A forgotten source of income, a missed employment, a deduction claimed without the right evidence. These may sound like minor oversights, but they can be enough to trigger an investigation from HMRC. While most taxpayers have nothing to hide, understanding the common mistakes that raise red flags can help avoid unnecessary scrutiny.
The good news is that most investigations are avoidable. By understanding the common issues that raise red flags and maintaining good records throughout the year, taxpayers can reduce the risk of problems and ensure that their self-assessment tax return accurately reflects their financial position for the tax year.
The information HMRC already knows
One of the most common triggers for HMRC enquiries is missing information that already exists within its own records.
For example, if you changed jobs during the tax year and accidentally omit one employment from your return, HMRC will often identify the discrepancy because it has already received details through PAYE submissions. The same applies to benefits in kind, such as company cars or private medical insurance, which are reported separately through P11D forms.
Bank interest is another area that is frequently overlooked. Many taxpayers forget that interest earned on savings can be taxable and should be included where relevant.
These mistakes are often genuine oversights rather than deliberate omissions, but they can still prompt questions because the information supplied does not match HMRC’s records.
Patterns, inconsistencies and unusual figures
While individual errors may be relatively straightforward to correct, HMRC is increasingly focused on identifying patterns and inconsistencies.
For sole traders and small business owners, repeated trading losses can attract attention. HMRC may question how a business continues to operate year after year without generating a profit and may seek reassurance that all expenses claimed are genuinely business-related.
Similarly, large fluctuations in income or profit can raise questions. A business reporting strong profits one year, very low profits the next, and then a significant recovery the year after may prompt HMRC to take a closer look at the underlying figures.
Consistently late self-assessment tax returns can also create concern. While a single late submission is unlikely to trigger an enquiry on its own, repeated delays may suggest poor record keeping or weaknesses in financial administration. Click here to find out more about self-assessment tax returns deadlines.
HMRC also increasingly uses information from third parties to identify discrepancies. In recent years, the organisation has worked with bodies such as local authorities and the Land Registry to identify landlords who may not be declaring rental income. This means that information supplied elsewhere can sometimes reveal inconsistencies in a tax return, even if the return itself appears complete.
When a small mistake becomes a bigger issue
Receiving a letter from HMRC does not automatically mean there is a serious problem. In many cases, HMRC simply wants clarification or believes a correction may be required.
The process typically begins with HMRC writing to the taxpayer and providing an opportunity to review and amend the return. If an error is identified and corrected promptly, HMRC will usually require any additional tax due to be paid, together with interest on the underpayment.
However, where errors are found to be careless or deliberate, the consequences can become more significant. HMRC has powers to look back several years, and in cases involving deliberate inaccuracies, investigations can potentially extend much further.
This is why seemingly minor discrepancies can sometimes lead to broader enquiries. Once HMRC identifies one issue, it may seek reassurance that other areas of the return are also accurate.
Getting it right from the start
The best way to avoid unwanted scrutiny is organisation and strong record keeping.
Keeping receipts, maintaining accurate records of income and expenses, and reviewing information carefully before submission all help reduce the likelihood of errors. Taxpayers should also ensure they understand the rules around deductions and reliefs, particularly where guidance has changed over time.
If a mistake is discovered after submission, it is usually better to act proactively rather than wait for HMRC to identify it. Amending a return voluntarily demonstrates transparency and can often lead to a more straightforward resolution.
Self-assessment tax returns do not need to be stressful, but accuracy matters. Working with a self-assessment tax accountant will ensure the correct tax is paid and also avoid the unnecessary questions that can arise from preventable mistakes.
At Hayward Wright, we support individuals and business owners with self-assessment tax returns, helping ensure submissions are accurate, complete, and compliant. Whether you need assistance preparing your return, understanding your tax obligations, or maintaining records throughout the year, our experienced team is here to help. Speak to a member of the team to find out more about our self-assessment and tax advisory services.