Did you know that you can file your self assessment tax return early? In fact, you can submit your return as early as the 6th April each year – and we’ve got six good reasons why you should.
The deadline for submitting your tax return on paper each year is 31st October; the online submission and payment deadline is 31st January. With more than nine months to get it done, you might be wondering – why the rush? Well, here’s six reasons why:
6 good reasons why you need to file your tax return early
1. Time to register
If you’re filing a self assessment tax return for the first time, it’s important to know that you need to register with HMRC before you can submit anything. This isn’t an instant process – register online as soon as possible, as it can take around ten days to receive your Unique Taxpayer Reference (UTR) Number.
You then need to request an activation code in order to log in to your HMRC account. Keep in mind that the closer to the deadline you register, the busier HMRC will be – so the process could take longer.
2. Time to organise all the information you need
The longer you wait to submit your tax return, the further back you’ll have to go to retrieve the information you need. If you wait until January 2021, you will need to go back almost two years to April 2019. This could make some things more difficult and time-consuming; for example, some online banking platforms only provide statements going back 12 or 15 months.
If you file your tax return early you also have less chance of losing or accidently throwing away any important forms, invoices, or receipts. The process will be less stressful if you don’t have to chase up or track down paperwork copies and you’ll also be able to claim any allowable expenses.
3. Time to budget for your HMRC payment
Filing your tax return early does not mean that you have to pay the balance of tax due at the same time. You still have until 31st January to pay the balance of your tax and your first payment on account, if applicable.
What it does mean is that you know your tax liability earlier, so you can plan ahead, budget and save in order to make your January payment. If you leave it all until January and then find that you can’t afford to pay HMRC you’ll receive an immediate £100 fine. Additional increasing fines will be levied the longer your payment is outstanding.
COVID-19 business support – option to defer second payment on account for 2019-2020
It’s worth noting that you can choose to defer your second payment on account this year, payable on 31st July 2020. This is as part of the UK Government’s COVID-19 support for businesses and deferral is until 31st January 2021. While this might help with cashflow in the short term it does mean that you’re likely to have a larger tax bill to pay in January. This makes having an accurate note of your tax liability and the time to budget and save even more important.
4. Receive any refund sooner
The earlier you file your tax return, the earlier you’ll receive any refund on the tax you’ve paid. The closer to the submission deadline, the longer you can expect your refund to take.
Receiving any refund due to you sooner means the money is in your account, not sitting with HMRC, and will help with your cashflow. This could be particularly important as markets begin their slow recovery from the COVID-19 pandemic.
5. No mistakes, no fines, just peace of mind
Submitting your self assessment return in good time means that you’re not rushing through it, you’re under less pressure, and you’ve less chance of making a mistake – and mistakes can be costly.
In January 2020 HMRC reported that more than three million people had still to submit their return with just a week to the deadline – and almost a million then missed the deadline altogether. Be certain to beat last-minute rush, so there’s less pressure on the online platform. HMRC will also be able to respond faster, should you need their assistance.
Being well ahead of the deadline also means there’s no chance of receiving HMRC’s fines for late submission. That immediate £100 fine quickly builds the later you are – and can top £1,600.
Having your tax return done is something crossed off your ‘to do’ list, leaving you more time and energy to focus on your business, your family, or your own needs. Leaving it until later in the year means you could be worrying about it for longer. Don’t let the stress ruin the festive season for you either, unlike the 12,257 people who submitted their tax returns on Christmas Day and Boxing Day 2019!
6. Take advantage of tax planning opportunities
If you file your tax return early, you’ll have a clear picture of your tax liability for the following year, and the opportunity to consider any tax planning opportunities. While we all need to pay our tax fairly, you need to ensure that your business is able to take advantage of any appropriate tax strategies. These might include Corporation Tax and Employer National Insurance Tax relief on pension contributions, capital allowances on qualifying assets or considering how and when you extract profit from a limited company.
Need a hand?
We’re here right now to help you file your tax return early – in fact, we specialise in the fast completion of tax returns. As a small business ourselves, we understand how crucial it is to know how much tax you need to pay, as early as possible. Receiving any refund due to you as soon as possible can also be vital to small business cashflow, in particular during these unprecedented times.
Please get in touch if we can help, or if you’d like to chat through the process – email Hamish.Sheppard@crunchers-edinburgh.co.uk or call us on 0131 502 0543.