What should you do if you underpaid tax?

The new tax year is here and now is the time when individuals and businesses will need to examine the updated rules and regulations to ensure that they are ready for the coming months.

This is also the time for looking back on the previous tax year, but this can sometimes lead to the discovery that something has gone wrong.

If you notice that you underpaid tax, now is the time to take action before the situation gets worse.

If I underpaid tax, what do I need to do now?

Individuals and businesses are both at risk of underpaying tax.

Generally, larger businesses do have a better handle on their obligations as they utilise expert teams to review figures and manage tax exposure effectively.

On the other hand, SMEs continue to attract the attention of HMRC as it has been noted that the tax gap for small businesses Corporation Tax is 40.1 per cent of the small businesses theoretical Corporation Tax liability, or £14.7 billion in absolute terms, in the 2023 to 2024 tax year.

Dividend tax and stamp duty land tax are just some of the taxes that, judging by their frequent appearance in the news, individuals struggle to pay properly.

A lack of understanding of tax obligations is most commonly given as the reason why taxes are underpaid, but HMRC take a dim view of those shirking their responsibilities.

If you find yourself staring at your accounts and realising that you have not paid the full amount of tax you owe, then it is on you to fix that situation immediately.

HMRC will find the error eventually, but if you voluntarily disclose the mistake before this time, then they are likely to take a more lenient approach to you.

HMRC’s Digital Disclosure Service (DDS) will generally be the best course of action to manage any reports of underpaid tax, but if you are a business owner who suspects that fraud may have occurred, then it may be better to use HMRC’s Contractual Disclosure Facility (CDF).

If you were not directly involved in a crime, then the CDF allows you to inform HMRC without the risk of implicating yourself.

Can tax compliance improve this year?

Our goal is to see tax compliance improve this year and we dream of a time when noncompliance is a thing of the past.

To make that a reality, we are highlighting the importance of seeking professional financial support for help managing your tax obligations.

Individuals and small businesses often try to go it alone without realising they can outsource to an accountant and have the stress of tax compliance handled for them.

This is especially useful when estates or businesses are notably complex, as this can result in tax rules applying that you may not be aware of.

Conversely, seeking professional support may reduce your tax bill overall, as an expert can help you access reliefs and take a more tax-efficient approach to your business or estate.

Our team is here to help you handle all of your tax obligations with confidence over the coming months.

We can review your finances and help you to determine where your tax exposure is and support you in paying the correct tax that you owe.

If you would like to take the stress out of tax compliance, speak to our team today.