Running a small business is tough enough. Don’t let accounting errors make it even harder.
From missed deadlines to messy spreadsheets, even the most organised business owners can fall into avoidable traps when it comes to their finances. And unfortunately, HMRC isn’t known for giving second chances.
In this guide, we’ll walk through the most common accounting mistakes made by UK sole traders and small business owners, and how you can avoid them with a few smart habits (or a helpful accountant in your corner).
Let’s get into it.
1. Mixing Business and Personal Finances
It’s one of the most common errors, and the easiest to fix.
Many sole traders use one bank account for both business and personal spending. While this might seem simpler at first, it often leads to chaos when it’s time to file your tax return.
Why it matters:
- It’s hard to track business income and expenses clearly
- You risk missing deductible expenses
- HMRC could challenge your records
Avoid it:
Open a separate bank account just for business. Even if you’re not a limited company, it keeps everything cleaner and easier to manage, and shows you’re running things professionally.
2. Falling Behind on Bookkeeping
It starts with “I’ll sort that later”, and ends with hours of panic in January.
Bookkeeping isn’t the most glamorous part of business, but it’s essential. When you fall behind, you lose track of where your money’s going, and risk late submissions, inaccurate returns, and poor cashflow decisions.
Avoid it:
- Set a regular bookkeeping habit (weekly or monthly)
- Use cloud software to automate where possible
- Or let us take it off your plate entirely
If you need bookkeeping support, then we can help.
3. Not Saving for Your Tax Bill
When you’re self-employed, HMRC doesn’t take tax at source, which can be deceptive. You might feel like you’re earning well, only to get hit with a big tax bill you hadn’t planned for.
Avoid it:
- Save around 20–30% of your profits into a separate account
- If you’re new to self-employment, don’t forget the payment on account system
- Plan ahead with regular check-ins on your estimated tax
Glow Accounts can help you forecast your tax bill with real numbers, not guesswork.
4. Misunderstanding VAT Thresholds
In the UK, you must register for VAT if your taxable turnover exceeds £90,000 in any 12-month rolling period (updated April 2024).
Many businesses miss this because they:
- Don’t track turnover regularly
- Think the threshold is based on profit
- Aren’t sure what counts as VATable
Avoid it:
- Monitor your turnover monthly
- Keep a record of the last 12 months at all times
- Ask an accountant before it becomes urgent
Registering too late can mean penalties and backdated VAT. Don’t leave it to chance; if you’re in any doubt, contact us and we can help.
5. DIY Accounts Without Knowing the Rules
Spreadsheets and good intentions only get you so far. If you’re not clear on what you can claim, how to categorise expenses, or what HMRC expects, you could be losing money or risking penalties.
Avoid it:
- Use cloud accounting tools that flag common issues
- Get periodic reviews from a professional (even if you do most of it yourself)
- Don’t rely on hearsay; get proper advice
A quick review with Glow Account might uncover savings you’ve been missing for years.
6. Ignoring HMRC and Companies House Deadlines
Late filing or payment can trigger automatic penalties, and they escalate quickly.
Examples:
- Self-assessment late filing = £100 fine + daily penalties
- Companies House late accounts = £150+ penalty, doubling after a month
- VAT returns late = surcharge risk and reputation impact
Avoid it:
- Add all deadlines to your digital calendar
- Use accounting software that reminds you
- Let an Accountant like Glow Accounts to manage the key deadlines so nothing gets missed
7. Falling for Accounting or HMRC Scams
With fraud on the rise, small businesses are frequent targets. Common scams include:
- Fake HMRC messages via text or email
- Phishing emails asking for account details
- Phone calls threatening legal action
Avoid it:
- HMRC will never contact you via WhatsApp
- Don’t click on suspicious links: log into your HMRC account directly
- If you are unsure, ask us - we’re very happy to check for you
If it feels dodgy, it probably is. Glow Accounts’ clients can forward anything suspicious our way.
8. Using the Wrong Software (or None at All)
With Making Tax Digital around the corner, using proper software is no longer optional. But not all tools are right for every business.
Common mistakes:
- Sticking with spreadsheets when digital records are required
- Overpaying for software you don’t understand
- Using tools that don’t integrate with HMRC
Avoid it:
- Choose a simple, MTD-ready tool that fits your business
- Get guidance on setup and ongoing use
- Don’t overcomplicate it, let software work for you
Download our free Making Tax Digital Checklist for Sole Traders:
9. Forgetting to Track Expenses Properly
Every receipt matters, but when life’s busy, it’s easy to miss out on tax-deductible costs.
Commonly missed expenses:
- Business mileage
- Software subscriptions
- Use of your home as an office
- Training or development
Avoid it:
- Use a receipt capture app
- Keep a simple digital record
- Email receipts directly to your accountant or software tool
We’re also developing an “Expenses Checklist”, ask if you’d like early access.
10. Waiting Too Long to Ask for Help
We often hear:
“I wish I’d called you sooner!”
Whether it’s a late tax return, an unexpected VAT bill, or messy records, most accounting problems are much easier (and cheaper) to fix early on.
Avoid it:
- Don't sit on stress
- Schedule a check-in before year-end
- Use your accountant as a proactive advisor, not just a form-filler
Book a free 15-minute clarity call with Glow Accounts, no pressure, no jargon.
Final Thoughts: Mistakes Happen, But You Don’t Have to Make Them Twice
Running a small business means wearing many hats. If accounting isn’t your thing, that’s okay, but the cost of avoidable errors can be high.
The good news? With the right support, tools, and habits in place, you can stay compliant, reduce stress, and make smarter money decisions year-round.
Need help?
Glow Accounts works with small business owners across the UK to simplify their finances, avoid penalties, and keep more of what they earn.
Call us on 01892 267750 or get in touch to make MTD stress-free.
How Glow Accounts Can Help Your Business
- Hands-on support with bookkeeping and tax returns
- Help choosing the right software for Making Tax Digital
- A second opinion on your expenses or setup
- Or just someone to answer those “quick questions” without jargon
