The top 10 Self Assessment tax return mistakes – and how to avoid them

This guide explores 10 of the biggest and most costly Self Assessment mistakes people make when completing their tax return – and what you can do to avoid them and lower your tax bill.

Self Assessment is the system HMRC uses to deduct income tax from workers who are self-employed or generate income that isn’t taxed through PAYE. If you earn income that isn’t taxed automatically by your employer, you’ll need to declare that income to HMRC and pay the appropriate amount of tax using a Self Assessment tax return.

It is important that you file your tax return on time, as you will incur a penalty for missing the filing deadline. Your return should also be free of mistakes and the information submitted should be complete, as you could be penalised for not taking sufficient care in preparing your return.

Want to keep your Self Assessment tax bill as low as possible? Don’t worry we are here to help. We will walk you through the most costly mistakes people make with their tax return — and critically, what you can do to avoid those mistakes.

1. No Government Gateway user ID

A very common mistake is forgetting to register for a Government Gateway account or losing your Government Gateway user ID. Both issues may prevent you from filing your Self Assessment tax return and receiving a penalty if you are attempting to file close to the 31 January deadline.

The Government Gateway is a method of verifying your identity when using HMRC online services – including Self Assessment. You will need a Government Gateway user ID before attempting to set up a Self Assessment account.

If you do not have an account, you can register on the HMRC services: sign in or register page of the GOV.UK website. You will need your National Insurance number or a UK address, and a recent payslip, or P60, or a valid UK passport to register. It will take up to 10 days to receive your 12-digit activation code by post from HMRC.

If you have lost your Government Gateway user ID you can recover your user ID and password at the GOV.UK website. However, if you do not know the email address you used to register your Government Gateway account, you will need to create a new one, and wait for your new activation code to arrive by post.

2. No Unique Taxpayer Reference (UTR)

Another common mistake is forgetting to apply for or losing your UTR number.

First-time Self Assessment filers need to set up a Self Assessment account with HMRC to obtain a Unique Taxpayer Reference (UTR).

Bearing in mind the Self Assessment deadline is on 31 January every year, you’ve got to make sure you have an active UTR well before that date, or it could cause you to miss the filing deadline and incur a penalty.

Strictly speaking, you’re supposed to register for Self Assessment by 5 October every year. That being said, there’s no automatic fine or penalty for missing that deadline. But to be on the safe side, you should always apply for your UTR at least 20 days before you’ve got to submit your return, as there is no such thing as a temporary or emergency UTR number.

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A UTR is a 10-digit code that uniquely identifies you as a taxpayer. After asking for a UTR, it normally takes about 10 days to get your number through in the post. It can then take another 10 days for you to receive the activation code you’ll need to access your new HMRC online account.

If you have lost your UTR number, you may be able to find it on previous tax returns and correspondence from HMRC, for example: notices to file a return or payment reminders.

In the event of not being able to find your UTR number, you should contact HMRC directly on 0300 200 3310. Once you have passed a series of security questions to verify your identity, they will post your number to you, which can take up to 7 days. This is the only way HMRC will send your UTR number to you, so don’t leave it too late!

3. Forgetting about tax-free allowances

The absolute worst error you could ever make when submitting your Self Assessment return is to forget to take advantage of your tax-free allowances.

When you hear HMRC talk about tax-free allowances, they’re normally just talking about your Personal Allowance. This is an allowance of £12,570 that gets applied to your tax account automatically. You do not need to apply for this allowance.

There are other automatic tax-free allowances you should be aware of, too. For example, you can get up to £1,000 per year in tax-free allowances for any income you generate from trading and property, known as the Trading Allowance and Property Allowance. If you have both types of income you will be eligible to £1,000 for each.

However, there are some really helpful tax-free allowances that aren’t applied automatically — and so you should do a bit of research to find out what these are and if you’re eligible.

Examples of tax-free allowances you need to apply for include:

• The Blind Person’s Allowance – if you or your spouse is registered blind you can claim £3,070 per year
• The Marriage Allowance lets you transfer unused Personal Allowance to your partner
• The Rent a Room Scheme allows you to earn up to £7,500 tax-free if you let out a furnished room in your home

Remember, there are a lot of tax-free allowances HMRC offers. Before filing your tax return, make sure you do your homework so that you’re not missing out on any schemes that could substantially lower your tax bill.

4. Not planning for payments on account

One of the top mistakes taxpayers make when filing their Self Assessment return is not planning for payments on account. So, just what are payments on account?

Simply put, a payment on account is an advanced payment HMRC asks you to make towards your next tax bill. This includes any Class 4 National Insurance contributions if you’re self-employed.

After filing your Self Assessment, you’ll have to make two payments on account every year. Each payment represents half of your previous year’s tax bill — and payments on account are normally due by midnight on 31 January and 31 July each year.

