Self assessment tax returns are something that millions of people across the UK have to deal with every single year. Whether you are self employed, a landlord, a company director or someone with multiple income streams the responsibility of filing an accurate tax return falls on your shoulders. And while the process is manageable when done correctly the reality is that mistakes happen all the time and they can be costly.

In this blog we are going to look at the most common self assessment mistakes that people make, why they happen and most importantly how you can avoid them so that your tax return is accurate, compliant and filed on time every single year.

Why Self Assessment Mistakes Are So Common

Before we get into the specific mistakes it is worth understanding why they happen so frequently. Self assessment puts the responsibility for reporting income and calculating tax directly on the individual. Unlike PAYE where your employer handles your tax for you, self assessment requires you to understand what needs to be reported, what can be claimed and how to fill in the return correctly.

Most people who file self assessment tax returns are not tax experts. They are business owners, landlords, freelancers and professionals who have a hundred other things demanding their attention. Tax is something they deal with once a year and the rules around it change regularly which means what was correct last year might not be correct this year.

Add to that the pressure of deadlines and the complexity of certain tax situations and it is easy to see why mistakes are so common. The good news is that most mistakes are entirely avoidable with the right knowledge and the right support in place.

Mistake One: Missing the Deadline

This is the most straightforward mistake and yet it catches thousands of people out every single year. The deadline for filing your online self assessment tax return is the 31st of January following the end of the tax year. Miss this deadline by even one day and HMRC will issue an automatic penalty of one hundred pounds. The longer the return remains outstanding the higher the penalties become.

What makes this particularly frustrating is that the penalty applies even if you do not owe any tax. You can have a zero tax bill and still be penalised for filing late. HMRC is very clear that the deadline is the deadline and there is very little room for exceptions.

The way to avoid this is simple. Put the deadline in your diary at the start of each tax year and start gathering your information well in advance. Do not leave it until January to start thinking about your tax return for the previous year. The earlier you start the more time you have to pull everything together accurately and the less stressful the whole process becomes.

Working with a professional accountant who handles self assessment returns also eliminates this risk entirely. A good accountant will manage your deadlines for you and make sure your return is filed on time every single year without you having to think about it.

Mistake Two: Not Keeping Adequate Records

Good record keeping throughout the year is the foundation of an accurate self assessment tax return. If you have not kept proper records of your income and expenses during the tax year you will struggle to fill in your return correctly and you may end up either underclaiming expenses or making errors in your figures.

HMRC requires you to keep records that support the information on your tax return and they can ask to see those records if they decide to look at your return more closely. If you cannot produce adequate records you could face penalties even if the figures on your return turn out to be correct.

The solution is to develop good record keeping habits throughout the year rather than trying to reconstruct everything at the last minute. Keep receipts for all business expenses, record all income as it comes in and make sure your bank records are organised and accessible. Using accounting software makes this much easier and many self employed people and landlords find that keeping their records updated regularly throughout the year saves them a significant amount of time and stress when it comes to filing their return.

Mistake Three: Forgetting to Report All Income

This is a mistake that can have serious consequences. HMRC requires you to report all taxable income from all sources on your self assessment tax return. It is not just your main self employment income or your rental income. It is everything including income from savings and investments, dividend income, foreign income, income from occasional freelance work and any other source of taxable income you have received during the year.

Many people forget about smaller income sources or assume that because the amounts are modest they do not need to be reported. This is not how HMRC sees it. All taxable income needs to be declared regardless of the amount.

HMRC has access to a significant amount of financial data from banks, investment platforms, employers and other sources and they use this information to cross check what is reported on tax returns. If there is a discrepancy between what you have reported and what HMRC already knows about your income it can trigger an enquiry which is a time consuming and stressful process to go through.

The best way to avoid this mistake is to make a comprehensive list of all your income sources at the start of each tax year and make sure you are tracking all of them throughout the year. A professional accountant can help you identify all the income that needs to be reported and make sure nothing is overlooked.

Mistake Four: Overclaiming or Underclaiming Expenses

Expenses are one of the most misunderstood areas of self assessment. On one hand many people underclaim expenses because they are not aware of everything they are entitled to claim. On the other hand some people claim expenses that are not actually allowable which can cause problems if HMRC looks at their return.

For self employed people expenses must be wholly and exclusively for business purposes to be claimable. This means personal expenses cannot be claimed even if they are partly related to your work. However there are many legitimate expenses that self employed people regularly miss including use of home as office costs, professional development and training, business related subscriptions, certain travel costs and equipment used for work.

For landlords the rules around allowable expenses are different again and have changed in recent years particularly around mortgage interest relief. Making sure you are up to date with the current rules is essential to claiming correctly.

Overclaiming expenses is equally problematic. Claiming personal costs as business expenses or claiming things you are simply not entitled to can result in penalties if HMRC investigates your return. The key is to understand what you can and cannot claim and to keep clear records that support every expense you put on your return.

This is an area where a professional accountant who specialises in self assessment adds real value. They know the rules inside out and can make sure you are claiming everything you are entitled to while not claiming anything that could cause problems.

Mistake Five: Getting Your Payments on Account Wrong

Payments on account are something that catches a lot of people off guard particularly when they are filing their self assessment return for the first time. If your tax bill is above a certain threshold HMRC requires you to make advance payments towards your next tax bill. These are called payments on account and they are due in January and July each year.

Many people do not realise that when they pay their January tax bill they may also be paying the first payment on account towards the following year at the same time. This means the January payment can be significantly higher than they were expecting.

Understanding how payments on account work and planning your cash flow accordingly is important. If your income has dropped significantly compared to the previous year you may be able to apply to reduce your payments on account. A professional accountant can advise you on this and make sure you are not paying more in advance than you need to.

Mistake Six: Not Registering for Self Assessment on Time

If you are newly self employed or have a new source of income that requires you to file a self assessment return you need to register with HMRC by the 5th of October following the end of the relevant tax year. Many people are not aware of this deadline and miss it which can result in penalties.

Registering late does not mean you avoid the obligation. It just means you have not met your registration deadline and HMRC will want to know why. Getting registered on time and setting everything up correctly from the start avoids this problem entirely.

How a Professional Accountant Helps You Avoid All of These Mistakes

The thread running through all of these common mistakes is that they are all avoidable with the right knowledge and support. A professional accountant who handles self assessment tax returns regularly understands all of these pitfalls and knows how to steer you clear of them.

They will make sure your return is filed on time, that all your income is reported correctly, that you are claiming all the expenses you are entitled to and that your payments on account are calculated accurately. They will also communicate with HMRC on your behalf if any questions arise about your return.

For many people the cost of professional help with their self assessment return is more than offset by the tax savings that come from claiming expenses correctly and the penalties that are avoided by filing accurately and on time.

Final Thoughts

Self assessment mistakes are common but they are not inevitable. With good record keeping habits throughout the year, a clear understanding of what needs to be reported and the right professional support in place your self assessment tax return can be a straightforward and stress free process.