Filing a Self-Assessment tax return is a key responsibility for many individuals in the UK, including the self-employed, landlords, company directors, and those with untaxed income. While the process might seem straightforward, it’s surprisingly easy to make errors that could lead to penalties, interest charges, or even an HMRC investigation. This detailed guide highlights the top mistakes individuals make when filing Self-Assessment tax returns and, more importantly, how you can avoid them to stay compliant and stress-free.
1. Missing the Filing Deadline
One of the most common mistakes is missing the Self-Assessment deadline. For online tax returns, the deadline is 31 January following the end of the tax year (5 April). Missing this deadline results in an automatic £100 penalty, with further penalties and interest charges accumulating the longer you delay. To avoid this, set reminders well in advance and gather all necessary information early, including P60s, P45s, bank statements, and other income records.
2. Incorrect or Incomplete Information
Entering incorrect figures or failing to include all required information can cause errors in your tax calculation and potential fines. Common oversights include forgetting to report interest on savings, dividend income, or rental income. Always cross-check your entries with your financial records and consider using tax software that prompts you for relevant information. Keep all supporting documents in case HMRC requests them later.
3. Omitting Foreign Income
Many taxpayers mistakenly believe that foreign income is not taxable in the UK, especially if tax has already been paid abroad. However, UK residents must declare all worldwide income on their tax return. Double taxation relief may apply, but you must still disclose the income and any tax paid overseas. Failure to declare foreign income can lead to significant penalties, especially under HMRC’s offshore disclosure rules.
4. Misreporting Self-Employment Income and Expenses
Self-employed individuals often struggle with accurately reporting income and allowable business expenses. Common mistakes include:
- Mixing personal and business expenses (e.g. claiming for non-business travel or meals).
- Forgetting to claim legitimate expenses like office supplies, professional fees, or mileage allowances.
- Failing to account for allowable use of home expenses if working from home.
Use accounting software or consult with an accountant to separate business and personal costs clearly, and claim all legitimate expenses to reduce your tax bill.
5. Ignoring Payments on Account
If your tax bill is over £1,000, HMRC may require you to make payments on account towards the next tax year. These advance payments are due by 31 January and 31 July each year. Many taxpayers forget this requirement, resulting in unexpected cash flow issues or late payment penalties. Check your Self-Assessment statement to understand whether payments on account apply and budget accordingly.
6. Forgetting to Claim Allowances and Reliefs
UK taxpayers are entitled to various allowances and reliefs that can reduce their tax liability, including:
- Marriage Allowance transfer between spouses or civil partners.
- Blind Person’s Allowance.
- Gift Aid donations to charities.
- Pension contributions that qualify for tax relief.
Failure to claim these can mean paying more tax than necessary. Review your eligibility for allowances and ensure you include them in your return.
7. Overlooking Capital Gains Tax (CGT) Reporting
Many individuals forget to report capital gains on assets like shares, property, or investments. Even if your total gains are within the annual exempt amount (£6,000 for 2024/25), you may still need to complete the Capital Gains Tax pages of the tax return if you disposed of chargeable assets. Keep accurate records of purchase costs, sales proceeds, and any allowable expenses to calculate gains correctly.
8. Using the Wrong Tax Code
For those who have additional income, such as from employment, pensions, or benefits in kind, ensuring you use the correct tax code is essential. An incorrect tax code could mean under- or over-paying tax. HMRC issues tax codes based on previous years’ information, but changes in income or circumstances may affect this. Always check your tax code and update HMRC with any changes to avoid unexpected tax bills or refunds.
9. Not Checking HMRC’s Pre-Populated Information
HMRC may pre-populate certain information in your online Self-Assessment return, such as employment income or pension payments. However, these figures can sometimes be incomplete or outdated. Always cross-check the pre-populated figures with your own records and correct them if necessary. Relying solely on HMRC’s data can lead to errors and potential penalties.
10. Failing to Seek Professional Advice When Needed
Self-Assessment can be complex, especially for those with multiple income sources, foreign assets, or complex investment portfolios. Many taxpayers try to navigate the system alone, leading to mistakes that could have been avoided with expert guidance. If you’re unsure about any aspect of your tax return, consult a qualified accountant or tax advisor. The cost of professional advice often pays for itself by ensuring accuracy and peace of mind.
How to Avoid These Common Mistakes
To avoid these pitfalls and file a correct and timely tax return, consider the following tips:
- Start Early: Don’t leave your tax return until the last minute. Begin gathering information and filling out your return well before the deadline.
- Use Reliable Software: Consider using HMRC-approved software that guides you through the process and helps reduce errors.
- Keep Accurate Records: Maintain detailed records of income, expenses, and supporting documents throughout the year.
- Review Before Submission: Double-check all figures and ensure you’ve included all relevant income and claims for allowances or reliefs.
- Seek Professional Help: For complex tax affairs, work with a tax advisor to ensure compliance and optimise your tax position.
Conclusion
Filing a Self-Assessment tax return is a responsibility that many individuals in the UK cannot ignore. Avoiding common mistakes not only saves money but also reduces stress and the risk of penalties. By staying organised, understanding your obligations, and seeking help when needed, you can file your tax return confidently and focus on your financial goals.
