Debunking 10 common myths about Self Assessment tax returns

Dealing with your taxes can be confusing if you’ve never done it before, especially when it involves Self Assessment tax returns. In the simplest terms, a Self Assessment tax return is a form you send to HMRC so they can calculate your tax for income that isn’t already fully covered through PAYE (your employer’s system, in other words).

Most people who are employed and only earn a salary through PAYE don’t need to file one. But there are many scenarios where HMRC expects a return, and not filing when you should can lead to penalties.

This guide clears up the top myths people believe about Self Assessment, so you can see clearly whether it applies to you – and what to do if it does.

Do I need to file a Self Assessment tax return?

Before we get into myths, here’s a quick checklist. You probably need to file a Self Assessment return if, in the last tax year:

• You were self‑employed and made more than £1,000 profit before expenses
• You received money that wasn’t taxed through PAYE (such as freelance work, some side hustle income, tips, or certain kinds of commission)
• You had income from property, such as rental income
• You took dividends from a company (for example, if you’re a director or equity‑holding founder)
• You have capital gains from selling assets (including shares, crypto, second properties, and so on.)
• You owe tax on Child Benefit because your income is above the threshold
• You received overseas income that isn’t covered by UK tax codes

If any of the above sounds familiar, it’s worth checking your position early rather than waiting for a letter from HMRC. And remember, the personal tax year runs from 6 April to 5 April the following year. For example, the 2026/27 tax year runs from 6 April 2026 to 5 April 2027 and must be reported by 31 January 2028 (about 9 months after the tax year ends).

Busting the top 10 Self Assessment myths

These misunderstandings are the main cause of most problems with Self Assessment, particularly for people dealing with it for the first time.

Myth 1: HMRC hasn’t contacted me, so I don’t need to file

It’s easy to assume that if HMRC doesn’t get in touch with you, there’s nothing you need to do. However, Self Assessment operates on a self-reporting basis – HMRC generally won’t issue a notice to file unless they have prior knowledge of your untaxed income.

If you’ve started earning untaxed income, such as through self-employment, rental income, or dividends, you may need to register even if no letter arrives. HMRC usually won’t send a notice to file unless they already know something’s changed, and that knowledge often depends on you telling them.

If you think you should be in the system, it’s best to register early. Waiting to hear from HMRC can lead to missed deadlines and penalties later on.

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Myth 2: I have to pay tax at the same time as filing my return

Because the deadline to file a Self Assessment return is 31 January, many people assume that payment must be made at the same time. It doesn’t. Filing the return and paying the tax are separate steps. You can submit the return earlier in the year, see exactly how much you owe, and still wait until January to pay, as long as the money reaches HMRC by the deadline.

Filing early matters because it exposes the full bill sooner – including anything that might push it higher than expected. The most common reason for that is payments on account. If you’re self-employed or receive rental income, HMRC may ask you to pay part of next year’s tax in advance, alongside what you owe for the year just ended.

That advance payment isn’t a penalty. It’s the standard way tax is collected when income isn’t taxed through PAYE. Filing earlier simply means you see that charge sooner, while there’s still time to plan for it.

Myth 3: I don’t owe any tax, so I don’t need to file a return

It’s a common misconception that if you don’t owe any tax, you don’t need to file a Self Assessment return. But that’s not actually how HMRC works.

The requirement to file is based on expectation, not outcome. In other words, if HMRC expects a return from you (whether that’s because you registered previously, earned untaxed income, or received a notice to file), then you’re obliged to submit one, even if your tax bill comes out at zero.

In other words, it’s the act of filing that matters. Failing to do so can still trigger penalties, regardless of whether there’s any tax due. These penalties apply to the missing return itself, not unpaid tax. So even if you’re confident you owe nothing, it’s still essential to meet the filing deadline.

Myth 4: HMRC will take me out of Self Assessment if I no longer need to file a return

It’s easy to assume that once you stop earning untaxed income – say, you leave freelancing behind and return to PAYE – HMRC will update your status for you. But that’s not the case.

Once you’re in the Self Assessment system, HMRC will continue to expect a tax return every year until you tell them otherwise. That’s where many people trip up. They assume they’re off the hook, skip the next return, and then face penalties for missing the deadline – even though they had no tax to pay.

If your circumstances change and you believe you no longer need to file, there is a straightforward process to inform HMRC. But until you do that, the obligation still exists.

Myth 5: I now have to file a tax return because I sold belongings online

If you’re selling personal belongings – like old clothes, second-hand gadgets or furniture – you won’t normally owe any tax. Clearing out things you already owned isn’t considered income, so there’s no need to register for Self Assessment or file a return.

But the rules change when selling becomes more like trading. If you’re buying items specifically to resell, making things to sell, or treating it like a business, HMRC sees that as trading activity – and it may be taxable.

This matters even more now that online platforms such as eBay, Vinted, and Depop have to share seller data with HMRC. Casual, one-off sales are still fine. But regular, high-volume selling is much more visible – and if it looks like a business under the badges of trade (the factors HMRC uses to decide whether an activity counts as trading), HMRC will expect you to report it as one.

Myth 6: I’m not a sole trader, so I don’t need to file a tax return

There’s a common misconception that Self Assessment only applies to freelancers or the self-employed. In reality, it covers any income not fully taxed at source – including if you’re a landlord, investor, or company director receiving dividends.

