Paying enough tax?

Are you paying enough tax? According to HMRC figures, the UK’s tax gap has grown to an estimated £35 billion. If you’re wondering what the tax gap is, it’s the difference between the amount of tax that HMRC was expecting to be paid and the amount paid in 2019-20.

Taking reasonable care when reporting figures

Photo by cottonbro

The biggest share of this missing tax – around £12.6 billion – is from income tax, National Insurance contributions and capital gains tax and the most common reason is failing to take reasonable care when reporting your finance figures.

HMRC has a system of penalties it may charge if you make a mistake on your tax return, depending how big the mistake is and whether it thinks the error was made on purpose.

Taxpayer’s knowledge, abilities and circumstances should be taken into account when a judgement is made. If you’ve taken ‘reasonable care’ to fill in your tax return correctly, you won’t be charged a penalty. This may apply if you’ve only made one or two minor errors. If the error meant you didn’t pay as much tax as you should have done, you’ll still have to repay it.

However, if you’re deemed to have been careless, you may be charged between 0% to 30% of the extra tax you owe due to the mistake, in addition to paying back the missing tax.

Should HMRC think you’ve deliberately underestimated the amount of tax you owe, you’ll be charged 20-70% of the tax owing. Likewise, if you’re deemed to have deliberately underestimated the tax you owe. If you have attempted to conceal this fact, you could be charged between 70% and 100% of the extra tax owing.

Sole Traders & Business Partnerships

Sole traders or a partners in a business partnership, must keep records of all business income and expenditure. This includes data such as; sales and income, PAYE records, VAT records and business expenses. Proof can include receipts, bank statements and sales invoices. There are no specific rules on how your records should be kept. However, HMRC can issue a fine if they aren’t complete and accurate.

Careless mistakes are always more likely to happen if you’re racing to get your tax return finished before the deadline. Therefore, it’s a good idea to submit your return as early as possible. As P60 documents for the 2020-21 tax year have already been issued, people have all the information they need to file the corresponding tax returns.

SW&A’s experienced team can cater for all of your accounting needs! We can also save you the hassle of submitting your own tax return. Call us on 01905 622202 for more details or contact us via email – and relax.         

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