5 Common Tax Mistakes Self-Employed People Make (and How to Avoid Them)

As a self-employed individual, preparing and filing your self-assessment tax return can be stressful. We’ve seen clients trip up on simple errors that can lead to penalties or higher tax bills. Here are five common mistakes and how to avoid them.

1. Missing the Filing Deadline

Late self-assessment tax returns (31 October 2025 for paper and 31 January 2026 for online) trigger a £100 penalty with additional fines if delayed further.

Solution: Set a calendar reminder (and stick to it!) or hire an accountant to handle your filing obligation.

2. Missing or Claiming the Wrong Expenses

Many fail to claim expenses such as home office costs, mileage or equipment costs. This inflates your tax bill. Others mistakenly claim capital costs as revenue costs, which could be a red flag to HMRC.

Solution: Track all your business expenses and record them. If easier, you can also use simplified expenses. Read our expenses guide.

3. Error in National Insurance Contributions

As a self-employed individual, you’ll likely have to pay Class 2 and potentially Class 4 National Insurance Contributions. It’s important to understand how these are calculated and ensure no mistakes occur. Miscalculating profits (e.g., due to unclaimed expenses) leads to overpayment.

Solution: Double check profit calculations. Use HMRC’s guide: Self-employed NIC rates.

4. Poor Record Keeping

As a self-employed individual, you must maintain records for 5 years after the tax deadline for the relevant tax year. For example, records for the tax year ending 5 April 2025 should be kept until 31 January 2031.

If you can’t produce records during an HMRC enquiry, it could lead to amended tax bills, interest or penalties. HMRC completes a number of random checks every tax year.

Solution: Store invoices digitally with tools like QuickBooks or Xero. Your accountant may hold copies, but you are responsible for the originals.

5. Personal vs Business Expenses

It is common for some people to accidentally claim personal expenses as business expenses. It is very important to be careful when dealing with this.

Solution: Separate business and personal finances to create a clear line. When in doubt, ask yourself if the expense is wholly and exclusively for business use. When using partial claims, ensure the calculation is fair and something you can justify to HMRC in the future.

Bonus: Not Preparing for Making Tax Digital (MTD)

MTD will start from 6 April 2026 for self-employed individuals and landlords with income above £50,000 (£30,000 from 6 April 2027). These individuals will have to submit digital updates quarterly.

Although this isn’t a common mistake yet, many people are not prepared for the administrative burden this will bring. You’ll need a good system in place to capture all revenue and expenses in preparation for quarterly returns. Also, you should decide which digital filing system you’ll use.

Example:

Our client Aravind, a freelance tutor, missed mileage claims and incorrectly claimed a personal expense. With our help, we rectified these mistakes—saving him over £300 this tax year!

Avoid These Mistakes with Talwar Accountants

Don’t let these tax errors cost you time and money. Book a free consultation with our expert advisors to ensure your 2024/25 return is error-free. Contact us today!

Kind regards,
Jagdeep Singh ATT
Talwar Accountants
https://www.talwaraccountants.com/contact