10 Self Assessment Mistakes to Avoid in 2026 (and How HMRC Penalises Them)

Why Self Assessment errors are so costly

Around 12.1 million people file a Self Assessment tax return in the UK each year. HMRC's own research suggests around one in five returns contains at least one error — and many of those errors result in either a tax underpayment (and subsequent interest/penalty) or a missed relief (money left on the table).

The penalty regime for Self Assessment is steep. Here is the standard ladder before we get into specific mistakes:

Late payment of tax also attracts interest at 7.25% per annum (Bank Rate + 2.5%) and penalty surcharges after 30 days, 6 months, and 12 months.

Now for the ten mistakes.

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Mistake 1: Forgetting to declare dividends above £500

The dividend allowance fell to £500 for 2026/27 (from £2,000 in 2022/23). Many taxpayers — particularly those holding individual shares or investment funds outside an ISA — still assume the old £2,000 allowance applies and fail to declare dividend income.

Dividends above £500 are taxable at:

• 8.75% (basic-rate taxpayers)
• 33.75% (higher-rate)
• 39.35% (additional-rate)

UK companies deduct no tax at source on dividends — HMRC relies entirely on Self Assessment declarations. If you received UK dividends of, say, £2,500 in 2026/27, you must declare £2,000 of taxable dividends (£2,500 − £500 allowance) on your return.

Fix: Check your investment platform's annual tax statement before completing your return. Every platform issues a consolidated tax certificate by late April.

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Mistake 2: Missing rental income

Rental income above the £1,000 property allowance must be declared. Many small landlords (especially accidental landlords who rented out a previous home) forget entirely, or assume letting agents handle the reporting.

HMRC receives data from letting agents, mortgage lenders, and Land Registry — the risk of a "let property campaign" investigation is real, particularly after HMRC's use of data analytics in recent years.

Note: the property allowance allows you to deduct a flat £1,000 from gross rental income instead of actual expenses. This only makes sense if your expenses are under £1,000 — most landlords will benefit more from actual expense deduction.

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Mistake 3: Not claiming allowable expenses

The flip side of mistake 2 — landlords and self-employed people often miss legitimate expense deductions:

• Self-employed: HMRC allows the actual costs of running your business (office, travel, equipment, professional subscriptions, accountancy fees). Using the £1,000 trading allowance may be simpler but is often less tax-efficient above very low profit levels.
• Landlords: allowable expenses include letting agent fees, property repairs (not improvements), insurance, mortgage interest (at 20% basic-rate relief only for residential buy-to-let), and professional fees.
• Employees with job-related expenses: you can claim flat-rate expenses for uniforms/tools via form P87 (or on the Self Assessment return if you file one) without receipts, up to HMRC's approved amounts.

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Mistake 4: Ignoring payments on account

This is the most financially painful surprise for first-time Self Assessment filers. If your tax bill for the year exceeds £1,000 and less than 80% was collected via PAYE, HMRC will also require two payments on account — advance contributions toward next year's liability.

January 31 bill = balancing payment for 2026/27 + first payment on account for 2027/28.

Example: Your 2026/27 tax bill is £6,000.

• Balancing payment: £6,000 (minus any payments on account already made).
• First payment on account for 2027/28: £3,000 (50% of this year's bill).
• Total due 31 January: £9,000.

If you have set aside only £6,000, you face an unexpected £3,000 shortfall. A further £3,000 is due on 31 July as the second payment on account.

Fix: As soon as you know your tax bill, calculate your payments on account and set money aside across the year.

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Mistake 5: Wrong bank account for HMRC refund

If HMRC owes you a refund and you enter incorrect bank details on your return, the payment will bounce — then HMRC issues a cheque to your last known address, which may be wrong, adding weeks of delay.

Always verify your bank details in your Personal Tax Account (gov.uk/personal-tax-account) before filing, and double-check them on the return itself.

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Mistake 6: Not keeping records for 5 years

HMRC requires you to retain all records for at least 5 years after the 31 January filing deadline for the relevant tax year. For 2026/27 returns (due 31 January 2028), that means keeping records until 31 January 2033.

For self-employed people, records must include: invoices issued, receipts for expenses, bank statements, mileage logs (if claiming car expenses), and records of business assets purchased.

Destroying records prematurely can result in estimated assessments and penalties if HMRC opens an enquiry.

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Mistake 7: Using incorrect PAYE income figures

Your Self Assessment must use the figures from your P60 (or P45 if you left employment during the year) — not your last payslip, not your own calculations.

The P60 is your employer's official year-end record. Discrepancies between the P60 and payslip figures can arise from year-end adjustments, expenses reimbursements, or PAYE coding changes. HMRC's own records are based on P60/P11D data submitted by employers — if your return differs without explanation, it triggers a mismatch query.

If your employer made payroll errors, get them corrected via a P60 amendment before filing.

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Mistake 8: Getting your student loan repayment plan wrong

The UK has multiple student loan plans, each with different repayment thresholds:

Entering the wrong plan on your return results in either:

• Over-repayment (if you use a plan with a lower threshold than yours), or
• Under-repayment (higher threshold used in error), creating a balance HMRC will chase.

Check your loan plan on your Student Loans Company account if unsure.

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Mistake 9: Forgetting Gift Aid donations (extends your basic-rate band)

Gift Aid donations made during 2026/27 must be declared on your Self Assessment return — not because you owe extra tax, but because they:

1. Extend your basic-rate band by the gross donation amount, meaning more of your income is taxed at 20% rather than 40%.
2. Entitle higher-rate and additional-rate taxpayers to reclaim the extra tax relief (20% or 25% of the gross donation).

If you donated £1,000 cash in 2026/27 under Gift Aid:

• Gross donation to charity: £1,250.
• Basic-rate band extension: £1,250 (reduces higher-rate exposure).
• Your refund as a 40% taxpayer: £250.

HMRC will not apply this automatically. The relief only materialises if you enter your Gift Aid donations on the return.

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Mistake 10: Late registration — penalty before you've even filed

If you have a new source of income that requires Self Assessment (new self-employment, rental income, dividends above £500, Child Benefit charge) and you have not filed before, you must register with HMRC by 5 October following the end of the tax year.

For 2026/27 income: register by 5 October 2027.

Registering late does not automatically trigger the £100 penalty (which is for late filing), but it can prevent you from filing in time, which does trigger penalties. HMRC can also charge a failure to notify penalty of up to 30% of the tax owed for deliberate failure to register.

How to register: go to gov.uk/register-for-self-assessment. For self-employment, also register as self-employed (which triggers Class 4 NI obligations). For other income sources, register online as an individual.

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How to avoid all 10 mistakes

A simple pre-filing checklist:

• Gather P60 (and P45 if applicable).
• Download consolidated tax certificate from all investment platforms.
• Log all rental income and expenses.
• Tally all Gift Aid donations.
• Check dividend income across all accounts.
• Confirm student loan plan type with SLC.
• Calculate payments on account and set aside funds.
• Verify bank details in Personal Tax Account.
• Confirm records are stored and backed up for 5 years.
• File by 31 January 2028 (online deadline for 2026/27).

Sources

• HMRC: Self Assessment tax returns
• HMRC: Self Assessment penalties
• HMRC: Payments on account
• HMRC: Keeping records for Self Assessment
• Student Loans Company: Repayment thresholds