What Happens If You Make a Mistake On Your Self-Assessment Tax Return?
- Adil Akhtar
- Feb 2, 2023
- 15 min read
Updated: May 31, 2024
In the realm of taxes, the self-assessment tax return is a critical process for many individuals in the UK, particularly the self-employed, freelancers, and those with multiple sources of income. However, with complexity comes the potential for errors. Mistakes on a self-assessment tax return can have significant implications, so understanding the process of addressing these errors is crucial.
What Happens If You Make a Mistake?
When you make a mistake on your self-assessment tax return in the UK, you have the opportunity to correct it. The process for doing so depends on when you discover the error. You can correct a tax return within 12 months of the Self Assessment deadline, either online or by sending another paper return. If you miss this deadline or need to make a change to a return from an earlier tax year, you’ll need to write to HMRC.
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.
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
Deadlines and Timeliness
It's important to act promptly when correcting a mistake. The general rule is to update your Self Assessment as soon as you notice an error. For example, if you filed your 2021/22 tax return ahead of the January 2023 deadline, you have until January 2024 to make amendments.
Common Mistakes on Tax Returns
Incorrect UTR or NI Number: This is a common mistake where taxpayers enter the wrong Unique Taxpayer Reference (UTR) or National Insurance (NI) number, or in some cases, omit them altogether.
Non-disclosure of Pension Contributions: Failing to include pension contributions on your return can lead to denied tax relief and potential penalties.
Failure to Declare All Income Sources: Overlooking sources of income such as rental income, profit from selling assets, dividends, or even tips and commissions, can lead to underreporting and consequent issues with HMRC.
Making a Claim for Non-allowable Charges: Attempting to claim expenses that are not tax-deductible can lead to complications. It’s crucial to understand which expenses are allowable and which aren’t.
Missing Out on Tax-free Allowances: Not taking advantage of tax-free allowances, like the personal allowance, which stands at £12,570 for the 2023-24 tax year, can result in paying more tax than necessary.
Failing to Meet the Deadline: Delaying the submission of your tax return increases the chances of errors and may result in penalties.
How to Correct Mistakes within 12 Months of Filing
Log into your HMRC tax account.
Navigate to the "Self Assessment account" section.
Choose “Tax return options” and select the tax year you want to amend.
Make the necessary changes and re-submit the updated Self Assessment.
How to Correct Mistakes after 12 Months
Write a hand-written request to HMRC outlining which Self Assessment needs amending, the error, and the reason for the over- or underpayment of tax.
If you are seeking a refund due to the mistake, include proof of payment, how you wish to receive the refund, and a signed declaration confirming the accuracy of the information provided.
Send the letter to HM Revenue and Customs, BX9 1AS, United Kingdom.
Next Steps After Amending a Tax Return
Once you submit your amended tax return, the HMRC system updates within three days if done online. If you owe more tax, you'll receive a new deadline for payment. If you're entitled to a refund, you can request it through your account, though it may take up to a month to process. For paper submissions, expect a response within four weeks.
Mistakes on a self-assessment tax return can be daunting but rectifying them is manageable if you act promptly and follow the correct procedures. Understanding common mistakes and how to avoid them is the first step to ensuring a smooth tax filing process.
How to Write a Letter to HMRC for the Correction of the Mistake You Made on a Self-Assessment Tax Return More Than 12 Months Ago
To: Her Majesty's Revenue & Customs (HMRC)
From: [Your Name]
UTR: [Your Unique Tax Reference]
Date: 11 January 2024
Subject: Correction to Self-Assessment Tax Return - [Tax Year]
Dear HMRC,
I am writing to request a correction to my Self-Assessment tax return for the [tax year] tax year, which I submitted on [date of submission]. Unfortunately, I have identified an error in the return.
The Error: [Briefly explain the mistake you made and which box/section of the return it affected. Example: "I incorrectly reported my income from freelance work in box [box number]. Instead of £[incorrect amount], the actual income was £[correct amount]."]
