Correcting Common Self-Assessment Mistakes Related To 2025-26 Tax Code Updates

The Audio Summary of the Key Points of the Article:

Understanding the 2025-26 Tax Code Updates and Why They Matter for Your Self Assessment

Now, let’s get straight to the point: the 2025-26 tax year, starting 6 April 2025, brings some key changes that could trip you up if you’re not paying attention. Your tax code is the backbone of how HMRC calculates your Income Tax, whether you’re employed, self-employed, or juggling multiple income streams. For the 2025-26 tax year, the standard tax code remains 1257L, which means you get a tax-free Personal Allowance of £12,570—no change from last year. But don’t let that fool you into thinking nothing’s new. HMRC has tweaked how tax codes are applied, especially for those with complex income sources, and the Self Assessment rules have shifted too. Let’s break it down to avoid costly mistakes.

What Are the Key Tax Code Changes for 2025-26?

So, what’s different this year? HMRC has made several updates that affect how your tax code is calculated and applied, particularly if you file a Self Assessment return. Here are the big ones:

●       Increased Use of BR and K Codes: If you’ve got a second job, rental income, or dividends, HMRC is now more likely to issue BR (Basic Rate, taxing all income at 20%) or K codes (to recover underpaid tax from previous years). This is a shift to catch up with multiple income streams more aggressively.

●       Emergency Tax Codes (W1/M1): These temporary codes are applied faster if HMRC lacks your full income details, like after switching jobs or missing a P45. They tax your income on a week-by-week or month-by-month basis, which can lead to overtaxing.

●       Mid-Year Adjustments: Directors and those filing Self Assessments might see unexpected tax code changes mid-year, especially if HMRC adjusts your code to recover unpaid tax from your Self Assessment. This shows up as a K code and can shrink your take-home pay.

●       New Digital Reporting Thresholds: From 6 April 2025, the Self Assessment threshold for trading, property, and other taxable income has been unified at £3,000 (gross) per source. If your income from any of these is below £3,000, you can report it via HMRC’s new digital service instead of a full Self Assessment, potentially affecting 300,000 taxpayers.

These changes mean you need to be extra vigilant when checking your tax code and filing your Self Assessment to avoid errors. A wrong code could mean paying too much tax now or facing a hefty bill later.

How Do Tax Codes Work with Self Assessment?

Now, here’s where it gets a bit tricky. If you’re fully self-employed and only pay tax through Self Assessment, you might not have a tax code at all. But if you’ve got a mix of PAYE income (like a part-time job) and self-employed earnings, your tax code is critical. It tells your employer or pension provider how much tax to deduct, based on your Personal Allowance and other factors like unpaid Self Assessment tax.

For example, if you owe tax from your 2024-25 Self Assessment, HMRC might slap a K475 code on your payslip, meaning they’ll deduct an extra £4,750 from your income to cover it. Sounds harsh, right? It can catch you off guard if you’re not checking your payslips regularly. The key is to ensure HMRC has up-to-date details about all your income sources to avoid these surprises.

Be careful! Many taxpayers stumble over their tax codes, especially with the 2025-26 updates. Here are the most common slip-ups:

●       Ignoring Your Tax Code Notice: HMRC sends out Tax Code Notices or updates your code in your Personal Tax Account. If you don’t check these, you might miss a change that’s costing you money.

●       Assuming HMRC Gets It Right: HMRC’s systems aren’t perfect. If your employer sends incorrect PAYE data or you start a new job without a P45, you could end up on an emergency code like 1257L W1/M1, which might overtax you.

●       Not Updating HMRC: Life changes like a new job, marriage, or starting a side hustle can affect your tax code. If you don’t tell HMRC, your code won’t reflect your current situation.

Table 1: Key 2025-26 Tax Codes and Their Meanings

Case Study: Sarah’s Tax Code Mishap

Let’s talk about Sarah, a freelance graphic designer from Leeds who also works part-time at a local café. In April 2025, she got a Tax Code Notice from HMRC showing BR for her café job. She assumed it was fine since she was used to 1257L. Turns out, HMRC applied BR because they didn’t know about her self-employed income, which she reports via Self Assessment. This meant her café wages were taxed at 20% with no Personal Allowance, costing her an extra £200 a month. After checking her Personal Tax Account, she contacted HMRC, provided her self-employed income details, and got her code corrected to 1257L, saving her £1,200 by the end of the year.

