Self-employed workers are twice as likely to file their taxes late compared to higher earners, City AM can reveal, amid renewed focus over the administrative burden facing freelancers and sole traders.
Low-income earners most affected
Those that are self-employed and on the lowest incomes below the basic tax rate threshold are “significantly more likely to miss the self assessment deadline than higher earners” at nearly double the rate, according to the UK’s tax collector, HMRC.
The data, which was obtained via Freedom of Information (FoI) request by London fintech Pensionbee and covers the tax years from 2019/20 to 2023/24, shows that nearly six per cent of these earners failed to make the 31 January deadline to file their tax returns, compared with 2.7 per cent of those paying the higher tax rate.
This appears to be a consistent pattern across all years, even when HMRC waived the penalty fee it charges for late filing if self assessment returns were submitted before 28 February, which Pensionbee said suggests it to be a “systemic” issue.
Knowledge gap and structural issues
Pensionbee said the findings also “point towards a potential knowledge gap among lower earners regarding how and why filing a tax return is done” alongside “broader structural issues”. Lower earners, the company said, are more likely to not have access to accountants or financial advisors and manage their tax filing independently.
It added that this group may also “be more exposed to the income volatility that makes fixed financial deadlines harder to meet”.
Lisa Picardo, chief business officer at Pensionbee, said self-employed workers missing the deadline to file their taxes is “often a symptom of a wider pressure that the system does not adequately account for.”
“For many of these workers, unpredictable income and limited support make it genuinely harder to stay on top of financial administration and obligations, whether that is filing a tax return or saving into a personal pension,” Picardo said.
Teething problems for digital tax switch-up
Self-employed workers earning over the basic tax threshold and above £50,000 a year are now required to file their Self Assessment taxes digitally, but many are not registered.
HMRC in early April launched its new digital tax filing system, requiring anyone who earned over £50,000 in the 2024/25 tax year from self-employment or property to keep digital records of tax using authorised software.
However, three-quarters of UK landlords and sole traders that must sign up to the system failed to do so. The push is part of HMRC’s Making Tax Digital for Income Tax Scheme and follows HMRC writing to those affected in November last year to let them know they need to sign up and use the service by the beginning of the tax year.
