10 Self-Assessment Myths Debunked
With tax return season upon us we’ve all heard our fair share of myths and misconceptions when it comes to Self-Assessment. From weird deductions to wild conspiracy theories, the world of taxes is rife with misinformation.
We’ve taken a look at the top myths and debunk 10 common misconceptions:
Myth 1: You can claim a tax deduction for your entire home as a home office
Many hope to turn their entire living room into a home office and claim for the whole thing. In reality the home office deduction is reserved for spaces used exclusively and regularly for work. Your couch doesn’t qualify, and neither does your kitchen table where you occasionally set up your laptop.
Myth 2: You can deduct your daily commute from your taxes
Unfortunately, not. The cost of your daily commute is generally not tax-deductible in the UK. Only specific work-related travel expenses or those incurred as part of your job are eligible for deductions.
Myth 3: I can delay my tax return for a year
Some people believe they can keep postponing their tax return for up to a year without consequences. In the UK, there are strict deadlines for filing tax returns. Failing to meet these deadlines can result in penalties and interest charges. So, don’t let the myth of endless extensions lull you into a false sense of security. Submit your tax return on time to avoid potential penalties.
Myth 4: You can avoid paying tax by getting remunerated in cash
The idea of getting paid in cash to avoid taxes might sound like a clever scheme, but it’s illegal and far from foolproof. The HMRC requires all income to be reported, whether it’s in cash or any other form. So, if you’re thinking of stashing away your notes, think again.
Myth 5: Tax refunds are free money
Ah, the beloved tax refund. Is this a nice windfall of free cash from the government? No, a tax refund is your own money that you overpaid in tax throughout the year. Still a nice surprise though.
Myth 6: I can opt out of paying tax
Hmm if this were true, we’d all do it. It’s a simple no, taxes are a legal obligation and avoiding them through schemes or loopholes can lead to penalties and legal trouble.
Myth 7: Moving to a tax haven will eliminate UK taxes
The idea of moving to a tax haven to escape UK taxes might be tempting, but it’s not as simple as packing your bags. UK residents are subject to UK tax on their worldwide income. Even if you relocate, you may still have UK tax obligations.
Myth 8: I can claim all expenses for my side hustle
While it’s true that you can claim certain expenses related to your side job or business, not all expenses are tax-deductible. You must ensure that the expenses you claim are genuinely related to your business, and you’ll need to keep accurate records.
Myth 9: Every expense is deductible
Some people mistakenly believe that every expense they incur in their daily life is tax-deductible. While there are certain deductions, not all expenses can be claimed on your tax return. Deductions are typically limited to specific categories of expenses that are directly related to your work, business, or specific circumstances. Claiming expenses that don’t qualify can lead to incorrect filings and potential issues.
Myth 10: The 31st January deadline means tax returns can be done last minute
Unfortunately, not, although you can it’s advised not to. The 31 January is the final date they should be submitted, so it’s wise to get ahead and file your returns a little earlier to avoid any stress or fines. The HMRC encourages tax returns to be completed ahead of the deadline so that it is clear what tax is owed and allows you to budget forecast efficiently.
This was all a bit of fun but Self-Assessment Tax Returns can be time-consuming and complex. If you need support on any area of self-assessment or just some advice, please contact Lianne@langricks.com who will be able to assist.
