Common Tax Mistakes and How to Avoid Them

Tax mistakes are more common than you’d think—and they can cost you a fortune if you’re not careful.

30-Second Summary

If you’re running a business or handling your taxes, it’s easy to get something wrong without realising it. I’ve seen it myself, both in my own early mistakes and when helping clients. 

In this guide, I’ll walk you through the most common tax slip-ups and exactly how to dodge them. From missed deadlines to using the wrong professional, I’ll share practical steps, real-world examples, and tips to help you stay clear of trouble. 

Whether you need London accountants, accounting firms in Cambridge, or just want to know the difference between an accountant and vs tax advisor, this will cover everything.

Not Keeping Proper Records

I used to think I could remember everything. I’d tell myself, “I’ll file those invoices later” or “That receipt’s somewhere in my wallet.” You probably know where this leads. When tax season comes around, you’re left digging through shoeboxes or scrolling through bank statements.

Without clear records, it’s hard to prove what you earned and spent. HMRC isn’t going to take your word for it. They want proof—dates, amounts, and matching receipts.

Simple ways to stay organised year-round

Here’s what works for me:

• I scan every receipt and save it to a cloud folder labelled by month.
  
  

• I use a basic spreadsheet with categories (income, travel, office supplies).
  
  

• I set aside 15 minutes every Friday to update everything.
  
  

You don’t need expensive software, just a routine. If you’re working with London accountants, they’ll thank you for having everything ready. It also cuts down your bill since they won’t waste time sorting through a mess.

Mixing Business and Personal Expenses

It’s one of the most common traps: buying lunch, filling up your car, or ordering something online, then claiming it all as a business expense. But if you can’t show it was strictly for business, you could be in trouble.

HMRC’s rules are clear: only claim what’s “wholly and exclusively” for your business. If you blur the lines, they can disallow the expense or even fine you.

A simple fix that saves hours

Open a second bank account. I did this years ago, and it changed everything. I only use this account for business income and expenses. It makes tracking simple, and if I’m audited, everything’s in one place.

Even if you're a sole trader, having a separate account makes life easier. Every good accountant in Cambridge will tell you the same.

Missing Deadlines and Penalties

Let me be blunt—missing deadlines is expensive.

If you file your tax return late, you’ll face a £100 fine right away. Leave it longer, and the penalties grow fast. I once helped a client who was six months late—his fines hit over £1,000, and that didn’t include the unpaid tax.

Setting reminders and using an accountant

Here’s what I do:

• I set calendar alerts for every HMRC deadline.
  
  

• I check in with my accountant in Cambridge at least twice a year.
  
  

• I never leave things till January.
  
  

If you’re worried about missing a date, get help early. London accountants often offer year-round support. And trust me, it’s cheaper than paying penalties later.

Claiming the Wrong Deductions

I’ve seen people try to claim everything from their home broadband to their dog’s vet bill. Sometimes it’s an honest mistake. But HMRC sees it as bending the rules.

Here are a few things people get wrong:

• Claiming full home utility bills instead of just a business portion
  
  

• Writing off clothes that aren’t a uniform
  
  

• Overstating travel costs
  
  

How an accountant can help

I once had a new client who thought he could write off 100% of his home rent. I explained he could only claim for the part used as an office. We worked it out, and he avoided a huge problem.

A good accountant in Cambridge or one of the trusted London accountants can review your claims. They know what’s allowed, what’s not, and what’s worth checking twice.

Getting Confused Between Accountant vs Tax Advisor

Here’s something I wish I’d known earlier: not all tax experts are the same.

An accountant usually helps with bookkeeping, financial statements, and tax returns. A tax advisor, on the other hand, advises on tax planning, saving money legally, and dealing with complex tax matters.

If your situation is simple (like a small business or freelance work), an accountant in Cambridge may be all you need.

But if you:

• Have multiple income sources
  
  

• Own property
  
  

• Need help with inheritance tax or trusts.
  
  

...then a tax advisor could be a better fit.

Quick cheat sheet to pick the right help

Your Situation Who to Call

Need help filing a basic return Accountant

Want to save tax on property Tax Advisor

Planning to sell a business Tax Advisor

Want help organising records Accountant

Unsure what to claim Accountant or Advisor

Many accounting firms in Cambridge offer both, so just ask upfront what you need.

Ignoring VAT Responsibilities

Here’s a common one—people think VAT doesn’t apply to them. But if your taxable turnover hits £90,000 in any 12 months (as of 2024), you must register.

I once met a small shop owner who’d gone past the threshold but didn’t register. HMRC charged backdated VAT plus penalties.

A warning for small businesses

Even if you’re close to the threshold, you should keep a monthly eye on turnover. And remember, you must register within 30 days of crossing the limit.

Accountants Cambridge are great at spotting when you need to register. Don’t wait till it’s too late.

Not Hiring the Right Professional Help

One of the worst mistakes is trying to save money on advice. I once helped someone who used a “friend” who claimed to know tax. The result? Over £2,000 in fines due to missing paperwork.

Tax rules change. You need someone who keeps up and knows what applies to you.

Trusted accounting firms you can count on

Some accounting firms in Cambridge have been around for decades. They’ve seen it all. If you’re based locally, they know the regional rules and HMRC’s patterns. The same goes for London accountants, who often handle more complex or high-volume cases.

If you don’t know who to hire, ask:

• Are you qualified and registered with a UK body (like ACCA or ICAEW)?
  
  

• Do you offer tax advice as well as filing services?
  
  

• What support do you give if HMRC comes calling?
  
  

Forgetting About Allowances and Reliefs

Every year, people miss out on things like:

• Marriage Allowance
  
  

• Annual Investment Allowance
  
  

• Capital Gains Tax Relief
  
  

• Work-from-home expenses
  
  

Why? Because they don’t know they exist. Or they assume they don’t apply.

I saved a client over £1,100 just by shifting part of their income to their spouse using the Marriage Allowance.

How good auditors spot them

Good Auditors in Cambridge will run through all the reliefs you’re eligible for. They don’t just file—they check where you can legally cut your bill.

And if you’re audited, you’ll be glad you claimed things properly.

Leaving Everything Till the Last Minute

I’ve done it before. Sitting at my desk on 30th January, scrambling for receipts, bank statements, and login details. It’s a nightmare.

When you rush:

• You make mistakes
  
  

• You miss deductions
  
  

• You forget income (and HMRC sees this as dishonesty)
  
  

Building better habits with monthly check-ins

The best habit I ever started? A monthly “tax check.” It takes 20 minutes. I update income, save receipts, and email my accountant in Cambridge if something’s unclear.

No more late-night panic in January. No more missed claims.

Try it. You’ll sleep better.

Failing to Review Tax Returns Before Submitting

I once had a client who missed a zero in his income box. HMRC flagged it within a week. It delayed his return, and they added interest.

Mistakes happen. But once you hit submit, it’s on record.

A second pair of eyes saves the day.

Always review your return line by line. Better yet, let someone else check it.

That’s why I love working with London accountants and accounting firms in Cambridge—they don’t just prepare the forms, they double-check everything.

Final Thoughts

Taxes don’t have to be scary or confusing. If you:

• Keep good records
  
  

• Claim only what’s allowed.
  
  

• Get help when you need it.
  
  

...you’ll stay on the safe side. You don’t need to be perfect—you just need to be prepared.

Still unsure where to start? Reach out to trusted accounting firms in Cambridge or speak with experienced London accountants. Whether you need regular support or just a check-in once a year, it can make all the difference.