Common Mistakes When Filing a Self Assessment Tax Return in the UK

Most Self Assessment mistakes are not exotic. They are the same handful of errors, repeated every January, and each one carries a price: a penalty, an unexpected bill, or an afternoon lost to HMRC's phone queue. Nearly all of them are avoidable with a little care in the weeks before the deadline.

Deadline mistakes that cost money

There are three dates worth knowing by heart. If you need to file for the first time, you must tell HMRC by 5 October after the end of the tax year. The return itself is due by 31 October on paper, or 31 January online. Any tax owed is also due by 31 January.

Missing the filing date triggers an automatic £100 penalty, even if you owe nothing. Leave it three months and daily penalties of £10 begin to build up, to a maximum of £900. At six and twelve months there are further charges based on a percentage of the tax due, or a fixed amount if that works out higher. Late payment is punished separately, with a 5% charge at 30 days and again at six and twelve months, plus daily interest.

The mistake underneath all this is usually timing. People wait for a P60, a bank statement or a login they have not used since the previous year, and discover the problem on 29 January. Create or recover your Government Gateway details now rather than in deadline week.

Expenses: the rule, and where people go wrong

For self-employed people, expenses must be incurred wholly and exclusively for the purposes of the trade. That phrase does a lot of work, and it is where most disagreements with HMRC begin.

Claiming too much

• Ordinary commuting between home and a permanent workplace.
• Client entertaining, which is not allowable even when it feels like a business cost.
• Clothing you could comfortably wear in everyday life. Uniforms and protective gear are different.
• Fines and penalties, including parking tickets picked up while working.
• The personal share of a phone, broadband or energy bill.

Claiming too little

The opposite error is just as common and costs you real money. Costs often overlooked include mileage on business journeys, a fair business proportion of home running costs or the flat-rate simplified expenses figures, professional subscriptions, insurance, accountancy fees, and training that updates skills you already use.

Big purchases need different treatment. A laptop, van or piece of machinery is usually a capital item, claimed through capital allowances rather than as an everyday expense. And if your total expenses are small, the £1,000 trading allowance may be simpler and more generous — but you cannot claim it and your actual expenses at the same time.

Payments on account catch people out

If your bill is more than £1,000 and less than 80% of it was collected at source, HMRC will ask for payments on account: two instalments, each half of the previous year's liability, due on 31 January and 31 July. Newly self-employed people often meet this for the first time and assume it is a mistake. It is not, but it can be reduced.

If your profits have fallen, you can claim to reduce your payments on account before the deadline. Be careful: reduce them too far and the eventual bill turns out higher, and interest is charged on the shortfall. If you have stopped trading or your income has dropped sharply, reducing to nil is reasonable — just keep evidence of why.

Income you forgot to declare

Report income gross, not what landed in your bank after fees. Beyond self-employment, remember the less obvious sources: dividends, savings and investment interest, rental income, foreign income, and disposals that may be liable to Capital Gains Tax. Selling goods online, driving for a delivery platform, or taking occasional freelance work all count, though trading allowances may cover small amounts.

Then check whether you are due a claim you have not made: higher-rate relief on pension contributions or Gift Aid donations, Marriage Allowance, or professional expenses as an employee. These reduce the bill and are easy to forget.

Records, claims and corrections

Keep records of income and expenses for at least five years after the 31 January filing deadline for that tax year. Bank statements alone rarely tell the whole story, so note what each transaction was for while you still remember.

If you file and then spot an error, you can usually amend your return online within 12 months of the filing deadline. That is far better than waiting for HMRC to notice. Where you are unsure whether something is allowable, or your affairs are complicated, an accountant's fee is often cheaper than the penalty and interest.

A quick pre-submission checklist

1. All income sources included, at gross figures.
2. Expenses backed by receipts or statements, with a note of why they qualify.
3. Capital purchases claimed as capital allowances, not everyday expenses.
4. Payments on account reviewed, and reduced if your income has dropped.
5. Any reliefs or allowances you are entitled to claimed, not assumed.
6. Bank details correct for a repayment, and enough money set aside for the bill.

Give yourself a fortnight

Two weeks of slack turns a stressful scramble into a routine job. Set aside an afternoon, gather your paperwork, and file before the middle of January. If the number looks frightening, deal with it early too: HMRC can sometimes collect tax owed through your PAYE code the following year if you file online by 30 December and the amount is under £3,000, and there are time-to-pay arrangements for larger bills. Facing the figures in good time is always cheaper than avoiding them. This is general guidance rather than tax advice — for anything unusual in your own affairs, speak to a qualified accountant.

Photo: Mohamed_hassan / Pixabay