Explanation for the Error: [Provide a reasonable excuse for why you made the mistake. Be honest and specific. Examples: "I was overwhelmed with [personal circumstance] at the time of filing and unintentionally entered the wrong figure." "I mistakenly believed that [incorrect assumption about tax rules]." "I relied on incomplete financial records from [source], which were later revised."]
Reason for Delay in Identifying the Error: [Explain why it took more than 12 months to find the mistake. Keep it concise and focused. Examples: "I only recently received updated financial records from [source]." "My accountant, who advised me on the return, is currently experiencing staffing issues and only recently flagged the discrepancy." "Due to [personal circumstance], I have not had the opportunity to thoroughly review my financial records until now."]
Corrective Action: [State how you would like the correction to be handled. Example: "I would like to amend the return to reflect the correct income of £[correct amount]. This would result in a [tax owed/refund due] of £[amount]."]
I understand that I am submitting this correction more than 12 months after the original filing deadline. I sincerely apologize for any inconvenience this may cause. I would be grateful if you could consider my explanation for the error and the delay in its identification. I am fully prepared to comply with any additional requirements or procedures necessary to make this correction.
I have attached copies of [supporting documents] to substantiate my claim. Please feel free to contact me if you require any further information.
Thank you for your time and understanding.
Sincerely,
[Your Signature]
[Your Printed Name]
Please note: This is a sample letter and you may need to adapt it to your specific circumstances. Be sure to include all relevant details and tailor the explanation and excuse to your specific situation.
Navigating the Consequences of Mistakes in UK Self-Assessment Tax Returns
Understanding Penalties and Consequences
After identifying and correcting a mistake on a self-assessment tax return, it's crucial to understand the consequences, particularly penalties that might apply. Mistakes can be categorized into 'innocent' or 'deliberate,' with varying degrees of penalties.
Innocent Mistakes: These include errors made in good faith, such as miscalculations or incorrect data entry. The repercussions are generally less severe but can involve additional tax liability, reduced refunds, or lower penalties.
Deliberate Errors: These are intentional misrepresentations, like underreporting income or overstating expenses. The implications are serious, including higher penalties, criminal prosecution, and possible imprisonment.
Penalty Structure for Inaccuracies
HMRC imposes penalties based on the nature of the mistake and whether it was disclosed voluntarily or discovered by them. The penalty as a percentage of the potential lost revenue varies as follows:
Reasonable care: No penalty
Careless mistake: 0% to 30% (if self-disclosed), 15% to 30% (if discovered by HMRC)
Deliberate error: 20% to 70% (self-disclosed), 35% to 70% (discovered by HMRC)
Deliberate and concealed: 30% to 100% (self-disclosed), 50% to 100% (discovered by HMRC).
Taking Reasonable Care
'Reasonable care' involves maintaining adequate records, seeking advice when uncertain, and following given advice. If HMRC deems an error as carelessness, penalties may be reduced or not enforced under special circumstances.
Additional Tax and Interest Charges
If a mistake results in underpaid tax, you'll be charged interest on the amount. Corrections within 12 months typically incur only interest charges, while those made later may also attract penalties.
Criminal Charges for Serious Offenses
In cases of deliberate falsification, HMRC has the authority to prosecute, potentially leading to fines, imprisonment, and a criminal record.
Correcting Mistakes Post the 12-Month Window
For errors discovered after 12 months, you must contact HMRC directly. They will assess the situation and advise on the necessary steps.
Preventive Measures for Future Returns
Keep accurate and comprehensive records of income and expenses.
Utilize tools like online calculators or consult tax professionals for accurate tax return preparation.
Regularly review tax returns before submission to avoid errors.
Mistakes in self-assessment tax returns can carry significant consequences, ranging from additional tax liabilities to severe penalties and even criminal prosecution for egregious errors. Understanding these implications is essential for UK taxpayers. Immediate action to rectify mistakes, maintaining accuracy in future returns, and being aware of the penalty structure are key to navigating these issues effectively.
