Financial guru Martin Lewis has issued a critical warning to savers with a specific type of income, urging them to avoid a common and costly mistake. The advice comes just ahead of the looming Self Assessment tax deadline, set for January 31, 2026.
Clarifying the Tax Trap for the Self-Employed
During a recent episode of his popular BBC podcast, Lewis highlighted a fundamental misunderstanding that often leads to financial distress. He explained that while employees typically have tax deducted at source through payroll, self-employed or freelance workers receive their income before tax is taken.
"Misunderstanding that causes huge problems for many young - and some not so young - people," Lewis emphasised, noting that this can result in individuals suddenly owing "a whack of cash" to HMRC when their tax bill arrives.
A Simple Strategy to Safeguard Savings
To prevent this scenario, the MoneySavingExpert.com founder proposed a straightforward yet effective method. He advised that for every £100 earned, approximately £30 should be immediately transferred into a separate bank account, ideally one offering high-interest savings rates.
"At the end of the year, when the tax bill comes, you've got the money sitting there to pay it," Lewis stated. He stressed the importance of discipline, adding, "Do not think of it as your money. It's no longer your money, you've paid it into that account and it's pre-empting what you're going to pay in the tax bill."
Lewis warned that failing to follow this advice could lead to significant hardship, describing it as "absolute hell" to suddenly need to find a large sum without prior preparation.
Imminent Deadline and Filing Statistics
This timely warning coincides with the approaching Self Assessment deadline. According to recent figures, 8.6 million people have already filed their returns for the 2024 to 2025 tax year. However, those who have not yet submitted face the risk of an automatic £100 fine if they miss the cutoff.
Last year, more than 11.5 million customers successfully filed by the deadline. HMRC is now focusing on assisting the remaining 3.3 million individuals who have yet to complete their returns this time around.
Official Guidance from HMRC
Myrtle Lloyd, HMRC’s Chief Customer Officer, encouraged prompt action, saying, "Don’t leave it until deadline day. Filing now will give you peace of mind that your tax return is completed and if you have tax to pay, you have a week to arrange payment."
For those concerned about meeting their tax obligations, Lloyd pointed to available support options. "If you’re worried about paying your tax bill, you may be able to set up a payment plan online – search ‘difficulties paying HMRC’ on GOV.UK," she advised.
It is noteworthy that this year’s deadline falls on a Saturday, which may affect processing times and require earlier submission to avoid penalties.
