HMRC notices

What happens if you discover a mistake on your tax return? The good news is that errors can usually be corrected, but it is important to take action as soon as possible to avoid paying the wrong amount of tax or missing out on a possible refund.

If you realise that you have made an error after submitting your self-assessment tax return, you can normally amend your return within 12 months of the self-assessment filing deadline. The amendment can be made online or by submitting a revised paper return. For example, your self-assessment for the 2024-25 tax year can usually be amended up to 31 January 2027.

If you amend your return online, your tax calculation will be updated immediately and will show whether you owe additional tax or are entitled to a repayment. Any changes may also affect payments on account.

If the 12-month amendment period has passed, you will need to contact HMRC in writing. This applies if you need to report income that was missed from your return or if you believe you have paid too much tax and want to claim overpayment relief.

Overpayment relief claims can generally be made up to four years after the end of the relevant tax year. You must explain why you believe the tax has been overpaid, provide details of the amount involved, and confirm that the information provided is correct and complete.

After submitting your self-assessment return it is important to keep your records used to prepare the return. HMRC may ask to check your return, so it is important to keep the supporting documents and information used to complete your tax return.

There are no specific rules on how records must be stored. You can keep them on paper, digitally or as part of a software package, provided they remain accurate, complete and accessible if HMRC needs to review them.

If your tax return relates only to personal income, you should normally keep your records for at least 22 months after the end of the tax year they relate to. For example, records for the tax year ended 5 April 2026 should generally be kept until at least 31 January 2028. If you file your return late, records should be kept for at least 15 months after the date you submitted the return.

The records you should retain will depend on your circumstances but may include:

• employment records, such as P60s, P45s and P11D forms
• details of work expenses, including tools, travel and specialist clothing
• savings, investments and pension statements
• details of rental income and allowable expenses
• records of foreign income
• information relating to Capital Gains Tax
• details of state benefits and other taxable income

This is not a complete list. You should keep any records that support figures included in your tax return, including calculations and evidence for any claims or reliefs.

Different retention rules apply if you are self-employed or keep records for business purposes. Self-employed individuals must generally keep business records for at least five years after the 31 January filing deadline for the relevant tax year. Failure to keep adequate records can result in penalties from HMRC.

Keeping your skills and knowledge up to date is important but the cost of professional training can add up. If you are self-employed some training costs may be claimed as allowable business expenses.

Training costs can usually be claimed where the course helps you improve skills or knowledge that you already use in your business. This includes keeping up to date with changes in your industry, learning about new technology used in your work, or developing new skills that support your business operations, such as administration or management skills.

For example, a graphic designer taking a course on updated design software, or a tradesperson learning about new industry standards, may be able to claim the cost as a business expense.

However, tax relief is not available for every type of training. You cannot claim the cost of courses that help you start a new business or expand into a completely new area of business activity that is not directly related to your industry.

To support a claim, you should keep records of the training course, including invoices and details of how it relates to your business activities. If you are unsure whether a particular course qualifies, HMRC’s guidance at https://www.gov.uk/guidance/check-if-the-cost-of-training-could-be-an-allowable-business-expense includes some useful examples or we would of course be happy to help.

Most people are aware that cash donations to a charity can qualify for tax relief. However, it is less well known that gifts of land, property and qualifying shares can also provide valuable tax advantages.

If you donate land, property or shares to a UK charity, or sell them to a charity for less than their market value, you may be entitled to both Income Tax and Capital Gains Tax (CGT) relief. However, Income Tax relief is not available for gifts to Community Amateur Sports Clubs (CASCs).

Income Tax relief is claimed by deducting the value of the qualifying donation from your total taxable income for the tax year in which the gift or sale is made. If you complete a self-assessment tax return, the claim is made in the ‘Charitable giving’ section. Those who do not file a tax return can contact HMRC directly to claim the relief, either as a repayment or through an adjustment to their tax code.

There is also no CGT to pay on qualifying gifts of land, property or shares made to charity. Where an asset is sold to a charity for less than its market value, any gain is calculated using the actual amount paid by the charity rather than the asset’s market value.

To support any claim, it is important to retain records showing that the gift or sale was made and accepted by the charity. If the charity asks you to sell the asset on its behalf before donating the proceeds, keep evidence of both the gift and the charity’s request, as this will help preserve your entitlement to tax relief and avoid any unnecessary tax liability.

If you are self-employed, you may be able to claim tax relief on certain business insurance costs as an allowable expense. This means the cost can be deducted when calculating your taxable profits, reducing the amount of tax you may need to pay.

The insurance must relate to your business activities and be incurred wholly and exclusively for business purposes. For example, professional indemnity insurance premiums can be claimed as an allowable business expense where they protect you against claims arising from your work. Other professional costs, such as fees paid to accountants, solicitors, surveyors and architects, may also qualify where they relate to business activities.

You cannot claim relief for costs that are personal in nature or unrelated to your trade. It is important to keep invoices, receipts and other records to support any claims made.

Keeping accurate records of business insurance and professional costs will help support your claim and ensure that you only claim expenses that are allowable. If you are unsure whether a particular cost qualifies for tax relief, you should check HMRC’s guidance or seek professional advice.

If your personal details or circumstances change, you may need to tell HMRC as this could affect your tax position or entitlement to certain benefits.

You should notify HMRC if you get married or form a civil partnership, or if you divorce, separate or stop living with your husband, wife or partner. You should report these changes as soon as possible, as failing to do so could result in you paying too much tax or receiving a tax bill at the end of the year. If you receive Child Benefit, you must also tell HMRC separately about changes to your relationship or family circumstances.

