipts, invoices, and bank statements that can support your claims. It's also a good idea to use an online tax calculator or seek the help of a tax professional to ensure that your self-assessment tax return is accurate and complete.
What are the Primary Guidelines On Inaccuracy Consequences?
An inaccuracy penalty is chargeable in case you provide HMRC a record (for example, put up a tax go-back) and both of the following practices:
the document contains a mistake or inaccuracy which results in you understating your legal responsibility to tax, or claiming an excessive amount by way of loss relief or repayment of tax;
The error can be ‘careless’, deliberate, or planned and hidden.
So, for a penalty to be chargeable, it is not sufficient that there ought to be a mistake within the report. The mistake has to have led to you not paying enough tax and has been made carelessly or deliberately. ‘Careless’ is corresponding to the concept of ‘negligence’ and indicates that you didn't take ‘reasonable care’ (see underneath).
The stage of penalty is generally labored out as a percentage of the ‘capability lost sales’ (PLR) – that is, the more tax that you need to pay as a result of correcting the inaccuracy. The percentage depends on your behavior and whether or not you advised HMRC approximately the error or whether HMRC found it first.
Type of Behavior You Told HMRC HMRC Found the Error
Reasonable care No penalty No penalty
Careless 0% to 30% 15% to 30%
Deliberate 20% to 70% 35% to 70%
Deliberate and concealed 30% to 100% 50% to 100%
How Do We Define Reasonable Care?
HMRC says that a number of ways you may take reasonable care to encompass:
1. Retaining enough information to make correct tax returns
2. Retaining that information secure
3. Asking HMRC or a tax adviser if you are not positive approximately something, and following any recommendation you are given
Point to Be Noted:
Even if HMRC insist that the error changed into carelessness, they:
· Are allowed to reduce a penalty or no longer implement it ‘if they suppose it proper because of special situations’; or
· May additionally drop all or a part of the penalty for up to 2 years. This means they don’t ask you to pay it for up to 2 years and you could no longer have to pay it in any respect in case you meet sure situations for that duration.
What Should You Do If You Make a Mistake In Your Self-Assessment?
Making a mistake on your self-assessment tax return in the UK can have serious consequences, so it's important to take the necessary steps to correct any errors as soon as possible. Here are some steps you should follow if you discover that you've made a mistake on your self-assessment tax return.
Identify the Mistake: The first step is to identify what the mistake is and how it occurred. This could involve reviewing your records, bank statements, receipts, and invoices to ensure that you've accurately reported your income and expenses.
Correct the Mistake: Once you've identified the mistake, you should correct it as soon as possible. You can do this by sending an amended self-assessment tax return to HM Revenue and Customs (HMRC). If you made an error in your calculation, you'll need to adjust the figures on your tax return and recalculate the amount of tax you owe.
File the Amended Return: To file an amended return, you'll need to complete a new self-assessment tax return and submit it to HMRC. You can do this online or by post, depending on your preference. When you file the amended return, be sure to include a clear explanation of the mistake and why you're making the correction.
Pay Any Additional Tax: If you owe additional tax as a result of the correction, you'll need to pay it as soon as possible. You can pay online, by phone, or by post, and you'll receive a confirmation of payment from HMRC.
Keep Records: It's important to keep records of any corrections you make to your self-assessment tax return, including the date you made the correction, the reason for the correction, and any correspondence with HMRC. This will help you in case you need to provide evidence in the future.
Avoid Future Mistakes: To avoid making mistakes on your self-assessment tax return in the future, it's important to keep accurate records of your income and expenses throughout the year. This includes keeping receipts, invoices, and bank statements that can support your claims. It's also a good idea to use an online tax calculator or seek the help of a tax professional to ensure that your self-assessment tax return is accurate and complete.
Seek Professional Advice: If you're unsure about how to correct a mistake on your self-assessment tax return, you may want to seek the advice of a tax professional. They can help you navigate the process and ensure that you're in compliance with all relevant tax laws and regulations. A tax accountant can also make an appeal to HMRC on your behalf.
So, if you discover that you've made a mistake on your self-assessment tax return in the UK, it's important to take the necessary steps to correct it as soon as possible. By following these steps, you can minimize the financial penalties and avoid potential criminal charges. Keeping accurate records, using an online tax calculator, and seeking the help of a tax professional can also help you avoid making mistakes in the future.
Conclusion
Making a mistake on your self-assessment tax return in the UK can have serious consequences. If you do make a mistake, it's important to correct it as soon as possible in order to minimize any financial penalties and avoid potential criminal charges. By keeping accurate records and seeking the help of a tax professional, you can ensure that your self-assessment tax return is accurate and complete.