This often catches people on PAYE out. If your salary is taxed automatically, it’s easy to assume everything’s already dealt with. But if you also earn income outside the PAYE system – say, from letting out a property or receiving dividends – HMRC may still require a tax return.

Company directors are a common example. Many take a PAYE salary alongside dividends, not realising that those dividends can trigger a need to register for Self Assessment.

Myth 7: It’s fine to file my Self Assessment return at the last minute

The deadline for filing a Self Assessment return is 31 January, but that doesn’t mean it’s wise to wait until then.

Leaving it to the last minute is one of the most common ways people run into problems. You might realise you’re missing key documents from a bank or client. You could hit login issues with your HMRC account. Or, more seriously, you might discover you should have registered months ago and now face penalties for late registration.

Filing early gives you breathing room. It means you can spot any gaps, request missing paperwork, and resolve login or access issues before the pressure’s on. It also means you’ll know your tax bill sooner, giving you more time to plan, budget, and pay on time.

Myth 8: I can’t file a Self Assessment tax return without an accountant

You can absolutely file your own Self Assessment return, and many people do. HMRC’s online system is designed for individuals, including sole traders, and it guides you through the process step by step.

That said, it’s worth considering professional help when things get more complex. If you have multiple income streams, overseas earnings, capital gains, or are unsure how something should be taxed, speak with an accountant. They can often provide clarity and help you avoid mistakes, as well as being useful for tax planning.

In fact, it’s common for people to handle their own returns in the early years and then bring in an accountant as their financial situation becomes more involved.

Myth 9: Claiming expenses through Self Assessment means I’ll get money back

Claiming business expenses through Self Assessment doesn’t trigger a refund from HMRC. Instead, it reduces the amount of profit you’re taxed on. You still pay for the expense, but your tax bill may be slightly lower because your overall profit figure is smaller.

Because of that, not everything qualifies. HMRC only allows expenses that are clearly and exclusively for business. Some are simple: if you pay for software used solely for work, you can typically claim the full amount. Others require a more careful split. If you work from home, you can claim part of your utility bills, but only the portion that relates to business use. The same goes for shared equipment, like a laptop used for both personal and professional purposes.

Ultimately, you can only claim what’s tied to the work you do, and you need to be able to justify how you’ve worked it out.

Myth 10: HMRC can’t make me pay tax if I don’t submit a tax return

Choosing not to file a return doesn’t block HMRC from acting. If HMRC expects one and it doesn’t arrive, they can issue a tax bill based on their own estimate of what you owe – known as a determination. That figure becomes legally enforceable until replaced by an actual return.

From there, costs start to build. Penalties are applied for late filing, and interest is charged on the estimated amount, even if it turns out to be wrong. Those charges are tied to the original due date, so the longer the delay, the more they grow.

Filing the return is the only way to reset the process. It replaces HMRC’s estimate with your real numbers and stops further automatic penalties from stacking up. Until then, the figures – and the consequences – are out of your hands.

How to register for Self Assessment with HMRC

If you’ve never filed a Self Assessment return before, you’ll need to register first. This involves a few simple steps, but it can take time, so don’t leave it until the last minute. Here’s what the process looks like:

1. Create or sign in to your Government Gateway or GOV.UK One Login account. This is your secure access point for dealing with HMRC online.
2. Register for Self Assessment. You’ll need to provide details about your income and when you started receiving it.
3. Wait for your Unique Taxpayer Reference (UTR). HMRC will send this by post. You can’t file without it.
4. Activate Self Assessment in your online account. Once you’ve received your UTR, follow the instructions to add Self Assessment to your HMRC services.
5. File your return once the tax year ends. The tax year runs until 5 April. You can file any time after that, up until the 31 January deadline.

Remember, if you wait until January to start this process, you may not receive your UTR or activation code in time, so it’s worth registering well in advance.

Handling your Self Assessment tax return

Complete the return through a few basic steps: collecting income sources, identifying which expenses to claim, and keeping clear records. You can avoid most issues by dealing with these important steps early:

• Keep income and expenses recorded throughout the year. When that’s already in place, you’re not trying to build the return backwards from half-missing records.
• Identify all income sources before you begin. That means listing everything that needs to go in – such as salary, self-employment, rent, interest, and dividends – so you don’t pause the return every few minutes to check what’s missing.
• Check which expenses are allowable and how to split them, especially when something is only partly used for business. If you work from home or use personal equipment for work, the return needs to reflect that proportion.
• Submit once your figures are final. There’s no need to wait for the deadline. Filing earlier doesn’t change the payment due date, but it gives you time to correct mistakes or adjust plans without being pinned against a cutoff.

None of that is especially technical, but it does get trickier if it’s all left to the last moment.

Staying on top of business admin

Dealing with Self Assessment works best when you keep the underlying admin organised. That means keeping records in order, income and expenses up to date, and leaving time around deadlines to address issues.

That workload increases when you operate through a limited company. Alongside your own tax position, you’re also responsible for Companies House filings, director details, dividend records, and payroll, where applicable. Each one adds another obligation that has to be handled accurately and on time.

That’s why many business owners choose to work with 1st Formations. We help set up and support limited companies with the key filings and obligations – freeing you to focus on running your business.