Sarah’s story shows why you need to double-check your tax code, especially if you’ve got multiple income sources. Don’t just trust HMRC to get it right—take control!

How to Check Your Tax Code

Now, it shouldn’t surprise you that checking your tax code is easier than you might think. You can find it on:

●       Your payslip

●       A Tax Code Notice letter from HMRC

●       Your Personal Tax Account or the HMRC app

If something looks off, use HMRC’s online tool to understand your code or contact them directly. Be warned, though—HMRC’s phone lines get jammed around the Self Assessment deadline (31 January 2026), so act early.

This section sets the stage by explaining the 2025-26 tax code updates and their link to Self Assessment mistakes. The next part will dive deeper into specific Self Assessment errors, how to spot them, and practical steps to fix them, ensuring you don’t end up with a tax headache.

Spotting and Fixing Common Self Assessment Mistakes for 2025-26

Now, let’s get into the nitty-gritty of Self Assessment mistakes that could cost you time, money, or a headache with HMRC in the 2025-26 tax year. Filing your Self Assessment tax return isn’t exactly a walk in the park, and the recent tax code updates add a few extra hurdles. Whether you’re a sole trader, a landlord, or someone with a side hustle, getting your return right is crucial to avoid penalties or unexpected tax bills. Let’s dive into the most common errors, how to spot them, and what you can do to fix them before they spiral out of control.

What Are the Most Common Self Assessment Mistakes?

So, the question is: what slips through the cracks most often? HMRC’s data from the 2023-24 tax year shows that around 1.5 million taxpayers made errors on their Self Assessment returns, leading to £300 million in penalties and corrections. The 2025-26 changes, like the new £3,000 income threshold and Making Tax Digital (MTD) updates, make it even easier to trip up. Here are the big ones to watch for:

●       Missing Income Sources: Forgetting to report income from side hustles, rental properties, or dividends is a classic mistake. With the new £3,000 threshold, you might think small earnings don’t count, but HMRC’s data-sharing with platforms like Airbnb or eBay means they’ll likely know.

●       Incorrect Expense Claims: Claiming personal expenses (like a family holiday) as business costs or miscalculating allowable expenses can lead to HMRC rejecting your return or auditing you.

●       Wrong Unique Taxpayer Reference (UTR): Using an incorrect or outdated UTR can delay your return or link it to someone else’s tax record. This happened to 120,000 taxpayers in 2024-25, per HMRC.

●       Late Filing or Payment: The deadline for online returns is 31 January 2026, and paper returns are due by 31 October 2025. Missing these triggers an automatic £100 penalty, with further fines if delayed beyond three months.

●       Not Accounting for Tax Code Adjustments: If your PAYE tax code was tweaked mid-year (like a K code to recover unpaid tax), failing to reflect this in your Self Assessment can lead to under- or overpayment.

Table 2: Common Self Assessment Mistakes and Their Consequences

How Can You Spot These Mistakes Early?

Be careful! Catching errors before you submit your return is the best way to avoid trouble. Start by reviewing your records well before the deadline. For 2025-26, HMRC’s new digital reporting threshold means you need to track all income sources, even if they’re below £3,000. Here’s how to stay on top of things:

●       Check Your Income: Use bank statements, invoices, and platform reports to ensure you’ve reported every penny. HMRC’s data-sharing agreements with digital platforms mean they’ll likely spot unreported income.

●       Verify Your UTR: Log into your Personal Tax Account to confirm your UTR matches your records. If you’ve lost it, HMRC can resend it within 15 days.

●       Review Expenses: Only claim expenses directly related to your business. For example, a laptop used 70% for work and 30% for personal use? Claim only 70% of the cost. Keep receipts and use accounting software to track them.

●       Double-Check Tax Codes: If you’re on PAYE, compare your payslip’s tax code with your Self Assessment income. A BR or K code could mean HMRC’s already taxing you for Self Assessment income, so you don’t double-report it.

Step-by-Step Guide: Correcting a Self Assessment Mistake

Now, if you’ve already filed and spotted an error, don’t panic—here’s a practical guide to fix it:

1. Log into Your Personal Tax Account: Access your Self Assessment via www.gov.uk/check-income-tax-current-year. You’ll need your Government Gateway ID and password.

2. Identify the Error: Compare your return against bank statements, payslips, and receipts. Common fixes include adding missed income or removing incorrect expenses.

