As most people are aware, a Self-Assessment tax return needs to be filed with HM Revenue and Customs by 31 January each year.
In January 2018, some 2.6 million people had not yet filed their tax returns by 29 January. Over 6% of all tax returns due were filed in the final 24 hours and 745,588 missed the deadline entirely.
Whilst perhaps it’s understandable who so many people leave submitting their tax return to the final few days before the deadline, there aren’t many benefits in doing so. These are the reasons why you should look to file your tax return sooner, rather than later.
Registration
If you must submit a Self-Assessment tax return, you must register in advance and obtain a Unique Taxpayer Reference (UTR) number.
It can take around 14 days to obtain a UTR number during quiet periods but if you wait until January to register for Self-Assessment, then the process can take much longer meaning that you may not have your UTR number before the filing deadline.
If you are looking to submit your tax return online, you will also need to register with HM Revenue and Customs and obtain the necessary PIN codes to submit your return. Again, if you leave this to January, it could take some time to arrive.
As soon as you are aware that you will be required to submit a tax return, you should look to register with HM Revenue and Customs as soon as possible.
Obtaining information
Depending on what needs to be included on your tax return, it may take some time to collate all the information. Copies of P45’s, P60’s, bank statements, invoices, expenses and dividend vouchers may all be needed to complete your tax return and if you do not have all this information you may need to request information. If you need to contact HM Revenue and Customs for this information during January, you will expect a lengthy wait whilst you ae on hold.
Time to budget
Even if your tax return is submitted early, the tax isn’t due until 31 January. Knowing your tax liability in advance will give you time to plan on how you can pay the liability. By not knowing your tax liability until January, you may not have enough to pay the liability when it is due, especially as payment is expected just after Christmas.
You may be due a refund
Depending on your income for the year, you may be due a refund of tax from HM Revenue and Customs. By waiting until January to submit your tax return, you delay receiving a refund which has always been due to you.
Payments on account
If you complete a tax return and your tax liability is below £1,000 and you don’t pay much tax at source (such as PAYE), you should only be expected to make one payment of tax a year in January.
For many people, they are expected to make additional payments in advanced called ‘payments on account’ in respect of next years tax liability. These payments are due 31 July. If profits are fluctuating, it is sensible to prepare your tax return as soon as possible so that the tax liability is calculated before 31 July. This way, if your actual liability turns out to be lower, you can amend your July payment on account to help with your cashflow.
Avoid penalties or additional charges
By completing and submitting your tax return early, you guarantee that you will not incur any costs for late submission.
If you provide your accountant with information in January to complete your tax return, they may not have the capacity to submit your tax return and may look to charge a premium for completing your tax return before the deadline. In addition to this, although your accountant will do their utmost to submit your return before the deadline, there may be circumstances why they cannot submit a return and it is therefore submitted late. By submitting your return early, you avoid all these issues
You can use your tax code
If you owe less than £3,000 in tax and you submit your tax return early, you can opt to have your tax liability collected through your tax code. This can be a great option for employees or pensioners as they can have the tax liability collected throughout the year as opposed to paying in a lump sum.
Peace of mind
Knowing that your tax return has been prepared and submitted and you are aware of your tax liability provides you with peace of mind. A recent study suggested that over 50% of small businesses were stressed about self-assessment. With a filing deadline of 31 January, why let the thought of having to deal with your tax return spoil your Christmas or New Year?
As you can see, there are some real benefits to not leaving your tax return to the last minute. Please contact us on 0161 952 4244 to discuss how we can help you in preparing your tax return.