Freelance tax mistakes

5 freelance tax mistakes that will haunt your business (and why you can’t afford to go it alone)

 

Starting a business as a freelancer feels like freedom—until the paperwork, tax traps, and sleepless nights hit. Imagine pouring your energy into clients, only to lose thousands to avoidable fines or waste weeks untangling HMRC errors. At Accrue Accounting, we’ve seen too many freelancers burn out not because their work failed, but because they tried to do everything alone. Find out more about the 5 freelance tax mistakes.

 

 

Freelance tax mistake 1: Opting for the wrong tax-efficient business structure

 

Registering as a sole trader feels easy, at first. But here’s what no one tells you: you could be handing over 40% of your income to the taxman when you could keep thousands. And if that’s not scary enough, one lawsuit could wipe out your life savings.

This isn’t a guess. We’ve seen freelancers lose £15k overnight—all because they didn’t set up right.

What if you could lock in between 19%-25% tax rates, leaving the rest to be able to grow and bulletproof your assets? That’s where we step in.

Switching structures later triggers unnecessary costs and admin.
So, avoid this freelance tax mistake: Accrue Accounting analyses your income, growth plans, and risk tolerance to recommend the most tax-efficient structure, then incorporates your limited company in 24-48 hours.

 

Freelance tax mistake 2: Overlooking mandatory HMRC registrations

 

You land your first big client. Cash starts flowing. Life’s good—until you realise: you never registered for Corporation Tax. Suddenly, that £1,600 fine hits. Worse? HMRC won’t even warn you first.

Why this hurts more than you think:

• Penalties snowball monthly while you’re busy working
• Clients get nervous when payments are delayed due to your admin errors
• VAT thresholds creep up (£90k isn’t as far away as it seems)

Here’s the kicker: while you’re stressing over penalties, we could’ve handled this in one 10-minute call.

HMRC won’t send reminders, and penalties are compounded monthly. Accrue Accounting handles all registrations upfront, from VAT to CIS schemes, ensuring full compliance from your first invoice.

 

 

Freelance Tax Mistake 3: Blurring personal & business finances

 

Using a personal bank account for business transactions muddles records, increases audit risks, and makes tax filings error-prone.

HMRC views mixed finances as a red flag. Plus, creditors can target personal assets if your business faces legal trouble.
Accrue Accounting streamlines business bank account setups (with partners like Mettle or Starling) and integrates accounting software like Free Agent, keeping your finances crystal clear.

 

 

Mistake 4: Failing to track deductible expenses

 

Lost receipts, forgotten mileage claims, and unrecorded home office costs mean freelancers overpay tax by £1,000s annually.

HMRC allows deductions for office supplies, travel, and even a portion of household bills, but only if documented. Accrue Accounting automates expense tracking, flags every eligible deduction, and ensures you claim every penny owed, without the admin headache.

 

 

Mistake 5: Ignoring annual compliance deadlines

 

Limited companies must file annual accounts, confirmation statements, and Corporation Tax returns. Miss one deadline, and you’ll face fines – or even strike-off threats from Companies House.

1 in 3 freelancers admits they “don’t understand” filing requirements.
Accrue Accounting manages all filings and deadlines, sends reminders and handles HMRC correspondence so you stay focused on clients.

 

 

Why choose Accrue Accounting?

Freelancers love working with us because we remove complexity and maximise tax savings:

• Save £££ through tailored tax planning
• Avoid 100+ hours of admin with automated compliance
• Grow confidently with proactive financial insights

 

 

Free Download: Grab our “Freelancer’s Guide to Hassle-Free Company Setup” (includes a step-by-step checklist).

 

 

 

Don’t let these mistakes derail your freelance success. Contact Accrue Accounting today to launch your UK business with confidence – and keep more money in your pocket.