3. Amend Your Return: You can amend your 2025-26 return online until 31 January 2027. Go to the “Amend a Return” section, update the incorrect fields, and resubmit. HMRC will send a confirmation email.

4. Pay Any Additional Tax: If your correction means you owe more tax, pay it by 31 January 2026 to avoid interest (at 7.75% as of June 2025) or penalties.

5. Claim a Refund: If you overpaid, HMRC will refund you within 12 weeks, either to your bank account or by cheque. Check your refund status online.

6. Contact HMRC if Needed: If the error involves a tax code or complex income, call HMRC’s Self Assessment helpline (0300 200 3310). Have your UTR and National Insurance number ready.

This guide works for most errors, but if HMRC has already sent a penalty notice, act fast to appeal within 30 days, explaining your “reasonable excuse” (e.g., serious illness or IT issues).

Case Study: Raj’s Expense Error

Let’s consider Raj, a self-employed plumber from Bristol. In his 2024-25 Self Assessment, he claimed £2,000 for a new van as a business expense, thinking it was fully deductible. HMRC rejected the claim because vans are capital assets, not day-to-day expenses. Raj should’ve used Capital Allowances to claim a percentage of the van’s cost over time. After amending his return online, he reduced his claim to £400 (via the Annual Investment Allowance) and avoided a £500 penalty. Raj’s lesson? Always check HMRC’s rules on allowable expenses before filing.

Why Are These Mistakes More Common in 2025-26?

Now, here’s the thing: the 2025-26 tax year is trickier because of Making Tax Digital (MTD) updates. From April 2025, self-employed individuals and landlords with income over £50,000 must submit quarterly digital updates to HMRC, even if they don’t owe tax yet. This increases the risk of errors if your records aren’t meticulous. Plus, the new £3,000 threshold for non-Self Assessment reporting might tempt you to under-report small income streams, but HMRC’s data-matching tech is sharper than ever.

For example, if you earn £2,500 from selling crafts on Etsy, you might think you can skip Self Assessment. But if HMRC’s data shows you earned £3,100, you’ll need to file a full return or face a penalty. Keep detailed records and use HMRC’s digital tools to stay compliant.

Practical Tips to Avoid Mistakes

None of us is a tax expert, but these habits can keep your Self Assessment on track:

●       Use Accounting Software: Tools like QuickBooks or Xero sync with HMRC’s MTD platform, reducing errors in quarterly updates.

●       Set Calendar Reminders: Mark 31 October 2025 for paper returns and 31 January 2026 for online filing and payment.

●       Hire an Accountant: If your income exceeds £50,000 or you’ve got multiple sources, a professional can save you time and stress.

●       Check HMRC Guidance: Visit www.gov.uk/check-income-tax-current-year for the latest rules and calculators.

Key Takeaways to Master Your 2025-26 Self Assessment and Avoid Costly Errors

Now, let’s tie it all together with the most critical points you need to keep in mind for the 2025-26 tax year. Whether you’re a freelancer, a small business owner, or someone juggling multiple income streams, getting your Self Assessment right is about staying proactive and informed. The tax code updates and new rules can feel like a maze, but these takeaways will help you navigate it with confidence. Below, I’ve distilled the essentials into a concise list, followed by some deeper insights into avoiding rare but tricky scenarios and ensuring your tax return is spot-on.

Top 10 Must-Know Points for 2025-26 Self Assessment

Here are the key points to keep your Self Assessment on track and avoid common mistakes:

1. The standard tax code for 2025-26 is 1257L, giving you a tax-free Personal Allowance of £12,570, but check your payslip or Personal Tax Account to ensure it’s correct.

2. HMRC is increasingly using BR and K codes to tax second jobs or recover unpaid Self Assessment tax, which can reduce your take-home pay if not addressed.

3. Emergency tax codes like W1/M1 are applied faster in 2025-26 if HMRC lacks your income details, potentially leading to overtaxing.

4. The new £3,000 threshold for trading, property, or other income means you can report smaller amounts digitally instead of through Self Assessment, but all income must still be declared.

5. Missing income from side hustles, rentals, or dividends is a top error, and HMRC’s data-sharing with platforms like eBay or Airbnb makes it easier for them to spot unreported earnings.

6. Incorrect expense claims, like personal costs or miscalculated business expenses, can trigger HMRC audits or rejected returns.

