Common Tax Return Mistakes UK Taxpayers Make (And How to Avoid Them)

Filing your tax return in the UK can be tricky, and even the most experienced taxpayers sometimes make mistakes. Whether you’re self-employed, a business owner, or simply filing your personal return, overlooking key details can result in costly penalties, missed refunds, or unnecessary complications. Understanding the common mistakes and how to avoid them can help ensure your tax return is accurate and filed on time.

In this article, Experlu is sharing the most frequent errors that UK taxpayers make, along with practical tips on how to avoid them.

1. Missing the Deadline

Missing the tax return deadline is one of the most common mistakes taxpayers make. In the UK, the deadline for paper returns is 31st October, while for online submissions, it’s 31st January.

Why it’s a problem:

• Penalties: HMRC imposes an automatic £100 penalty if your tax return is submitted late, even if you don’t owe any tax.
• Interest: If you still haven’t paid the tax due by the deadline, additional interest is charged.

How to avoid it:

• Set reminders: Use your phone or calendar to set reminders well in advance of the deadline.
• File early: Aim to submit your return a few weeks before the deadline to avoid last-minute issues.

2. Incorrectly Reporting Income

A common mistake is misreporting your income. Whether you’re employed, self-employed, or receiving investment income, it’s essential to accurately report all sources of income.

Why it’s a problem:

• HMRC penalties: Underreporting or omitting income could lead to fines or a more thorough investigation into your tax affairs.
• Missing refunds: If you don’t report all your income, you may lose out on refunds or reliefs.

How to avoid it:

• Cross-check documents: Ensure you have all income records, including P60, P45, self-employment income, dividends, and savings interest.
• Use the correct tax codes: Verify that your tax code is accurate, especially if you’ve changed jobs or received additional income.

3. Failing to Claim Allowable Expenses

Self-employed individuals often fail to claim all allowable business expenses. This is a missed opportunity to reduce your taxable income and pay less tax. Common mistakes include not claiming office supplies, travel costs, or home office expenses.

Why it’s a problem:

• Overpaying taxes: Not claiming all eligible expenses means you’ll pay more tax than necessary.
• Limited tax savings: The more expenses you can claim, the lower your taxable profit, which reduces your tax liability.

How to avoid it:

• Keep detailed records: Track all business-related expenses, including receipts for office supplies, travel, and client meetings.
• Review HMRC’s guidelines: HMRC provides detailed lists of allowable business expenses—ensure you’re claiming everything you’re entitled to.

4. Incorrectly Applying for Tax Reliefs

Many taxpayers miss out on valuable tax reliefs simply because they don’t fully understand what they’re eligible for. Common tax reliefs include the Marriage Allowance, Blind Person’s Allowance, and Childcare Vouchers.

Why it’s a problem:

• Missing refunds: Failing to claim available reliefs can lead to you overpaying tax.
• Increased tax liability: Not applying for eligible reliefs means paying more tax than necessary.

How to avoid it:

• Research available reliefs: Make sure you know what tax reliefs apply to your situation. Check HMRC’s website for a full list of available reliefs.
• Seek professional help: If you’re unsure, a tax advisor can help ensure you’re applying for all available reliefs.

5. Not Claiming Tax-Free Allowances

The UK tax system offers various tax-free allowances, such as the Personal Allowance and the Savings Allowance. Failing to claim these allowances can lead to paying more tax than necessary.

Why it’s a problem:

• Paying more tax: Missing out on these tax-free amounts means you’ll pay more tax than necessary.
• Complicated calculations: If you’re eligible for allowances, failing to claim them can result in a more complicated tax return.

How to avoid it:

• Check your eligibility: The Personal Allowance for the 2025/2026 tax year is £12,570, but it may be reduced if your income exceeds £100,000. Also, ensure you’re using other tax-free allowances like the Marriage Allowance and Blind Person’s Allowance if applicable.
• Claim allowances automatically: Many allowances, like the Personal Allowance, are applied automatically, but double-check that you’re receiving all you’re entitled to.

