If you’re self-employed, the end of January is never something you look forward to. Tax return time is stressful – especially when there are so many rules to be aware of and admin hoops you have to jump through before you press ‘submit’.
With this in mind, we’ve written this practical list of 10 things sole traders often get wrong at self assessment time!
For the basics, keep this open in another tab: Self Assessment tax return guide.
1. Assuming the paper deadline is “basically the same” as online
It is not. Paper Self Assessment returns have an earlier deadline than online ones. If you file on paper (very rare these days),
HMRC must receive it by the end of 31 October (for that tax year’s deadline), otherwise you are in late-filing territory even if you intended to pay on time. Read more here: 31 October deadline for paper tax returns.
2. Assuming “I filed” means “I’m safe”, even if payment is late
If you file your return late, you will incur an automatic £100 penalty. However, some people don’t realise that you’re separately penalised if you fail to pay any tax you owe by 31st January.
HMRC charges late payment interest from the due date until the day the bill is cleared. As of 9 January 2026, HMRC’s late payment interest rate is an eyewatering 7.75%.
Interest accrues daily, so you may incur a substantial late payment penalty within a short period.
3. Getting blindsided by payments on account
This is one of the most common “why is my January bill so high?” moments, particularly if you’re filing for the first time.
If your Self Assessment bill is over £1,000 and less than 80% of your tax is collected at source, you will usually have to make payments on account for the next tax year.
That means you pay an advance towards the next tax year (often half in January and half in July), on top of what you owe for the year just ended.
For example, if your tax bill is £2,000 for the previous tax year, you’ll have to pay an extra 50% (£1,000) in January, and a further 50% (£1,000) by the end of July in advance.
4. Not realising HMRC can charge penalties even if you owe no tax
If HMRC expects you to file a return and you don’t, you may still face a late filing penalty, even if you don’t owe any tax.
The key point is that if you are already in the Self Assessment system, you must submit a return unless you have been formally removed from the system.
5. Mixing business and personal transactions, then guessing at the totals
If you don’t separate your business and personal spending, it becomes difficult to properly apportion income and expenses to your business. You could, in fact, overpay tax.
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In the worst case scenario, you might not be able to provide evidence of any expense claims if HMRC ever queries them
This is why we always recommend opening a separate business bank account and using digital accounting software. Both will make your life much easier, and you won’t blur the personal/business boundary.
6. Getting “allowable expenses” wrong, especially with home working and mixed-use costs
Many self-employed people struggle with costs that have both business and personal elements, such as home-working costs, broadband, training, and mobile phone expenses.
HMRC’s rule is that you can only offset costs that have been incurred “wholly and exclusively” for your trade, but in real life, plenty of costs have a mixed use.
Therefore, you should always maintain accurate records and apportion expenses sensibly.
Read our guide and HMRC’s guide to Expenses if you’re self-employed.
Also see our guide to simplified expenses.
7. Forgetting the side incomes that still belong on the return
A surprising number of people file their business return but forget other taxable items that may also need to be declared, such as bank interest above the current allowance, any ‘side hustle’ income, and other forms of untaxed income.
Even if the amounts are very small, they must all be reported on your tax return.
8. Not using the amendment window when you spot a mistake
If you notice an error after submitting your return, you can usually amend it within the allowed window. This is typically within 12 months of the filing deadline.
You can read more guidance here: Correct a Self Assessment tax return.
9. Thinking “MTD is just a software change” and ignoring the admin shift
From 6 April 2026, Making Tax Digital for Income Tax starts for many sole traders and landlords, based on “qualifying income” (broadly, gross income from self-employment and property).
If your qualifying income exceeds £50,000 for the relevant test year, you must transition to the new digital record-keeping and quarterly update system.
Read our guide to Making Tax Digital for the self-employed.
Find out if you have to join here: Check if you need to use MTD for Income Tax.
10. Not clocking that MTD changes what “the tax return” looks like (no SA100 in the usual sense)
If you join the MTD for Income Tax system (from April 2026 if your turnover is £50,000 or above), you no longer submit the usual end of tax year tax return (SA100) as before.
You need to maintain digital records (typically in accounting software), submit quarterly updates to HMRC, and then finalise the year with an end-of-period final declaration.
If your turnover is anywhere near the threshold, it is worth planning early. It is not all bad news – a recent report suggests that sole traders who join MTD will actually save time each month, as using digital accounting has a lot of hidden benefits.
