Self assessment: Why so many business owners get caught out

For many business owners, self assessment is simply another task on the to-do list. But every January, countless people find themselves rushing to meet the deadline, often discovering they've missed something along the way.

The biggest misconception is that self assessment only applies to sole traders. In reality, company directors who receive dividends, landlords, business partners and anyone with untaxed income may also need to complete a return.

It's often not the filing itself that causes problems, but understanding what's reportable and what reliefs can be claimed. Over the years I've seen people miss legitimate expenses, overlook pension tax relief, or be caught out by payments on account, leaving them with a much larger tax bill than they expected.

Preparation makes all the difference. Keeping accurate records throughout the year and reviewing your tax position well before the January deadline removes much of the stress and allows time to plan, rather than simply react.

The tax landscape is changing too. Making Tax Digital for Income Tax is now being introduced in phases, meaning many sole traders and landlords will move to more frequent digital reporting over the coming years. While the aim is to modernise the system, it also reinforces the importance of maintaining good financial records throughout the year.

Ultimately, self assessment shouldn't be viewed as an annual compliance exercise. Done properly, it's an opportunity to review your finances, understand your tax position and ensure you're making the most of the reliefs available.

For business owners, a little planning throughout the year is almost always more valuable than a frantic few days in January.

Nicole Valentine, Nava Accountancy