7. Using the wrong Unique Taxpayer Reference (UTR) delays your return, so verify it in your Personal Tax Account.

8. Late filing or payment by 31 January 2026 (online) or 31 October 2025 (paper) results in a £100 penalty, with further fines for longer delays.

9. Making Tax Digital (MTD) requires quarterly digital updates for self-employed individuals or landlords with income over £50,000, increasing the need for accurate records.

10. You can amend your 2025-26 Self Assessment return online until 31 January 2027 to fix errors, pay additional tax, or claim refunds.

What If You Face a Rare Tax Code Scenario?

Now, consider this: some situations don’t crop up often but can throw a spanner in the works. For instance, if you’re a company director, HMRC might adjust your tax code mid-year to account for dividends reported in your Self Assessment. This happened to Eleanor, a director from Manchester, in 2024-25. She received a K200 code in July 2024, reducing her monthly salary by £2,000 to cover unpaid tax from her dividends. She didn’t notice until her accountant flagged it, and by then, she’d overpaid £1,800. Eleanor fixed it by amending her return and contacting HMRC to adjust her code back to 1257L.

Another rare issue is for expats or non-residents with UK income. The 2025-26 rules mean you might face a 0T code (no Personal Allowance) if HMRC doesn’t have your residency status updated. Always notify HMRC of changes in your circumstances via your Personal Tax Account to avoid this.

How Do Tax Code Mistakes Affect Refunds?

So, the question is: what happens if a tax code error messes with your refund? If you’re overtaxed due to an emergency code like 1257L M1, you can claim a refund through your Self Assessment or by contacting HMRC directly. For example, in 2023-24, HMRC processed 2.3 million refunds worth £2.7 billion, with the average refund at £1,174. But if you under-report income, your refund could be delayed or clawed back later with interest (currently 7.75% as of June 2025). Always cross-check your payslips and Self Assessment to ensure your refund matches your actual tax liability.

To illustrate, let’s look at Tariq, a part-time Uber driver from London. In 2024-25, he didn’t report £4,000 in tips because he thought they were tax-free. HMRC’s data from Uber showed the income, and his expected £900 refund turned into a £600 tax bill plus a £100 penalty. Tariq amended his return, paid the tax, and set up a reminder to report all income in 2025-26.

Why Is Record-Keeping So Critical This Year?

Be careful! The 2025-26 tax year puts a bigger spotlight on accurate records, especially with Making Tax Digital (MTD). If your income exceeds £50,000, you’ll need to submit quarterly updates using MTD-compliant software. Even if you’re below this, the new £3,000 threshold means HMRC expects precise reporting for smaller income streams. For example, if you earn £2,800 from renting a spare room, you can use HMRC’s digital service, but you still need receipts and bank statements to back it up.

Table 3: Key Deadlines and Penalties for 2025-26 Self Assessment

How Can You Stay Ahead of HMRC?

None of us wants to be on HMRC’s bad side, so here’s how to stay proactive:

●       Use HMRC’s Tools: The HMRC app or Personal Tax Account lets you check your tax code, UTR, and refund status in real time.

●       Keep Digital Records: Use apps like FreeAgent or QuickBooks to track income and expenses, especially for MTD compliance.

●       Plan for Payments on Account: If you owe more than £1,000 in tax and less than 80% is covered by PAYE, you’ll need to make payments on account by 31 January and 31 July 2026. Plan ahead to avoid cash flow issues.

●       Appeal Penalties Early: If you’re hit with a fine but have a “reasonable excuse” (like a family emergency), appeal within 30 days via your Personal Tax Account.

Final Thoughts to Keep You on Track

Now, it shouldn’t be a surprise that the 2025-26 tax year demands more attention to detail than ever. The combination of new tax code applications, digital reporting thresholds, and MTD requirements means you can’t just wing it. By checking your tax code regularly, keeping meticulous records, and acting fast to correct errors, you’ll save yourself stress and money. Whether it’s a simple fix like updating your UTR or a complex one like adjusting for a K code, staying on top of your Self Assessment is your best defence against HMRC’s penalties.

FAQs

Q1: What are the most common self-assessment mistakes related to the 2025-26 tax code updates? 

A1: The most common mistakes include using outdated tax codes, failing to account for changes in personal allowances, misreporting income, and not applying the updated thresholds for dividend and savings income.

Q2: Can you change your tax code if you think it’s incorrect? 

