5 self-assessment myths debunked

There's so much to remember when filing a tax return, it's no wonder so many people often feel confused about the process.

In a Which? survey of 1,269 members in November 2024, just under a third said they would be submitting a self-assessment tax return. We asked these people what they dislike most about filing. Almost a quarter said they don't understand the tax rules or questions asked on the form.

But misunderstandings can lead to costly mistakes and missed opportunities. So to help you file your 2023-24 tax return with confidence, we bust some of the most common self-assessment myths.

Myth 1: I can claim back all business expenses

Self-employed workers can claim tax relief on business-related expenses via self-assessment. This means that you can deduct the cost of 'allowable' business expenses from your taxable profit, offsetting some of the tax you'll need to pay. Knowing what you're allowed to claim can be complicated, however, and it's easy to misunderstand the rules. For example, if you're self-employed, you:

• Can still claim work from home expenses. Employed workers can now only make such a claim if they don't have any other option but to work from home (such as going into an office), but self-employed taxpayers can still claim a proportion of their bills, depending on the space used and time they spend working. 
• Can't claim for regular commuting costs, such as your train ticket to and from your usual place of work. HMRC doesn't count money spent on commuting as a legitimate business expense unless it's to a temporary place of work. You can, however, claim back travel costs for business trips – for example, going to a conference or client meeting. If you use a car for business, you may also be able to claim back running costs (petrol, car tax, insurance, repairs and servicing).   

In most cases, you can choose between totting up and deducting actual expenses or using the ‘trading allowance’. This deducts £1,000 from your gross self-employment income.

• Find out more: how to calculate your tax bill

Myth 2: I can't amend tax return mistakes after filing

Our survey found that four in 10 people filing a tax return this year dislike self-assessment because they are worried they will make a mistake. 

It's true that HMRC can impose fines for mistakes it believes were down to carelessness or deliberate attempts to underpay tax, but there is some room to manoeuvre if you’re still waiting on a few figures.

Instead of missing the deadline, HMRC will allow you to include estimations. Just state this when you submit the form (there's an option to indicate when figures are estimates). Once you’ve filed your 2023-24 return, you can tweak it online anytime from 72 hours after you’ve filed it until 31 January 2026. 

If you want to update a return from 2021-22 or earlier, you'll need to write to HMRC explaining which tax year you are correcting and why you want to make an amendment. 

That doesn't mean you shouldn't work hard to file an accurate return. HMRC can impose fines for mistakes it believes were down to carelessness or deliberate attempts to underestimate the bill.

• Find out more: how to fill in a self-assessment tax return

Myth 3: The tax bill always needs to be paid in full

The deadline for paying the tax you owe for 2023-24 is the same as for filing your tax return – 31 January 2025. If you don't meet this deadline, you’ll face late payment fines and be charged interest from the date the payment was due. Late payment interest is currently set at 7.25%.

But if you haven't budgeted for the bill and realise you can't pay by the deadline, you can ask HMRC for help spreading the payments with a Time to Pay arrangement. You can set up a plan on the gov.uk website. There's no 'standard' Time to Pay arrangement, so your payments and time period will be decided based on your needs. 

HMRC also offers a Budget Payment plan to make weekly or monthly Direct Debit payments towards your next tax bill, meaning you will have less to pay by next year's deadline. You must be up to date with any payments from your last tax bill to set this up.

• Find out more: late tax returns and penalties for mistakes

Myth 4: Late payments will affect my credit score

HMRC takes a dim view of tardiness. You’ll be slapped with a £100 penalty if your tax return is filed even a day past the deadline, and there are additional fines if you pay your tax bill late.

One silver lining if you find yourself owing money to the tax office is that, unlike some other forms of debt, your credit score won’t be affected. That's because the tax you owe is not the result of unpaid credit.

If you think you'll struggle to pay on time, ask HMRC for help as soon as possible. They may be able to set you up with a suitable payment plan.

Myth 5: I don't owe tax, so I don’t need to file a return

There are a few reasons why you might think you no longer need to file a tax return. For example, maybe you don't owe any tax for 2023-24 because you're self-employed and earned less than the £1,000 threshold. Or perhaps you're now employed and paying all your taxes through your PAYE.

But there are other reasons you might need to file, apart from paying tax on income. For example, you may still want to claim tax relief on business expenses, charitable donations and pension contributions. Plus, you might want to pay voluntary Class 2 National Insurance Contributions to protect your entitlement to certain benefits and the state pension. 

Even if you are sure there is no cause for filing, unless you have told HMRC, then you may still have to complete a self-assessment form by the deadline. HMRC will usually send you a notice to file and if you don't do it, the tax office will keep writing to you and you may be charged a penalty.

You can tell HMRC that you no longer need to send a tax return by filling in an online form, using the tax office's digital assistant, or by phone and post.

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