Advanced Strategies for Correcting Self-Assessment Tax Return Mistakes in the UK and Managing HMRC Interactions
Advanced Correction Techniques and Managing HMRC Interactions
Correcting mistakes on your self-assessment tax return, especially complex ones, requires careful handling and a strategic approach. Understanding advanced correction strategies and managing interactions with HM Revenue and Customs (HMRC) effectively is essential.
Penalties for Amended Returns
Amending income and corporation tax returns can technically attract a penalty of up to 100% of the underpaid tax. However, penalties are subject to mitigation considering factors like size, gravity, disclosure, and cooperation. In the current climate, voluntary error correction is generally not penalized if it arises despite reasonable care.
Disclosure and Cooperation
When correcting an error, especially one arising from a lack of reasonable care (e.g., inadequate record-keeping), formal disclosure to HMRC is crucial. Disclosure involves:
Informing HMRC about the error.
Providing help in quantifying the inaccuracy.
Allowing HMRC access to records for full correction.
Online Amendments
For online tax returns, the process includes:
Logging into the HMRC online account.
Selecting ‘Self Assessment account’.
Choosing ‘More Self Assessment details’.
Selecting ‘At a glance’ and then ‘Tax return options’.
Choosing the tax year to be amended.
Making corrections and re-filing the return.
Amendments Using HMRC App
You can also amend your tax return using the HMRC app. This requires initial sign-in with a Government Gateway user ID, followed by subsequent logins using fingerprint or facial recognition or a PIN number.
Paper Return Amendments
If you filed on paper, you'll need to download a new tax return, mark corrections, write ‘amendment’ on each corrected page, and include your name and Unique Taxpayer Reference (UTR). The corrected return should be sent to HMRC.
Dealing with Mistakes Outside the 12-Month Window
For mistakes identified after the 12-month window, you must write to HMRC including:
The tax year for correction.
The reason for the incorrect tax amount.
The amount over or underpaid.
For refund claims, a declaration of ‘overpayment relief’ and proof of tax payment.
Consequences of Not Amending Incorrect Returns
Failure to amend incorrect returns could lead to fines or HMRC investigations. It is vital to act within the allotted time and be upfront about the errors.
Managing Underpayment of Tax
If changes to your tax return result in underpayment, the updated bill will show the new amount due and the deadline for payment. This information is accessible online after making amendments.
Ensuring Reasonable Care
To avoid penalties, it’s important to demonstrate that you took ‘reasonable care’ in filling out your tax return. Penalties vary based on the nature of the error – from 0 to 30% for lack of reasonable care, up to 100% for deliberate and concealed errors.
Professional Assistance and Record Keeping
Consider hiring a tax professional or accountant, especially if you are unsure about any aspect of your tax return. Maintaining accurate records and ensuring diligent bookkeeping are essential to support any claims or corrections.
Correcting mistakes on self-assessment tax returns, particularly complex ones, requires a meticulous approach and proactive communication with HMRC. Understanding the penalty structure, ensuring timely and complete disclosure, using online tools or professional help, and maintaining accurate records are key to successfully managing these corrections. Always prioritize accuracy and transparency in your tax affairs to avoid complications with HMRC and ensure compliance with UK tax laws.
A Real-Life Case Study: Correcting a Mistake on Your Self-Assessment Tax Return After Submission
Imagine Oliver Bennett, a freelance graphic designer based in Bristol, who discovers a mistake in his self-assessment tax return after submitting it to HM Revenue and Customs (HMRC). This case study explores the entire process Oliver undertakes to correct his error, ensuring compliance and avoiding potential penalties.
Background Scenario
Oliver, managing his own finances, submitted his self-assessment tax return by the January 31 deadline. However, in March, while reviewing his financial statements, he realizes that he inadvertently omitted a significant client payment from his reported income.
Steps for Correcting the Error
Identifying the Error: Upon discovering the mistake, Oliver assesses the implications of the unreported income, which affects his tax liability.
Accessing HMRC's Online Services: Oliver waits 72 hours after his initial submission, as required, before making any amendments to allow the HMRC systems to fully process his original return. He then logs into his HMRC online account using his Government Gateway ID.
