Are you paying the wrong amount of tax? Many people are, and even Her Majesty’s Revenue & Customs (HMRC) sometimes slips up.
So, whether it's having the wrong tax code, not submitting your tax return or other errors, read our list of 10 common tax mistakes below to ensure you’re not giving the taxman more than you should.
All figures are for 2018-19 tax year.
- Missing out on allowances
The personal allowance refers to the amount of income you can have tax-free. For the year 2018-19 it’s £11,850.
- Not claiming Blind Person’s Allowance
You get an extra allowance of £2,390 if you are registered blind or severely sight-impaired, or if you live in Scotland or Northern Ireland and your sight is too poor for you to do any work for which eyesight is essential. Once you've registered as a blind person with your local authority, you need to phone HMRC on 0300 200 3301 and ask for Blind Person's Allowance. It is not added automatically.
- Not working as a team
Couples can save tax by giving investments to the partner who pays the lower rate of tax – but it has to be a real gift, not a gift in name only. If you are married or a civil partner and one of you was born before 6 April 1935, you also get Married Couple’s Allowance which may cut your tax bill. If both of you were born after 6 April 1935, you may be eligible for Marriage Allowance instead, but this is dependent on how much you earn.
- Not transferring unused allowances
If your income is too low to use up all your Married Couple’s Allowance or Blind Person’s Allowance, you can transfer the unused part to your husband, wife or civil partner. Contact your tax office for more information.
- Paying tax when you don’t need to
All basic rate taxpayers have a Personal Savings Allowance (PSA) of £1,000. This means you do not pay tax on the first £1,000 of interest from your combined savings interest. Higher rate taxpayers have a PSA of £500 (additional rate taxpayers have nil). Banks and building societies no longer deduct tax at source as they did in the past (unless you had signed an R85). If you go over your PSA you will have to pay tax directly to HMRC.
- Not claiming back overpaid tax
If you’ve paid too much tax because you’ve failed to claim an allowance or tax relief, or because too much tax has been deducted from your income, you can usually claim tax back within four years of the end of tax year in question. Find out how at Gov.uk
- Not checking your tax code
Your tax code tells your pension company or employer how much pay you can be paid free of tax – tax is taken off the rest. Your tax office will write to you from time to time explaining how the code was worked out. Check they have given you the right allowances, that the amount of pension or other income shown is correct, and query anything that you don’t understand.
- Not informing HMRC when your working hours change
If you change your hours, tell HMRC. They may need to adjust your tax code. Be particularly careful if you have a job as well as a pension - you get a code for each source of income, but it’s common for the wrong amount to be deducted.
- Forgetting to tell HMRC that you're soon to retire
Make sure your tax office knows in good time if you expect to start receiving a pension in the next few months so that they can sort out your tax code.
- Putting off your tax return
If you are sent a tax return for the tax year, you must fill it in by 31 October, or by 31 January if you do it online. The tax must be paid by 31 January each tax year. If you miss the deadline there’s an automatic £100 penalty, plus higher penalties after a further three months.
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