That being said, it’s important to bear in mind you won’t need to make payments on account if:

• your last Self Assessment bill was under £1,000, or
• you’ve already paid over 80% of all tax you owe

If you want to avoid getting the fright of your life when you see the next tax bill, you will need to plan accordingly. You should do your best to start tucking away funds for your payments on account so that you’ve got it to hand when it’s time to pay your bill.

It is worth remembering that if your business is expanding you will generally have higher payments on account – so be prepared!

5. Not declaring the correct salary and benefits from PAYE jobs

If you have a job in which your tax is deducted through PAYE, you need to make sure HMRC knows about it and the income earned through PAYE is correct on your return. Otherwise, you could end up paying more tax than you need to.

Thanks to Making Tax Digital, this information is now typically generated on your tax return automatically before you even start filling it out. But this data is often inaccurate. For example, your employer may not have reported your PAYE earnings correctly or simply may not have reported them!

You should always check the amount you’ve earned and what’s been taxed from your PAYE employment to make sure the information on your return is correct. After all, if your employer has submitted the wrong number by mistake, it could end up costing you. Likewise, there may be situations in which some of your PAYE income hasn’t been added to your return automatically.

The best place to check your PAYE information is on your P60 or P11D. This will show how much you earned and how much tax was paid in the last tax year, which you can then enter manually if need be.

6. Claiming disallowed expenses

There are many allowable expenses you can legitimately claim to reduce your tax bill. Allowable expenses are essential business costs that are required to keep your business up and running. They are tax-deductible, which means HMRC allows you to offset those expenses against your annual tax bill.

Examples of allowable expenses you can claim are:

• office costs – office, property, equipment, stationery
• travel costs – car, van, fuel, parking, train or bus fares
• clothing expenses – protective clothing, uniforms
• staff costs – salaries, bonuses, pensions, or subcontractor costs
• things you buy to sell on – goods for resale, or raw materials
• financial costs – accountancy costs, insurance, bank charges
• costs of your business premises – rent, rates, utility bills, business rates
• advertising or marketing – advertising, entertainment, subscriptions, website costs
• training courses – related to your business

There are important rules that you must follow when claiming expenses and you should also keep records and receipts of all expenses claimed, as HMRC may want to see them one day.

A legitimate expense must have been incurred ‘wholly and exclusively’ for the purposes of running the business and be allowable for tax purposes. This means the costs should have been incurred while actually performing a business activity or trying to attract more business.

If in doubt as to what you can and cannot claim, check out HM Revenue Helpsheet HS222 How to calculate your taxable profits, which includes a table of the most common ‘allowable’ and ‘non-allowable’ expenses.

Claiming illegitimate expenses may have serious consequences. Apart from paying interest on the underpayment of tax, if you deliberately under-declare tax payable, you could receive a penalty of up to 100% of your tax bill. In practice, penalties of 10% to 30% are more common.

7. Not claiming tax relief on private pension contributions

Do you make private pension contributions? If so, you can get tax relief of up to 100% of your annual earnings.

This is especially important for higher-rate taxpayers who overpay hundreds of millions of pounds in tax every year due to unclaimed pension tax relief.

You get this tax relief automatically if:

• your employer takes workplace pension contributions out of your salary, or
• you contribute towards a private pension and pay Income Tax at 20%, as your pension provider should claim the basic tax rate relief and add it to your pension pot

It is worth checking the basic rate relief has been claimed as there are a handful of pension providers who do not do this.

However, if you pay the higher rate (40%) or additional rate (45%) of Income Tax, you will need to claim the extra 20% and 25% through your Self Assessment tax return. This money will not be paid into your pension pot, but will instead be paid in one of the following ways:

• as a reduction in your current tax bill
• as a tax rebate
• as a change in your tax code (i.e. you will pay less tax next year)

HMRC will not remind you that you can claim this higher rate tax relief on your pension contributions – or that you have to claim it via your Self Assessment tax return.

Also remember, you need to do this every year. So if you have not done this previously, you may have unpaid tax relief that can be claimed for up to 4 previous years.

If you still have questions about how your pension contributions are taxed, the best place to start is tax on your private pension contributions at the GOV.UK website.

8. Missing the filing and payment deadline

We’ve already talked about making sure you apply for your UTR and register for Self Assessment in time — but that’s not the only deadline you’ve got to remember.

The HMRC Self Assessment online submission deadline is on 31 January every year. HMRC made a rare exception in 2021 because of disruption related to the COVID-19 pandemic. So that deadline for online filing was extended to 28 February.

But deadline extensions are a rare occurrence, so you shouldn’t bet on it happening regularly. Instead, you should always plan to have your Self Assessment return completed and submitted before 31 January.

If you fail to send your return in time (and you’ve not been granted an extension), penalties can range from a fine of £100 up to 100% of your tax bill. That means if you file late, you could end up paying twice as much tax.

More important still, don’t forget that 31 January isn’t just the deadline for filing your return. It’s also the deadline for making your payment on any tax owed — as well as your first payment on account, and HMRC will charge you interest on late payments.

That’s why it is prudent to file early, so you’ve got plenty of time to set money aside to pay your bill by the deadline.

