Although the end of January is still a few weeks away, did you realise that filing your tax return sooner rather than later has a number of advantages?
The one positive aspect of the tax return deadline is that it is always the same – January 31st. This means that with a little planning and assistance from your accountant, you should be able to avoid penalties by keeping easily accessible and up-to-date records of your income and expenses throughout the year.
The better your record keeping, the easier it will be to complete your tax return precisely and ahead of schedule. Our post also explains why you shouldn’t put off filing your self-assessment tax return if you expect a refund or if your income fluctuates throughout the year.
Here are out top reasons for getting that tax return filed ASAP…
Time is money
If your financial circumstances have altered this year, getting things in order as soon as possible will allow you the time to consider any tax planning alternatives that may be open to you. It also gives you time to gather bank statements and any other financial documentation you’ll need to prepare your return. There are many apps available that make it much easier to keep track of all those stray pieces of paper that accumulate over time.
File now, pay later
Calculating your tax responsibilities and filing your return now will give you enough time to begin budgeting and controlling your cash flow, as well as planning for any tax you may owe. When you rush through your tax return at the last minute, you’re more likely to make mistakes. And HMRC has stated that it will – and does – apply fines for inaccuracies. But, if you pay your bills on time, you’ll be fine. However, filing your tax return early does not imply that you must pay any tax liabilities before the deadline of January 31st.
Get your tax refund faster
When HMRC makes mistakes with its tax regulations, it is common for employees or directors to receive tax refunds. Building subcontractors who work under the Construction Industry Scheme are also likely to earn tax rebates. As a result, the sooner you file your tax return, the faster any refund you may be due is processed. That means any money owed to you by HMRC could be earning extra interest in your bank account for a few months. So why wait until January, when reimbursements are typically delayed due to HMRC’s busiest season?
Beat that pesky deadline
Your tax bill isn’t truly due until January 31st, despite the fact that you may choose to file your Self Assessment early. You’ll have a full six months to plan for any tax you owe if you file in July. On the other hand, if you file in January but later discover that you lack the funds to pay your taxes, you risk receiving one of HMRC’s infamous on-the-spot £100 fines. Ouch.
Regarding penalties, it goes without saying that filing early will allow you time to correct any issues and prevent HMRC’s late filing penalties.
For those who are unfamiliar, these penalties are:
- A £100 instant fine if you miss the January 31st deadline
- £10-per-day fines (for up to 90 days) if you haven’t filed by 30th April
- A £300 fine (or 5% of the tax you owe – whichever is greater) if you still haven’t filed after another 90 days
- Another £300 fine (or 5% of the tax you owe – whichever is greater) if you still haven’t filed within a year
- Additional penalties – including up to 100% of owed tax – if HMRC believes you are intentionally delaying your filing.
This may all make you feel under pressure and we know that this time of year, combined with running a business can be stressful. Which is why we recommend not doing it all alone! We can assist you in completing your tax return, and take that worry from you. Tax has become an ever-changing and increasingly complex topic. And unless you have specialist expertise, you may become perplexed and miss out on all of the reliefs available to you. You could end up paying too much tax without realising it, or paying too little and risking an investigation if you don’t work with an expert – contact us here, or give us a call on 01737 570127 and we would be happy to chat about tax with you.