6. Errors in Business Accounts for the Self-Employed

According to 123financials many self-employed individuals often make mistakes when recording their business income and expenses, particularly when it comes to accounting for receipts, sales, or taxes already paid.

Why it’s a problem:

• Tax discrepancies: Incorrect records could lead to discrepancies between what you owe and what’s reported to HMRC.
• Penalties and interest: Inaccurate records may trigger penalties for underpayment or tax evasion.

How to avoid it:

• Use accounting software: Invest in reliable accounting software to keep track of your earnings and expenses.
• Hire a professional: If your finances are complicated, consider hiring an accountant to ensure your accounts are accurate.

7. Overlooking Income from Abroad

If you earn income from overseas, whether through investments, property, or a job, you must report it on your tax return. Many UK taxpayers forget or neglect to report foreign income, assuming it doesn’t apply.

Why it’s a problem:

• Tax evasion accusations: Failing to report foreign income can lead to penalties or legal trouble.
• Underreporting taxes owed: You may need to pay tax on foreign income, and if you don’t report it, you risk underpaying.

How to avoid it:

• Report all foreign income: Whether you’re earning from overseas investments, property, or employment, ensure all foreign income is reported.
• Use double taxation treaties: The UK has agreements with many countries to avoid double taxation. Make sure you’re applying these correctly.

8. Ignoring Tax Code Errors

An incorrect tax code can lead to either overpaying or underpaying tax. Errors in your tax code often happen when personal details change, like a new job or a change in benefits.

Why it’s a problem:

• Overpaying tax: An incorrect tax code may result in you paying too much.
• Penalties: If you’ve underpaid tax due to an incorrect tax code, you could face penalties and interest.

How to avoid it:

• Check your tax code regularly: If you’re unsure about your tax code, refer to your payslip or contact HMRC to ensure it’s correct.
• Update HMRC on changes: If your circumstances change (e.g., a new job, receiving a benefit), notify HMRC to avoid tax code issues.

9. Failing to Declare Taxable Benefits

Many taxpayers overlook or forget to declare taxable benefits such as company cars, private health insurance, or other perks. These benefits count as part of your income and are taxable.

Why it’s a problem:

• Underreporting income: If you fail to declare taxable benefits, HMRC may impose fines or conduct a detailed review.
• Inaccurate tax return: Not reporting taxable benefits can lead to an incorrect tax calculation.

How to avoid it:

• Review your benefits package: Ensure you’re reporting all taxable benefits provided by your employer, including perks like health insurance and cars.
• Keep track of benefits: Refer to your P11D or similar forms to ensure you’re reporting all relevant benefits.

10. Not Seeking Professional Advice When Needed

Many taxpayers think they can handle everything on their own, especially if their tax situation seems straightforward. However, some circumstances—like running a business or dealing with complex investments—require professional accountants and auditor’s input.

Why it’s a problem:

• Missed opportunities: You may not be aware of all the tax-saving opportunities available to you.
• Avoidable mistakes: Professionals can help prevent mistakes that could cost you money.

How to avoid it:

• Hire a tax advisor or accountant: If your finances are complex, it’s worth hiring a professional to ensure your tax return is accurate and optimised.
• Get advice early: Don’t wait until the last minute to seek help. Early consultation can save you time and money.

Conclusion: Filing Your Tax Return with Confidence

Filing your tax return doesn’t have to be overwhelming, but avoiding common mistakes is crucial. By staying organised, ensuring all income and deductions are accurately reported, and seeking professional advice when needed, you can confidently file your tax return and potentially save yourself from costly penalties. Remember, small errors can lead to big consequences, but with proper planning and attention to detail, you can make the process smoother and less stressful.

Key Takeaways:

• Stay ahead by filing on time and avoiding penalties.
• Double-check your income, expenses, and tax codes.
• Take advantage of all available deductions and reliefs.
• Seek professional advice if your tax situation is complex.