7 Mistakes You’re Making with Tax Returns for the Self-Employed (And How to Fix Them)

Let’s be honest: nobody starts a business because they’re excited about filling out a Self Assessment form. Whether you’re a freelance graphic designer, a local plumber, or running a boutique e-commerce shop, tax season usually feels like a dark cloud looming on the horizon.

When you’re dealing with tax returns for the self employed, the rules can feel like they’re written in another language. It’s easy to get overwhelmed, and even easier to make a mistake that could cost you hundreds, or even thousands, of pounds in fines and overpaid tax.

At Accountant Search, we see these slip-ups all the time. The good news? Most of them are incredibly easy to fix once you know what to look for. I’m Jessica, and today I’m going to walk you through the seven most common mistakes people make with their self-employed tax returns and, more importantly, how you can avoid them.

1. The "Last Minute Larry" Syndrome (Missing Deadlines)

This is the king of all mistakes. HMRC is very strict about deadlines. If you miss the January 31st deadline for filing your online return and paying your bill, you’ll get hit with an immediate £100 fine. If you’re more than three months late, those penalties start stacking up by £10 a day.

The Mistake: Waiting until the last week of January to start gathering your invoices and receipts. This leads to panic, errors, and often, a website crash on HMRC’s end because everyone else is doing the same thing.

How to Fix It: Mark the deadlines in your calendar right now. We have a great guide on essential deadlines for Self Assessment that you should definitely check out. The secret? File early. You can submit your tax return as soon as the tax year ends on April 5th. You don't have to pay the bill until January, but filing early gives you months to figure out how much you owe.

2. Ignoring "Allowable Expenses"

One of the biggest perks of being self-employed is that you only pay tax on your profits, not your total income. To find your profit, you subtract your business expenses from your turnover.

The Mistake: Many people don't claim everything they're entitled to because they aren't sure what counts as a "business expense." Conversely, some people try to claim for things that are definitely personal (like that fancy dinner for your partner’s birthday).

How to Fix It: Learn the "wholly and exclusively" rule. If an expense is purely for your business, it’s usually allowable. This includes things like:

• Home office costs (heating, electricity, broadband).

• Travel (fuel, parking, train tickets, but not your commute to a regular place of work).

• Marketing and website costs.

• Software subscriptions.

If you use something for both business and personal (like your mobile phone), you can claim a percentage of the cost. If you want to dive deeper, we've listed some tax saving tips for UK small business owners that could save you a fortune.

3. The "Shoebox" Method of Record Keeping

We’ve all been there, a drawer full of crumpled receipts, some so faded you can’t even see the price anymore.

The Mistake: Relying on physical receipts and manual spreadsheets. Not only is this a nightmare when it comes time to file your tax returns for the self employed, but it also makes you more likely to lose out on tax relief because you simply forgot about a purchase you made back in May.

How to Fix It: Go digital. Use an app to scan your receipts the moment you get them. Cloud-based software like Xero or QuickBooks can link directly to your business bank account, categorising your spending automatically. Plus, with "Making Tax Digital" (MTD) becoming the standard, digital records aren't just a "nice to have", they’re becoming a legal requirement. You can read our 3-minute guide to MTD here.

4. Forgetting About "Payments on Account"

This is the one that catches almost every newly self-employed person off guard. If your tax bill is over £1,000, HMRC assumes you’ll earn a similar amount next year and asks you to pay half of next year’s tax in advance.

The Mistake: Budgeting only for the tax you owe for the previous year. When January 31st rolls around, you might find your bill is actually 50% higher than you expected because of these advance payments.

How to Fix It: Always set aside about 25-30% of your monthly income into a separate "Tax Savings" bank account. It might feel painful at the time, but you’ll be incredibly grateful when that January bill lands. If you know your income is going to drop significantly next year, you can ask HMRC to reduce your payments on account, but be careful, if you underpay, they’ll charge you interest.

5. Not Declaring "Side Hustle" Income

With the rise of Vinted, Airbnb, and Etsy, many people have multiple streams of income.

The Mistake: Thinking that you only need to report income from your "main" job. HMRC is getting much better at tracking data from digital platforms. If you earn more than £1,000 in a tax year from a side hustle, you generally need to declare it.

How to Fix It: Keep a simple log of every penny that comes in from all sources, interest on savings, dividends from shares, or rental income from a spare room. It’s much better to declare it up-front than to have HMRC come knocking with a penalty notice two years down the line.

6. Mixing Business and Personal Finances

It’s tempting to just use your personal bank account for everything, especially when you’re just starting out.

The Mistake: Using one account for your groceries, your Netflix subscription, and your business supplies. This makes it almost impossible to get an accurate view of how your business is actually performing, and it makes your accountant's job (and your tax return) ten times harder.

How to Fix It: Open a dedicated business bank account. Many modern banks offer free business accounts for freelancers and small businesses. By keeping the two separate, you can see exactly what your business profit is at a glance, and your "paper trail" for HMRC will be crystal clear.

7. The "DIY" Trap

We live in the age of YouTube tutorials, so it's tempting to think you can handle everything yourself.

The Mistake: Assuming that an accountant is just an "expense." In reality, a good accountant often pays for themselves by finding tax reliefs you didn't know existed and ensuring you never pay a penny more than you need to.

How to Fix It: If your business is growing or your tax situation is getting complicated (e.g., you’ve become a Limited Company or you’ve started VAT registration), it’s time to call in the pros. Trying to navigate the UK tax system alone is like trying to fix your own car engine without a manual: you might get it running, but you'll probably have a few "spare" parts left over and a leak somewhere.

Final Thoughts

Filing tax returns for the self employed doesn't have to be a nightmare. By staying organised, using digital tools, and knowing your deadlines, you can take the stress out of the process.

If you’re feeling overwhelmed or just want to make sure you’re not missing out on potential tax savings, we can help. At Accountant Search, we specialise in matching SMEs and freelancers with the perfect accountant for their needs. Whether you need a local expert in London or an affordable online service, we’ve got you covered.

Ready to stop worrying about your taxes? Find your perfect accountant today and get back to doing what you love( running your business!)