8 Self-Assessment Tax Return Mistakes to Avoid

Paislei Godley, our associate director, reflects on the recently-concluded Self-Assessment season, which tends to induce substantial stress for businesses and the self-employed, especially in the run-up to the January 31 deadline.  

How can we cut stress during self-assessment season? 

Amid the challenges we've successfully navigated, it's apparent that pervasive myths and misconceptions surrounding Self-Assessment have led to mistakes and have added an extra layer of complexity. This is particularly challenging for those who are new to the process, making it difficult to discern truth from fiction. 

As we bid farewell to the tax return season, these reflections serve as a guidepost for future engagements with Self-Assessment. 

Read our tips to help you avoid common Self-Assessment mistakes in the future. 

1. Completing a Self-Assessment tax return is only necessary for the self-employed 

This is a common Self-Assessment mistake! 

Contrary to popular belief, certain circumstances may require individuals to file a Self- Assessment tax return, even if they are not self-employed. Such scenarios include: 

• Those who have earned £10,000 or more from savings, dividends or investments 
• Those who have earned £2,500 or more in untaxed income, for example, if you rent out a property 
• Those who earn £100,000 or more via an employer 
• If a person needs to pay Capital Gains Tax on profits from selling a second home, shares, or other chargeable assets 
• If a person's (or their partner's) income was over £50,000 and one of them claims child benefit 
• If somebody wants to claim tax back on work expenses over £2,500, private pension contributions, or donations to charity 

You can view exactly who needs to complete a self-assessment tax return at GOV.UK. 

2. Filing a Self-Assessment tax return is only required if you owe taxes 

This is false. 

Even if an individual's income falls below income tax and National Insurance thresholds, they may still need to submit a Self-Assessment tax return. It's essential to verify with HMRC, as changes in circumstances can necessitate filing. This Self-Assessment mistake can be costly, as failure to do so might result in fines. 

3. HMRC automatically fines individuals who miss the deadline 

This is true. 

HMRC will automatically issue a £100 late filing penalty charge to anybody who is up to three months late - the later it is, the higher the charge, so you will want to avoid this Self-Assessment mistake. There are also fines for those who don’t pay their tax bill on time.  

For those who have a reasonable excuse for missing the deadline, this fine can be appealed. Potential reasons for missing the deadline can include: 

• Death of a partner or close family member 
• A flood, fire, or theft that affects business 
• A serious illness 

You can find out more about appealing penalties at GOV.UK. 

4. Only an accountant can complete a tax return 

This is false. 

While there's no legal requirement for an accountant, businesses may benefit from their expertise. Individuals can complete their Self-Assessment tax returns without an accountant if they maintain organised files and documents.  

5. The Self-Assessment process is lengthy and challenging 

This is false. 

Though the Self-Assessment process can seem daunting, it doesn't have to be. The time required depends on the complexity of the tax return. Organised filing and the use of accounting software like Xero can simplify the process, calculate deductions, categorise expenses, determine owed taxes and ensure accuracy.  

6. Online filing is a time-consuming process

This is false. 

Contrary to misconceptions, online filing is the quickest and most straightforward method for Self-Assessment tax returns.  

The time taken depends on individual cases, with organised individuals likely completing it faster. If you file online, you can revisit your returns as many times as needed before submission. 

7. The January 31 deadline allows for last-minute tax returns 

This is false. 

While some procrastinate until the last minute, it's best not to do so. The January 31 deadline is the final submission date, but completing and submitting the tax return ahead of time prevents stress and potential fines. If you want to avoid rushing and potentially making mistakes on your Self-Assessment, then start early. HMRC encourages early filing for clarity on owed taxes and better budgeting.  

8. Full payment of tax bills is not mandatory 

This is true. 

If unable to pay the full tax owed by the deadline, HMRC can arrange an affordable monthly payment plan. Submitting the tax return ahead of the deadline facilitates quicker setup of the payment plan. 

If you need further help or advice, the experienced team at Prime Accountants stands ready to provide support in any area of self-assessment. Contact our associate director Paislei Godley for more information or learn more about our tax services.