Self-assessment tax returns can be stressful, especially if you do not know what jargon is used and what needs to go into each box. SATR errors are more common than you might think, and often it, can result in you having to either pay too much tax or not paying enough; either way, it can be costly. HMRC are used to people making errors on their tax returns. This can be a deliberate mistake to avoid paying taxes or an oversight that needs to be corrected. Either way, the penalties can be severe, so doing what you can to prevent them is always best. In this blog post, RJF Accounting will run you through what happens if you make an error on your tax return, how to put it right, and what possible penalties you could face.

Our Guide To Tax Return Errors And Potential Penalties

Tax Return Error Classification

If you make an error on your tax return, HMRC will classify it into one of four groups, and depending on the severity of the error and how they classify it will depend on the outcome. 

Reasonable Care

Reasonable care is the term HMRC uses to describe how everyone should complete their SATR. Reasonable care means that you should have taken steps to ensure that the information provided is up-to-date and, more importantly, correct. Mistakes can happen, be it a zero placed in the wrong place or a missed off an invoice, and HMRC understands this, but they want to ensure that it was not a deliberate mistake. If HMRC can see that you took reasonable steps to avoid errors, they can waive any due penalties. 

HMRC says some of the ways you can take reasonable care of your records and tax returns include:

  • Keeping sufficient records to make sure your tax return is accurate 
  • Keeping those records safe
  • Checking with an accountant, tax adviser or with HMRC if you’re not sure about anything

Careless Mistakes

HMRC could consider the error careless if you fail to take reasonable care when keeping records of your self-employed income and expenses or when completing your self-assessment tax return. Careless mistakes, unlike reasonable care, do come with a penalty that can range in severity. The penaty can be anywhere from 0%-30% on top of the additonal tax that was avoided due to the error. 

For example, if you missed an invoice and avoided paying £1000 additional tax, you could have to pay HMRC £1300 (£1000 tax owed plus 30%). The penalties will apply if there are multiple errors, so they can soon mount up! 

Deliberate and Concealed Inaccuracies

If you knowingly or deliberately submit information to HMRC on your incorrect tax return, then you are committing fraud, and it will be considered a deliberate act or attempt to conceal information from them. This can result in penalties of up to 100% of the tax, effectively doubling the amount you owe or, in severe cases, prosecution and jail. Examples of deliberate mistakes could be:

  • Creating false expenses
  • Hiding income

These types of errors are put into two brackets when HMRC are dealing with them:

  • Deliberate – where the error is knowingly made, but you make them aware. 
  • Deliberate and concealed – where the error is knowingly made, but they find out without your help. 

The penalties increase if HMRC finds you hiding the mistakes from them, so if you think you have an error on your tax return or knowingly made one, it is best to contact them first. 

What to Do if You Have Made an Error on Your Tax Return

If you spot an error on a submitted tax return, don’t panic! HMRC understands that mistakes happen and works with you to make things right. The most crucial thing is always to make sure that you contact them if there is an error – do not wait for them to find out. If you contact them first, the penalties could be lower or waivered, but if you let them find out on their own, be this via an audit or a report, the penalties will be much harsher. 

What to Do if You Disagree With HMRC’s Penalty

If you believe that HMRC has been unfair in their assessment of your mistake, i.e. they said your error was careless when you think it should fall under reasonable care, then you can appeal the penalty. You would need to write to HMRC in this instance, providing reasons why you believe it has been mishandled and highlighting any mitigating circumstances such as:

  • Any disabilities you have
  • You took reasonable steps to ensure the accuracy
  • You can’t afford an accountant or tax advisor and took incorrect advice offline, for instance. 
  • The fact that you do keep all of your records accurate and safe 

There are no guarantees that HMRC will waive or reduce any penalty given, and each case is examined on its merit. However, you can help this by being completely open and honest about the errors and what led to them. 

Avoiding Tax Return Errors

Of course, the best way to avoid any HMRC penalties is always to ensure that your tax return is done correctly in the first place. The best way to do this is to:

  • Keep strict records – and ensure everything is logged correctly
  • Take your time completing your return
  • Seek professional advice

Hiring an accountant or investing in bookkeeping may seem like an additional expense, but compared to the penalties that could be imposed – they look like a worthwhile investment! 

A good accountant will save you money, not just in avoiding errors on tax returns and penalties. Accountants advise on how to be more tax efficient with your earnings, claiming the allowable expenses and making the most of any tax allowances. 

If you want to talk to an accountant about your self-assessment tax return, why not reach out to the RJF Accounting team today? We provide specialist accounting services that can be tailored to your needs, from bookkeeping to payroll and accounting! We also handle other aspects of your business, from raising finance to investor relations! Call the team today on 0161 5040629 or drop us an email at hello@rjf.uk.com to see if we can help you get your business finances. We are open Monday to Friday, 9 am – 5 pm!


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