Nearly half a million to miss Self Assessment deadline, finds Handelsbanken

More than 475,000 self-employed people believe they will miss the deadline for completing self-assessment tax returns and paying any money owed, research conducted on behalf of Handelsbanken Wealth & Asset Management has found.

Less than a fortnight before the 31st January deadline, HMRC revealed around 3.8 million people were still to file their 2022/23 tax returns out of the 12.1 million submissions anticipated.

Handelsbanken Wealth & Asset Management’s research shows substantial numbers of self-employed workers struggle with completing self-assessment returns, with around 475,000 admitting they have missed the deadline in the past. 22% say they are worried about the financial consequences of making a mistake when filing, or the financial repercussions of missing the deadline.

Around 10% say completing self-assessment returns is challenging because of their lack of financial knowledge, and one in 12 (8%) say completing returns is tough because calculating their income is complex. The group most likely to miss the deadline is men aged 25-34, with 16% saying they are likely to file their return late.

Around half (46%) of self-employed people complete their self-assessment returns themselves, with 30% being confident about completing their self-assessment form correctly. That rises to 37% among the over-55s, with 55% completing their own returns.

The rising number of self-assessment returns reflects changes in the way people are employed, the study also showed. Over half (54%) of the working adults surveyed describe themselves as PAYE employee with no additional income, 27% as fully retired, while nearly a fifth (19%) – or 6.1 million people – have some form of self-employed income. Around one in 10 (9%) are self-employed with one or more sources of income.

A quarter of adults aged between 18 and 34 have some self-employed income, compared with just 9% of those aged 55-plus, and 22% of those aged between 35 and 54.

The main reason identified by the research for becoming self-employed is people’s desire to “follow their passion”. Around a third (33%) cited that as their motivation, compared with 17% who became self-employed to boost their income due to the cost-of-living crisis.

Around 15% of the self-employed took the plunge following redundancy. Nearly one in eight (12%) came out of retirement to become self-employed, as they needed the additional money because of the cost-of-living crisis.

Becoming self-employed has an impact on people’s contributions to their pensions and saving pots, the study shows. Around one in 10 of the self-employed contribute less to their pension, while 7% save less and 3% invest less.

Mark Collins, Head of Tax at Handelsbanken Wealth & Asset Management said:

“Self-assessment returns are clearly challenging for substantial numbers of the self-employed, with many at risk of missing the January 31st deadline and others struggling to complete returns.

“HMRC says that those with a reasonable excuse for missing the deadline may avoid penalties, but there is the risk of a £100 fine even if there is no tax to pay, and penalties can mount up if returns are more than three months late, with additional penalties for paying outstanding tax late.”

Handelsbanken’s study was conducted online by independent research company Opinium among a nationally representative sample of 2,000 UK adults aged 18-plus between January 19^h and January 23^rd 2024.