A2: Yes, individuals can contact HMRC to request a review and correction of their tax code if they believe it does not reflect their current circumstances.

Q3: How can someone find out what their correct tax code should be? 

A3: Taxpayers can check their tax code through their HMRC online account or review their payslips, P60, or coding notice sent by HMRC.

Q4: What should self-employed individuals do if their tax code hasn’t been updated for 2025-26? 

A4: They should contact HMRC immediately to ensure their tax code reflects the most recent updates, especially if their income sources or benefits have changed.

Q5: What role do tax codes play in the self-assessment process? 

A5: Tax codes determine how much tax is deducted at source, so using the wrong code can lead to underpayment or overpayment, which affects the accuracy of self-assessment returns.

Q6: What happens if a self-assessment return is submitted with an incorrect tax code? 

A6: It could result in an inaccurate tax liability calculation, leading to penalties, interest charges, or refunds that need to be corrected later.

Q7: Are there penalties for submitting a return using an outdated tax code? 

A7: While HMRC focuses more on the accuracy of the overall return, consistent use of outdated codes without reasonable cause may lead to inquiries or fines for carelessness.

Q8: How does the updated marriage allowance impact self-assessment returns? 

A8: Taxpayers eligible for the marriage allowance must ensure the transfer is reflected in their tax code; failing to update it could result in inaccurate tax calculations.

Q9: Is it necessary to report tax code changes in the self-assessment form? 

A9: While the tax code itself isn't directly entered in the return, the income and tax deducted—affected by the code—must be accurate, making awareness of any changes essential.

Q10: Can incorrect tax codes affect student loan repayment amounts? 

A10: Yes, using an incorrect tax code may distort reported income, potentially affecting the calculation of student loan repayments through the self-assessment process.

Q11: How often should individuals check for tax code updates during the tax year? 

A11: It is recommended to review tax codes at the start of the tax year, whenever income or benefits change, and before submitting a self-assessment return.

Q12: What are emergency tax codes, and how can they impact self-assessment? 

A12: Emergency tax codes are temporary codes used when HMRC lacks sufficient information; they can lead to incorrect tax deductions and require adjustments during self-assessment.

Q13: Are pension contributions affected by changes in tax codes? 

A13: Yes, tax codes consider relief for pension contributions, so an outdated code could result in missed tax relief or overpayment.

Q14: How can taxpayers avoid tax code-related mistakes in their self-assessment returns? 

A14: Regularly reviewing coding notices, checking HMRC accounts, and keeping personal financial details updated with HMRC can help avoid such errors.

Q15: Can self-assessment software detect errors related to incorrect tax codes? 

A15: While some software may flag inconsistencies, most rely on user-input data, so it's still crucial for taxpayers to verify their tax code independently.

Q16: Does a change in employment status affect your tax code for self-assessment? 

A16: Yes, switching between employment, self-employment, or multiple income sources can trigger tax code changes that need to be accounted for in the return.

Q17: Are tax code adjustments made automatically by HMRC after filing a return? 

A17: In many cases, yes—HMRC reviews submitted returns and may adjust the tax code accordingly; however, errors or omissions might require manual follow-up.

Q18: What information is needed when contacting HMRC to correct a tax code? 

A18: Taxpayers should have their National Insurance number, details of all income sources, recent payslips or P60s, and any HMRC correspondence ready.

Q19: How do benefits-in-kind influence your tax code and self-assessment? 

A19: Benefits-in-kind are added to your taxable income via your tax code, so failure to include or update them can lead to discrepancies in your tax return.

Q20: What should freelancers be aware of regarding tax code changes and self-assessment? 

A20: Freelancers should closely monitor any changes in income streams or allowable expenses that might influence tax codes and ensure these are accurately reflected in their return.

About the Author

Mr. Maz Zaheer, FCA, AFA, MAAT, MBA, is the CEO and Chief Accountant of MTA and Total Tax Accountants—two of the UK’s leading tax advisory firms. With over 14 years of hands-on experience in UK taxation, Maz is a seasoned expert in advising individuals, SMEs, and corporations on complex tax matters. A Fellow Chartered Accountant and a prolific tax writer, he is widely respected for simplifying intricate tax concepts through his popular articles. His professional insights empower UK taxpayers to navigate their financial obligations with clarity and confidence.

https://www.linkedin.com/in/totaltaxaccountants/

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