Millions of Brits are being urged to take immediate action to avoid unexpected tax bills and penalties from HM Revenue and Customs (HMRC). With rules constantly evolving, it's easier than ever to fall foul of the system.
Are You on HMRC's Radar? Key Red Flags
HMRC is cracking down on several common areas where taxpayers often make mistakes. Staying informed is your first line of defence against costly penalties.
1. The High-Income Child Benefit Charge Trap
If you or your partner earn over £50,000 and claim Child Benefit, you must register for Self Assessment. The charge gradually increases, and for those earning over £60,000, the entire benefit is effectively repaid through tax. Failing to declare this is a common and expensive error.
2. The Side Hustle Tax Rule
Earning from a side business, freelance work, or online sales? The £1,000 Trading Allowance isn't always a free pass. You must still report the income if your gross earnings exceed this threshold. HMRC is increasingly data-matching with platforms like eBay and Etsy.
3. Capital Gains on Your Home
Selling a property that isn't your main residence? You likely have a tax obligation. The annual exemption has been drastically reduced, meaning more people are liable for Capital Gains Tax than ever before.
4. State Pension and Taxable Income
The new State Pension can push retirees over the Personal Allowance. If your total income exceeds £12,570, you may have a tax bill, requiring you to file a Self Assessment return.
Other Critical Deadlines and Pitfalls
- Marriage Allowance: Couples can transfer part of their tax-free allowance, but you must claim it.
- Pension Contributions: Higher-rate taxpayers must claim additional relief on their Self Assessment form; it's not automatic.
- Interest from Savings: Basic rate taxpayers have a £1,000 savings allowance, but this shrinks to £500 for higher-rate earners and zero for additional-rate taxpayers.
- Gift Aid Donations: Higher-rate taxpayers can claim back the difference between the basic and their highest rate of tax.
- Tax Code Errors: Always check your tax code on your payslip. An incorrect code can mean you've overpaid or underpaid tax for months.
- Missing the Self Assessment Deadline: The deadline for online returns is January 31st. Missing it results in an immediate £100 fine, with further penalties accruing over time.
Act Now to Avoid Penalties
Proactivity is key. Review your financial situation against these points. If you're unsure, seeking advice from a qualified accountant can save you significant stress and money. Registering for Self Assessment well before the deadline is crucial to avoid last-minute panic and potential fines.
