The New Year period is often a joyous time – Christmas has been and gone and you’re getting ready to get back to work and get stuck into your business once again.
But for some, January can be a time of stress and panic, all because of the dreaded self-assessment tax return. That’s right, the obligatory paperwork you’ve formed a love-hate relationship with and always tend to put off until the last minute. But there are lots of reasons to get your self-assessment done and dusted earlier in the year.
With deadlines approaching and fines increasing, more and more people are realising that it makes sense to file their tax return earlier. Whether it be the benefit of tax planning or receiving a tax refund earlier than expected, we’ve put together our top 5 reasons to file your self-assessment early.
1. You can plan ahead
The saying “fail to prepare, prepare to fail” rings true when it comes to filing a tax return. More often than not, tax payers submit their self-assessment just in time and then find out they have a tax bill to pay, which leaves them scrambling to pay the bill and sadly, struggling to manage their cash flow.
But, if you submit your return early, you possess a huge advantage over those who don’t! Filing your tax return early means you have a longer period of time to pay an outstanding tax. So, for example, if you submitted in May, you would still have until January 31st the following year to pay. This would give you a good opportunity to budget for your tax bill, allowing you to manage your cash flow effectively and even consider any opportunities for tax planning.
Tax planning can be especially handy if, for example, you’ve purchased a buy-to-let property, or made a significant capital purchase, or perhaps you’ve even made a loss. By reviewing your tax affairs early, you give yourself and your accountant more time to consider any tax planning opportunities that could save you money later.
2. You’ll have the reassurance that it’s taken care of
Planning ahead ultimately gives you that feeling of relief. By giving yourself the earliest opportunity to find out how much income tax you owe, you give yourself time to get to grips with your income tax burden, but not only that, you allow yourself more time to make adjustments.
If you make a mistake on your tax return, you normally have 12 months from January 31st to submit any corrections. Therefore, the earlier you submit your tax return, the longer you have to make any amendments to it, which will help reduce the amount of pressure you’ll face.
3. You’ll receive quicker tax refunds
Have you ever had that unsettling feeling when you’re waiting for your tax rebate to arrive, and it keeps taking weeks and weeks to land in your mail? You always feel nervous when you’ve submitted your return last minute because you know HMRC will, in all likelihood, take a long time to process your refund, because your refund will be among many that need processing.
But the reality is, the earlier you submit your tax return, the earlier you’ll receive your refund because HMRC is less busy processing returns. Unlike the deadline for payments, HMRC doesn’t wait until January 31st to refund you.
4. You can avoid last minute stress
There’s nothing worse than panicking at the very last minute because you’ve mislaid important receipts and invoices. Not only will this add to the already stressful experience of filing your tax return, but it might also mean you’re unable to deduct allowable expenses because you can’t find the receipts.
We’ve all at some point experienced what it’s like to be on hold with HMRC’s tax helpline in January. It’s not uncommon to be waiting for over an hour, and an internal report at one point showed that 25% of calls went unanswered! But all that stress can be avoided by filing early, as you’ll be avoiding the rush, and you will be able to get the direct help from HMRC when you need it.
5. You’ll avoid any penalties
Perhaps the most obvious benefit to filing early is the chance to address any problems with your tax return and therefore avoid HMRC’s late filing penalties.With a minimum of £100, you should always file your tax return even if you can’t afford to pay the tax bill.
Need more help?
It’s important to know exactly what’s going to be required when filing your tax return. Filing receipts and allocating time way ahead of deadlines can go a long way in reducing the stress you’ll endure when submitting your self-assessment.
Ultimately, a lot can be said for taking the time to do things properly. Much like the tortoise vs. the hare, rushing your tax return will result in errors that may lead to penalties, whereas leaving plenty of time means you won’t be scrabbling about to pull together all the information you need.
If you’re still unsure of the key tax dates that affect you, view our online tax calendar to keep yourself in-the-know. For more support with your self-assessment, contact our expert team by visiting our website.