Amending the Tax Return Online: Using the 'Self Assessment account' section, Oliver navigates to 'More Self Assessment details', selects 'At a glance', then 'Tax return options', and finally the relevant tax year. He corrects the income amount and re-files the tax return.
Review and Resubmission: Oliver double-checks all the entries to ensure no further errors remain. After making the necessary corrections, he submits the amended return online. HMRC recalculates his tax based on the updated information.
Confirmation and Follow-Up: After submitting the amendment, Oliver receives immediate confirmation from HMRC that his tax return has been updated. The changes reflect in his tax account within three days, showing any additional tax owed or identifying if he is due a refund.
Managing Financial Implications: Given the increase in his income, Oliver prepares to pay any additional tax owed. He also reviews the effect of the amendment on his payments on account for the next tax year.
Real-Life Considerations and Challenges
Professional Advice:
Considering the complexities involved in tax amendments, Oliver consults with a tax advisor to ensure that his tax return correction is handled correctly. This professional advice is crucial to avoid potential future disputes or discrepancies with HMRC.
Penalties and Interest:
For errors deemed as careless but non-deliberate, HMRC may impose penalties ranging from 0% to 30% of the additional tax owed if the error is self-identified. Interest on any additional tax due starts accruing from the date the tax was originally due until the date it is paid.
Documenting the Process:
Oliver keeps detailed records of all communications with HMRC and copies of the amended tax return. These documents are essential for reference in future queries or audits.
Preventive Measures:
To avoid similar mistakes in the future, Oliver plans to implement more robust financial tracking and review his tax return more thoroughly before submission. He also decides to schedule quarterly reviews with his tax advisor.
Oliver Bennett’s proactive approach in correcting his tax return mistake not only ensures compliance with tax laws but also exemplifies responsible financial management. By understanding the steps to rectify errors on a tax return and the importance of timely action, taxpayers can navigate the complexities of tax amendments effectively. This scenario highlights the significance of maintaining accurate financial records and the benefits of seeking professional advice in managing one’s tax affairs.
The updates in 2024 aim to make the correction process more user-friendly and accessible, with enhanced digital tools and comprehensive guidance available directly from HMRC. For more detailed instructions and resources, taxpayers are encouraged to visit the official HMRC website.
These enhancements reflect HMRC's commitment to improving taxpayer experience and ensuring that the processes for filing and correcting returns are as efficient and straightforward as possible.
How Can a Tax Accountant Help You Reduce the Chances of Making Mistakes Self-Assessment Tax Return in the UK
A tax accountant plays a pivotal role in ensuring the accuracy and compliance of your self-assessment tax return in the UK. Here are several ways in which a tax accountant can help reduce the chances of making mistakes:
Expert Knowledge of Tax Laws and Regulations: Tax accountants are well-versed in current tax laws and regulations. They can provide invaluable advice on various tax-related matters, ensuring that your tax return complies with the latest legal requirements.
Identifying Allowable Deductions and Reliefs: Accountants can help identify all the deductions and reliefs you are entitled to, ensuring that you don’t miss out on any tax-saving opportunities. This includes understanding complex areas like capital gains tax, pension contributions, and charitable donations.
Accurate Record-Keeping and Documentation: Tax accountants assist in maintaining accurate financial records and supporting documentation. This is crucial for substantiating the figures reported on your tax return and can be vital if HMRC queries or investigates your submission.
Preventing Common Errors: They can help avoid common errors such as underreporting income, overstating deductions, or incorrectly filling out the tax forms. These errors can lead to penalties, additional tax liabilities, or even an audit by HMRC.
Handling Complex Tax Situations: For individuals with complex tax situations, such as those with multiple income streams, foreign income, or capital gains, a tax accountant can provide tailored advice to ensure accurate reporting.
Utilizing Technology and Accounting Software: Professional accountants often use advanced accounting software and tools which reduce the likelihood of errors that can occur with manual calculations or record-keeping.
Providing Representation in HMRC Interactions: In case of any disputes or inquiries from HMRC, a tax accountant can represent you and handle communications, leveraging their expertise to resolve issues effectively.
