Self Assessment: Common Mistakes Business Owners Make (and How to Avoid HMRC Penalties)

Self Assessment is one of those tasks that feels straightforward until it is not. For business owners, sole traders and landlords, small mistakes can trigger delays, unexpected tax bills, or penalties that are entirely avoidable. 

Here are the most common issues we see, plus simple ways to reduce HMRC risk and keep your return clean. 

1. Leaving it too late to file 

Even if you are confident that you will not owe much tax, filing late can still cost you. 

If you send your Self Assessment tax return late, HMRC applies the following late filing penalties*: 

• An initial £100 fixed penalty 
• After 3 months, additional daily penalties of £10 per day, up to a maximum of £900 
• After 6 months, a further penalty of 5% of the tax due or £300, whichever is greater 
• After 12 months, another 5% of the tax due or £300, whichever is greater 

These penalties apply even if no tax is owed or the tax has already been paid. 

What to do instead 

• Aim to finalise your figures well before January, especially if you have multiple income sources. 
• File as early as you can after the tax year ends (after 5 April) so you know what you owe and can plan cash flow.  

2. Filing on time, but paying late 

Filing and paying are separate. You can file your Self Assessment return on time and still incur penalties if you do not pay your tax by the deadline. 

HMRC charges late payment penalties of 5% of the tax unpaid at 30 days, 6 months and 12 months, plus interest.  

What to do instead 

• Confirm what is due by 31 January and whether you have payments on account. 
• If cash flow is tight, talk to us early so you can explore options before it becomes urgent. 
• Create a bank transfer which will happen on the 28th January for the amount you owe.  Do not do it on the actual 31st January, as there could be technical issues on the day.   

3. Forgetting payments on account 

Many self-employed individuals and landlords get caught out by payments on account. These are advance payments towards your next bill, and they are typically due on 31 January and 31 July.  

What to do instead 

• When reviewing your tax bill, check whether it includes payments on account. 
• Budget for July as well as January, so the second payment does not come as a surprise. 
• Create a bank transfer which will happen on the 28th July for the amount you owe.  Do not do it on the actual 31st January, as there could be technical issues on the day. 

4. Missing income, or using the wrong figures 

Common examples include: 

• Forgetting a small second income stream 
• Missing bank interest or dividend paperwork 
• Using sales totals rather than profit figures for self-employment 
• Mixing up personal and business transactions 

What to do instead 

• Reconcile your records before you start the return. 
• Use a simple checklist of income sources and confirm that you have supporting documents for each one. 

5. Overclaiming, underclaiming, or misunderstanding expenses 

Expenses are one of the biggest areas for mistakes, especially where there is mixed business and personal use. If something is partly personal, you normally claim only the business portion. 

What to do instead 

• Keep clear evidence and notes for anything that is not obviously business only. 
• Be consistent year to year and make sure your approach is reasonable and supported. 

6. Poor record keeping 

Weak records make everything harder: harder to complete the return, harder to answer questions, and harder to defend claims if HMRC asks. 

For self-employed record keeping, HMRC generally requires records to be kept for at least 5 years after the 31 January submission deadline for the relevant tax year.  

What to do instead 

• Store invoices and receipts digitally as you go, ideally on a spreadsheet, so you have totals easily calculated. 
• Keep a clean separation between business and personal spending where possible. 

7. Not using the amendment window when you spot a mistake 

Mistakes happen. The key is correcting them quickly and properly. 

You can usually correct a tax return within 12 months of the Self Assessment deadline.  

What to do instead 

• If you realise something is wrong, do not ignore it. 
• Get advice quickly so corrections are handled cleanly and with the right explanation if needed. 

8. Missing the “pay through your tax code” cut off 

If you qualify to pay some Self Assessment through your PAYE tax code, there is a separate deadline to meet and conditions to satisfy. 

For example, GOV.UK notes you can pay through your tax code if you owe less than £3,000, already pay tax through PAYE, and submit by the relevant cutoff date (such as 30 December for online returns).  

What to do instead 

• If you are employed as well as self-employed, this can be worth checking early. 

How Naylor Accountancy Services can help 

If you would like a quick sense check before you file, or you want us to handle the return end to end, we can help you stay compliant, avoid penalties, and make sure you are claiming what you are entitled to with the right supporting approach. 

If you want support with your Self Assessment, get in touch with Naylor Accountancy Services:
+44(0)1892 807 001
[email protected] 

*Source: Self Assessment tax returns: Penalties - GOV.UK