If your spouse or civil partner dies, you should contact HMRC to report the death and any changes to your income following their death. You should also tell HMRC if you move home so they can update your contact details. HMRC is usually informed automatically if you legally change gender by applying for a Gender Recognition Certificate.

You must also tell HMRC about certain changes to your taxable income. Your employer or pension provider will usually report changes to your employment income or pension, but you must tell HMRC about other changes, such as starting or stopping income from self-employment or property, receiving taxable benefits such as State Pension or Jobseeker’s Allowance, getting benefits from your job such as a company car, or receiving income above your Personal Allowance.

You must also report other changes, such as receiving lump sums from selling shares or property that is not your main home, and income from inherited property, money or shares.

If you make self-assessment payments on account and expect a significant decrease in income, you should tell HMRC as it may be possible to reduce your payments. Keeping HMRC updated helps ensure you pay the correct amount of tax and receive any benefits or allowances to which you are entitled.

As a self-employed individual, whether a sole trader or partner, you must keep accurate records of your business income and expenses to back up your self-assessment tax return. You should also keep your personal income details up to date. Nominated partners will also need to keep partnership records.

You can also choose an accounting method. Since the 2024-25 tax year, the cash basis is the default. This means that you record income and expenses when money is received or paid. There will therefore be no Income Tax liability on monies not yet received. This is very different to traditional accounting where you record income and expenses by the date you invoiced or were billed.

Your records should detail all sales, income, business expenses and any grants received. If applicable you must also include VAT and PAYE records. Holding proof, such as receipts, bank statements and sales invoices, allows you to calculate profit or loss and present the records to HMRC if requested. You should ensure all your records are accurate and clearly identify business transactions.

You must retain your business records for at least 5 years after the 31 January submission deadline of the relevant tax year. For instance, if you sent your records for 2022-23 by the 31 January 2024 deadline then you must keep these records until at least the end of January 2029. If records are lost or destroyed, provide your best estimated figures and inform HMRC.

Maintaining diligent and accurate records for the specified period is vital for meeting your tax obligations and ensuring compliance with HMRC requirements.

Members of a Limited Liability Partnership (LLP) are normally treated as self-employed for tax purposes. However, special rules can apply where a member's terms of membership are more akin to the terms of an employee than a partner in a traditional partnership. These are known as salaried members.

The legislation applies a three-part test. A member will be treated as a salaried member for tax purposes only if all three conditions are met:

• Condition A – Disguised salary: At least 80% of the member's remuneration is fixed, or any variable element is not linked to the LLP's overall profits or losses. 
• Condition B – Lack of influence: The member does not have significant influence over the affairs of the LLP. 
• Condition C – Insufficient capital stake: The member's capital contribution is less than 25% of their expected annual remuneration.

To fall within the salaried member rules, an individual must perform services for the LLP in their capacity as a member. Some LLPs will strive to ensure that at least one of the conditions set out above does not apply to ensure these rules do not apply.

In addition, the rules do not apply to:

• Companies
• Individuals who only invest capital in the LLP
• Former active members who no longer provide services but continue to receive a share of profits.

When renting out property, landlords may have both Income Tax and National Insurance considerations to consider. However, rental income is generally taxable.

For individuals, the first £1,000 of rental income is tax-free under the property allowance. Where rental income exceeds this, landlords may need to register for self-assessment and report their income to HMRC. Reporting is required where net rental income exceeds £2,500 after allowable expenses, or £10,000 before allowable expenses. If a tax return is not usually completed, registration for self-assessment is required by 5 October following the end of the tax year in which the income first arose. 

In addition to Income Tax, some landlords may also be able to pay voluntary National Insurance contributions. In certain circumstances, Class 2 contributions may be available where a person is considered “gainfully employed” for National Insurance purposes, such as where property letting is their main occupation or they actively manage multiple properties. Where Class 2 contributions are not available, voluntary Class 3 contributions may be an option to help maintain entitlement to the State Pension and certain benefits.

Rental profits are calculated by deducting allowable expenses from rental income. Allowable expenses may include costs such as letting agent fees, maintenance and repairs, insurance, utilities, Council Tax, advertising and accountancy fees. However, capital expenditure, such as property purchase costs or improvements beyond basic repairs, is not deductible.

Losses from property letting may be carried forward and offset against future rental profits or other property income, but only within the same property business. There are different tax rules on what costs you can claim depending on whether it is residential or commercial properties.

The meaning of trade for tax purposes, often referred to as HMRC’s “badges of trade” test helps determine whether an activity is a genuine business or simply a personal hobby. While the test is not definitive, it provides important guidance on how HMRC views different activities. At some point, what starts as a hobby may evolve into a taxable trade. Understanding this distinction is important in order to assess whether an activity has become commercial in nature, meaning it could be subject to tax.

As part of their investigation into whether a hobby has evolved into a trade, HMRC typically examines the following badges of trade:

• Profit-seeking motive
• The number of transactions
• The nature of the asset
• The existence of similar trading transactions or interests
• Changes made to the asset
• The manner in which the sale was carried out
• The source of finance used
• The interval of time between purchase and sale
• The method of acquisition

It is important to note that there is no statutory definition of the term ‘trade.’ The only statutory clarification available is that ‘trade’ includes a ‘venture in the nature of trade.’ As a result, it is the courts that have provided a definition of what constitutes a 'trade,' and these decisions serve as a framework for guiding HMRC's assessments when disputes arise.

The badges of trade have proven to be valuable indicators in numerous cases, providing practical guidance in distinguishing between a hobby and a taxable trade or business.