📬 7 Mistakes That Can Put You on HMRC’s Radar (and How to Avoid Them)

Let’s be real — getting investigated by HMRC doesn’t mean you’ve done something wrong.

But it does mean stress, admin, possibly professional fees, and time you’ll never get back (and let’s face it, we’ve all got better things to do 😩).

What often triggers an investigation is a simple, totally avoidable mistake. Something small that raises a red flag in HMRC’s system — and before you know it, you’re knee-deep in paperwork and wondering what on earth went wrong.

So let’s get ahead of it. Here's a look at seven common mistakes that could catch HMRC’s attention — and what you can do to stay on the safe side ✅

🚗 1. Living Beyond Your Declared Means

If your tax return shows a modest income, but your lifestyle says otherwise (hello luxury holidays, flashy cars and Instagram-worthy upgrades), HMRC may take notice.

These days, HMRC uses sophisticated data matching tools. They cross-check your declared income against things like:

• Land registry records

• Bank data

• Loan applications

• Even your social media (yes, really!)

Top Tip:
Make sure you’re reporting all your income — side hustles, rental income, dividends, crypto, and anything else that might not feel “big” but adds up.

💵 2. Running a Cash-Heavy Business

Businesses that deal primarily in cash — like salons, tradespeople, takeaways or cafés — automatically attract more attention. Why? Because cash is harder to track and easier to under-report (whether intentionally or not).

To stay safe:

• Bank all takings

• Use a proper till or POS system

• Keep detailed daily records
  These small habits show you're above board and audit-ready.

🕒 3. Late or Incorrect Filings

One late return? It happens.
But consistent lateness, rushed filings, or constant amendments can suggest disorganisation — or worse, that you're trying to hide something.

Solution:
Set reminders well before deadlines, get your paperwork in order early, and don’t be afraid to ask for help. An accountant (🙋‍♀️) can take a huge weight off your shoulders.

🏦 4. Mixing Business and Personal Money

It’s an easy trap to fall into — especially in the early days of business. But mixing personal and business transactions in one bank account makes things messy, hard to track, and difficult to defend if HMRC comes calling.

The fix?
Open a separate business account, and pay yourself a salary or drawings. That clear separation will make your bookkeeping easier and your business look more professional — win-win.

✈️ 5. Over-Claiming Expenses

This one catches a lot of people out. Claiming business expenses is 100% allowed — but the key words are “wholly and exclusively” for business.

Red flags include:

• Huge claims for travel and meals

• Mobile phone bills claimed in full when only partially used for work

• Family holidays logged as “business research” 🤔

Play it safe:
Only claim what’s genuinely for the business, and keep those receipts filed and ready to go.

📉 6. Big Drops in Income (Without Explanation)

A sudden dip in income or profits — with no obvious reason — can prompt questions from HMRC. Especially if things were ticking along nicely the year before.

If your income has dropped significantly, keep a note of the why:

• Lost a big contract?

• Took time off?

• Changed your pricing or structure?

That way, you’ve got evidence and context if HMRC ever asks.

📬 7. Ignoring HMRC Letters

No one likes official letters through the door — especially when they’re brown envelopes with scary logos. But ignoring them is a fast track to bigger problems.

If HMRC contacts you:

• Don’t panic

• Don’t delay

• Respond clearly or speak to your accountant immediately

A quick, calm response can stop a minor query from turning into a full-blown investigation.

💡 Bottom Line?

Most investigations aren’t because someone’s been deliberately dishonest — they’re triggered by red flags in the system. And the good news is: most of those red flags are totally avoidable.

With a bit of awareness, clean records, and some proactive steps, you can keep HMRC happy — and your stress levels low.

👀 More Help Is Coming…

If you're unsure whether you're ticking all the right boxes, or if your record-keeping could use a bit of a tidy-up, don’t worry — you’re not alone!

Keep following along — I’ve got some brilliant books and digital tools coming soon that will make staying compliant (and staying sane) so much easier.

In the meantime, if you’ve got a question or need a friendly ear, you know where I am 💌

Yours in staying compliant (without the panic),
Lisa x

Team TaxTalks