9. Not being aware of the High Income Child Benefit Tax Charge

More than 7.2 million UK families receive Child Benefit every year — which can be a huge help for them in terms of making ends meet.

But what a lot of taxpayers don’t know is they may have to pay a tax charge known as the High Income Child Benefit Charge if they (or their partner) individually earn over £60,000 per year and are in receipt of the benefit payment.

In this situation, you’ll be charged 1% of your Child Benefit for every £200 you earn above £60,000. Therefore, if your income is more than £80,000 per year, the charge will be equal to the Child Benefit payment.

It is your responsibility to deal with this charge through the Self Assessment tax return, so it is worth getting this right, and it could be a big shock to the system when it comes to paying your tax bill. Again, do yourself a favour and prepare accordingly.

However, you do have options with regard to this charge. For example:

• you can reduce your ‘adjusted net income’ by making a pension contribution either as part of an occupational pension scheme or a personal pension, and so reduce the tax charge payable, or
• if you earn in excess of £80,000, you may wish to elect not to receive Child Benefit and avoid paying the charge and the hassle of dealing with it in your tax return

Still have questions? You can learn more about the High Income Child Benefit Tax Charge on the GOV.UK website.

10. Not claiming charitable donations

Finally, everyone knows about claiming expenses to reduce your tax bill — but not everyone realises you can also lower your taxes by claiming on charitable donations.

Every donation you make to a registered charity or a Community Amateur Sports Club (CASC) is 100% tax-free. These donations are normally made through Gift Aid.

Gift Aid is the most popular way of donating to charities because it lets charities or CASCs claim an extra 25p from the UK Government for every £1 you donate.

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It’s also worth mentioning that if you’re a high earner and you pay tax above the basic rate, you’ll be able to claim the difference between the rate you pay and basic rate tax on your donation.

For example, let’s say you’re a high earner and you donate £100 to a local charity. They can claim Gift Aid on your donation to top up the contribution to £125 (at no extra cost to you). You can either choose to claim £100 on your Self Assessment return to lower your tax bill — or you can choose to claim all £125 as long as you’re willing to pay 40% tax on the extra £25.

The former is a little bit simpler, and so that is the option most filers go for. But if you’ve made hefty donations that have been submitted using Gift Aid, you could end up shaving even more money off your tax bill by paying tax on the difference and claiming Gift Aid.

Other common Self Assessment mistakes

So far, we have covered what we consider to be the biggest and most costly mistakes people make in filing their tax returns. However, they are just the tip of the iceberg and there are many more mistakes that people make.

Here is a selection of common errors that could potentially cause you delays and problems, so it is a good idea to try and avoid them:

• Poor arithmetic – making mistakes with calculations on your return.
• Using the wrong tax code – make sure you are on the correct tax code. You can check it on tax codes page of the GOV.UK website.
• Incorrect National Insurance and UTR numbers – it is important to submit these accurately and not enter them incorrectly on the return.
• Incomplete information – writing ‘to be confirmed’ or ‘info to follow’ is not acceptable to HMRC. All information required must be submitted.
• Ticking the wrong boxes – this is a very common problem that can be avoided by using the HRMC guide included with the tax return.
• Not reporting interest earned on savings – forgetting to report the interest you make from savings and investments.
• Failing to declare all income – forgetting to declare a source of income or under-declaring income could lead to an investigation by HMRC, a fine, and prosecution.
• Not declaring capital gains – remember to declare income from capital gains, such as the sale of property, a business or shares, etc.
• Forgetting to sign and date your return – relevant to paper tax returns only.

What to do if you make a mistake with your tax return

If you discover you have made a mistake with your tax return, you have 12 months from the submission deadline date to amend it.

You can make amendments and refile your return by following HMRC’s guide on tax return corrections. Your tax bill will be updated based on what you submit, and you may need to pay more tax or receive a refund.

If HMRC finds problems with your return, this could result in paying more tax and receiving a penalty notice. However, if you have taken reasonable care with your return and made a genuine mistake – no penalty should apply, and you have the right to appeal a penalty notice.

It is also worth mentioning that HMRC may decide to open an enquiry to investigate your tax affairs if there are inconsistencies between your different returns, you file returns consistently late, and/or your costs are significantly higher than the industry norm.

So, there you have it!

We’ve covered our top 10 Self Assessment mistakes people make when completing their tax return, a selection of other common errors, and what to do if you need to change your return.

Completing your Self Assessment return accurately and on time is incredibly important if you want to keep your tax bill as low as possible. So, you should do your homework beforehand to make sure you know all the facts.

If you have multiple sources of income and your return is quite complicated, or if you are simply unsure of what you are doing, we recommend you seek the assistance of an accountant who will ensure your tax affairs are handled properly.

If you’re on the hunt for more information about Self Assessment and company taxes, you’ve come to the right place. Check out the 1st Formations blog for regular tips, tricks, and updates about HMRC Self Assessment, Corporation Tax, company formation, and more.