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Filling in your tax return is no-one’s favourite job, especially as the deadline gets closer. But, getting your annual self-assessment tax return done properly (and on time) doesn’t just keep you on the right side of HMRC – it could also reduce the amount of tax that you pay.
With that in mind, it makes sense to arm yourself with the knowledge of the biggest mistakes that many people make when paying tax. If you’re aware of these, you could avoid expensive errors as well as having to pay more tax than you need to.
What’s on this page?
Not everyone has to fill in a self-assessment form every year. But if you are either self-employed, or have income from a variety of sources (such as investments or property), you will have to complete a tax return.
This is also the case if you earn more than £100,000 a year, because you start losing your Personal Allowance (the £12,570 you can make each year before you start paying tax). Company directors also need to file tax returns, and people who receive an income from dividends, as well as some people who sell goods or services through an online marketplace.
If you’re not sure whether you need to complete a tax return, you can check online with HMRC.
If you’re not already registered for self-assessment – either if you are registering for the first time, or you need to re-register because you didn’t need to do one last year – the deadline to register is 5 October for the previous tax year. You need to register to get a Unique Taxpayer Reference (UTR) so that you can get started. Contact HMRC as soon as possible if you have missed this deadline.
Mike Parkes, technical director at GoSimpleTax, says it's vital to be aware of HMRC’s deadlines. If you miss that all-important deadline of 31 January for online submissions, HMRC will give you an automatic penalty of £100. It doesn’t stop there.
The later you file, the bigger the penalties. “If you’re three months late, [it’s] a daily penalty of £10, capped at 90 days (£900). If you’re six months late, the fine is £300, or 5% of the tax owed, whichever is greater,” Parkes adds. “After 12 months, [HMRC] will penalise you another £300, or 5%, and, in exceptional circumstances, 100% of the tax due.”
Don’t forget the all-important step of hitting ‘submit’, which can be easy to overlook. This comes after the calculation of any tax you owe or are owed. Once you have submitted your return successfully, you’ll receive a confirmation email, so make sure you’ve got that.
As well as filing your return ahead of the 31 January online deadline, you must also pay any tax outstanding by then – there’s a page on the government website that explains how.
This tax will usually not be collected automatically – although for smaller amounts, you can opt to pay any tax you owe through your future payroll, if you are still employed. If you have already submitted your tax return, but haven’t yet paid your bill, make a diary note or set a phone reminder to get it paid ahead of the January deadline if you don’t want to pay it right now.
If you can’t afford to pay your tax, you can set up a self-assessment payment plan online. You can do this if you have filed your tax return, are within 60 days of the payment deadline, and owe £30,000 or less.
All taxable income needs to be declared on your return. This isn’t just your earnings or pension payments – it also needs to include income from other sources, such as dividends paid from investments, rent from buy-to-let property and, potentially, interest on cash savings.
When it comes to savings, the personal savings allowance means there's a certain amount of interest you’re allowed to receive untaxed, depending on your income tax band.
If you’re a basic-rate taxpayer, you can make £1,000 in interest and 20% is applied on amounts above this (this will be 22% from the 2027/28 tax year onwards). Higher-rate taxpayers have a £500 annual allowance and pay tax of 40% above this (this will be 42% from the 2027/28 tax year onwards). Additional-rate taxpayers have no personal savings allowance and pay 45% tax on savings interest (47% from 2027/28 onwards).
Interest or investment returns through an ISA are tax-free, so you don’t have to declare these.
Don’t forget about capital gains tax too. Stephanie Hurst, personal tax compliance director at accountancy firm Monahans, adds: “Some asset sales may be subject to capital gains tax. Property disposals are often missed or calculated without taking all reliefs into consideration.”
You will need to declare capital gains on your tax return if your gains (before deducting any losses) for the year are more than the annual exempt amount (£3,000 for 2025/26 and 2024/25). Or if your sales proceeds are more than £50,000, even if your gains are less than the annual exempt amount. But you don’t need to if your only disposal was of your home and main residence relief applies on the full amount of the gain.
There is a special process for capital gains tax for 2024/25, because the rates changed partway through the year. This special process is explained on the government website.
If you fail to declare any income or gains when submitting your tax return, you could be stung with a penalty.
If you are a higher or additional rate taxpayer, don’t forget to complete the section asking for information on your pension contributions. This needs to be the gross value of your pension contributions, which is the total amount that goes into your pension, including 20% basic rate tax relief.
If you are a higher rate taxpayer, you’ll need to claim the additional 20% tax relief you’re entitled to back through your tax return – or an additional 25% relief if you’re an additional-rate taxpayer.
Although some workplace pensions apply all the tax relief you are entitled to straight away through salary sacrifice, this isn’t always the case. If you’re still working and aren’t sure, checking with your employer is a smart move.
This might feel like another chore, but getting these numbers right can help take the sting out of a tax bill. You can normally use pensions tax relief to reduce the amount of tax you pay, get a tax rebate, or if you are still working, request a new tax code that takes these contributions into account.
Even better, if you have missed this in previous years, you can also use your tax return to make backdated claims for up to four years.
As well as paying your outstanding tax for the last tax year, HMRC may ask you to pay some of the bill for the following year (that is, the current tax year) upfront. This is known as a payment on account. If you are filing a self-assessment return for the first time, this means you may have to pay all the previous year’s tax bill and 50% of the current year’s bill by the 31 January deadline.
The remaining 50% of the current year’s bill will be due by 31 July. If you expect your tax bill for the current year to be significantly lower than for last year, you can ask HMRC if you can pay a lower amount on account.
If you’re still employed, you should have a tax code that shows how much tax you should be paying. This can be found on your payslips and will usually be made up of four numbers and a letter, such as 1280L.
Make sure you input it correctly, otherwise you could end up paying too much – or too little – tax, as it contains key information about your personal tax allowance and helps make sure everything is accurate on your return.
If you’ve given money to charity, make sure you include it on your return as it could cut your tax bill. Mark Greer, managing director for philanthropy services at the Charities Aid Foundation, says: “If you complete a self-assessment return and are a higher-rate taxpayer, you may be entitled to personal tax relief on any donations you have made, and you can also check whether you can claim for donations in previous years.”
The Gift Aid scheme means the charity gets the benefit of basic rate tax relief, but the additional 20% or 25% for higher and additional rate taxpayers can be claimed by the person making the gift.
If you discover that any of the figures on your return are incorrect after you have submitted it, don’t panic: you still have an opportunity to correct the record. Parkes at GoSimpleTax explains you have 12 months’ grace from HMRC.
“Although careless and deliberate errors can be penalised, HMRC will recalculate the tax you owe. But, whatever you do, don’t ignore it if you have made an error.” So, even if you’re done with the return and can’t face the thought of another check, it might be worth going over your numbers in a few months’ time to ensure everything is correct.
If you’re self-employed, you can cut your tax bill by claiming expenses such as the cost of equipment used in your job. Parkes says many people struggle because they don't keep accurate records.
“It’s imperative that you keep all relevant documentation so you can provide the right information about untaxed income and expenses relating to those earnings. These include expenses records, benefits, bank statements, property income, [money made through] capital gains and your P60, P45 and P11D forms,” he adds.
Registering for the self-assessment system, collating the financial information you need and then filling out your tax return is never going to be fun.
However, if you can view it as a bit of financial housekeeping that helps you take more control of your finances (and even reduces your tax bill), perhaps you’ll feel more motivated to make a start. Doing your tax return likely won’t be as bad as you think.
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