Timely Submission: They ensure that your tax return is prepared and submitted well before the deadline, avoiding late submission penalties and giving ample time to review the return for potential errors.
Future Tax Planning: Besides handling the current year's tax return, accountants can provide strategic advice for future tax years, helping you plan your finances in a tax-efficient manner.
Peace of Mind: Knowing that a professional is handling your tax affairs can provide significant peace of mind and allow you to focus on other important aspects of your business or personal life.
In summary, a tax accountant not only aids in reducing the likelihood of errors on your self-assessment tax return but also ensures that your tax affairs are managed efficiently, compliantly, and in a way that can optimize your financial situation.
FAQs
Q1: Can I correct a mistake on my UK self-assessment tax return after submitting it?
A: Yes, you can amend your tax return if you find a mistake after submitting it. This can be done online through your HMRC account or by submitting a revised paper return.
Q2: What is the deadline for correcting a mistake on my self-assessment tax return?
A: You have 12 months from the original filing deadline to correct mistakes without penalty.
Q3: Will I be charged a penalty for making a mistake on my tax return?
A: Penalties depend on whether the mistake was careless or deliberate and whether you disclosed it voluntarily. Penalties range from 0% to 100% of the additional tax due.
Q4: What should I do if I discover an error after the 12-month amendment period?
A: If you discover an error after the 12-month period, you should write to HMRC explaining the mistake and providing the necessary corrections.
Q5: Can I face criminal charges for making a mistake on my tax return?
A: Criminal charges are generally reserved for cases of tax evasion or fraud, not for simple errors or omissions.
Q6: How do I correct a mistake if I filed my tax return using commercial software?
A: Contact your software provider for guidance. If the software doesn’t allow amendments, you may need to correct the error directly with HMRC.
Q7: What happens if I underreport my income by mistake?
A: You will need to pay any additional tax owed, and you may face a penalty depending on the nature of the mistake.
Q8: If I overestimate my tax due to an error, can I get a refund?
A: Yes, if you overestimate your tax, you can claim a refund from HMRC.
Q9: How long does HMRC take to process an amended tax return?
A: Processing times can vary, but typically, HMRC updates the tax bill within a few days for online amendments. For paper amendments, it might take longer.
Q10: What is the best way to avoid making mistakes on my tax return?
A: Keep accurate records, understand your tax obligations, and consider seeking help from a tax professional.
Q11: Will HMRC automatically notify me of mistakes on my tax return?
A: Not necessarily. It’s your responsibility to ensure your tax return is accurate. However, HMRC may query discrepancies.
Q12: What if I make an error in calculating my tax liability?
A: You should amend your return with the correct calculations. If you've overpaid, you can claim a refund. If you've underpaid, you should pay the difference.
Q13: Are there any specific types of errors that are more commonly penalized by HMRC?
A: Deliberate errors or significant underreporting of income are more likely to attract penalties.
Q14: Can I amend a tax return from several years ago?
A: You can only amend tax returns going back up to four years, under specific circumstances such as claiming overpayment relief.
Q15: If I used an accountant and they made a mistake, who is responsible?
A: You are ultimately responsible for your tax return, but you may have recourse against the accountant, depending on the terms of your agreement.
Q16: What records should I keep to support my amended tax return?
A: Keep all relevant financial records, including invoices, receipts, bank statements, and any other documents that support your amendment.
Q17: How do I notify HMRC of a mistake on my tax return?
A: Log into your HMRC online account and follow the steps to amend your return, or send a letter to HMRC if you’re outside the online amendment window.
Q18: Can mistakes on my tax return trigger an HMRC investigation?
A: While not every mistake will trigger an investigation, significant errors or patterns of errors might lead HMRC to take a closer look.
Q19: What if I can’t pay the additional tax due after correcting a mistake?
A: Contact HMRC as soon as possible. They may offer options such as a payment plan.
Q20: Should I seek professional advice for amending my tax return?
A: It’s often wise to seek professional advice, especially for complex tax situations or significant amendments.
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