21 May Why you should file your annual Self-Assessment Tax Return early
If you’re one of the many UK taxpayers in regular employment you probably don’t need to worry about completing an annual Self-Assessment Tax Return. Your income tax will be automatically deducted each pay day, together with National Insurance and pension contributions via the PAYE system.
However, for the many people who do need to complete an annual Self-Assessment Tax Return, such as self employed people and company directors, it can seem like the exams that we should be studying for, but keep procrastinating until the last day possible, just with the added risk of missing the deadline and an automatic penalty of £100. And the penalty quickly increases if you delay further.
In fact, around 6% of all returns get filed in the last 24 hours before the deadline and almost a million people miss the deadline every year.
The deadline for filing your Self Assessment Tax Return is 31st of January, and any tax due to be paid has to be cleared funds in HMRC’s account on or before 31 January. Miss that payment deadline and you’ll be charged a minimum of 5% interest on late payment.
So, while the deadline sounds like it’s ages away, it is actually advisable to complete your Tax Return early. Besides the fact that you may have some free time during this Coronavirus lockdown, here are some of the best reasons for getting ahead of the game with your self-assesment.
It takes longer than you think
The first reason you don’t want to leave your Self-Assessment to the last minute is because the whole process of Self-Assessment may take you longer than you think.
Before you can file your tax return, you’ll need to register with HMRC — this may take ages depending on the time of the year. For example, the current COVID-19 crisis and the government’s measures to support businesses and people at these difficult times means that HMRC is busier than ever before. Getting your Unique Taxpayer Reference number by post may take weeks.
And even if you’re already registered with HMRC, getting everything you need to file your Self-Assessment also takes time. You are likely to need all sorts of paperwork, such as forms P45, P60, invoices, bank statements, expenses and so on. If you are not organised with all your documentation, this will be a bit of work to collect, especially as it may be from almost two years ago.
Reducing the stress
The first point also leads to the fact that filing your Self-Assessment early will make the process a lot less stressful. If you leave it too late and you find that there’s not enough time to collect everything you need and file your tax return, this will become a living hell. Therefore, doing it early means you will have fewer headaches later.
Moreover, you won’t have to pay your taxes up until the 31st of January anyway, so you have all this time to budget your finances for your tax liabilities.
It is less busy
You wouldn’t think it’s possible, but on the last week before 31st of January, HMRC gets even busier, with the number of people who have decided to leave their Self-Assessments to just before the deadline.
So, if you want to save some precious time and nerves waiting for a response from HMRC, this is the time to do it. Even if it takes a long time now, it won’t be quite as busy.
And one big advantage is that if you are owed some tax that you overpaid during the last year, you will get it back straight away (or as fast as HMRC can be). Otherwise, if you are waiting for your tax return money when everyone else is, it could take weeks to actually get it in the bank. After all, this money is more useful in your bank than in HMRC’s.
You will be able to enjoy your Christmas
Have you ever dreamed of a time when Self-Assessment won’t ruin your Christmas holidays for once? We’ve all been there - having to deal with the paperwork and filing forms instead of enjoying your family time (that you don’t get that much of anyway). Well, this year is the year to do it differently and get ahead of the game. You will thank yourself later.
If the previous points were not motivating enough to complete your Self-Assessment early, this one will definitely be. Just under a million of taxpayers last year missed the deadline and had to pay the penalties.
HMRC has no mercy for such people, so you will get fined at least £100 if not more, as it increases every day you have missed the deadline. Therefore, getting it over with early on might literally save you some cash later.
Need any help?
Self-Assessment can be a real pain if you struggle to keep all your books and documents organised. It is likely that you do, as bookkeeping and accountancy is not exactly your job. Outsourcing this area of your business could ensure that there is one less thing to worry about.
Our Virtual Accounts Office can look after your bookkeeping and accountancy needs while leaving you to concentrate on what you do best.
And we’ll be pleased to look after your Self-Assessment Tax Return for you so that you can relax in the comfort that you’re in good hands.
Call us on 01202 755600 or drop an email to firstname.lastname@example.org and we will be happy to have a chat.