If you have been completing a Self-Assessment Tax Return for a while you know it is an annual ritual that has to be performed. It needs to be done without fail no matter what. There are some who prefer to submit the return early with plenty of time, whilst others leave it to the last minute. We are not sure why because there are no obvious benefits to putting it off. Instead, we want to highlight the benefits of submitting your tax return before the deadline.
This deadline is always on 31st January. If you have a reasonable excuse, you can ask HM Revenue & Customs for an extension. A reasonable excuse is “something that stopped you meeting a tax obligation” like your partner or other close relative died “and other similar reasons
Here we set out seven good reasons why you should submit your tax return before the deadline of 31st January each year:
Plan for tax liabilities
This year cash is tight for everyone. With the cost-of-living crisis you may need extra time to budget for the tax due at end of next January.
We know many of you are putting aside some money each month for the tax liability and that is a good practice. But in recent months you may not have been able to set aside enough or may even have had to dip into the tax fund.
Completing your return in plenty of time will mean that you know ahead of the due date what your tax liability is going to be and then you can plan how to pay for it. You may need to ask HMRC for extra time so the sooner you know the bill the better.
You may be due a refund so why not get it quickly
You may well be entitled to a tax refund. There are various reasons why you would get a repayment from HMRC
If you are due money back from HMRC why wait? It’s your money, and you should get it back as early as you can. The point is you may or may not know you are due some money back, but you will know once you complete your return.
Inability to code out tax liabilities
Did you know that you can pay your Self-Assessment tax bill through your PAYE tax code hence spreading the cost over twelve months.
You can pay your Self-Assessment bill through your PAYE tax code as long as all these apply:
- you owe less than £3,000 on your tax bill
- you already pay tax through PAYE, for example you’re an employee or you get a company pension or dividends
- you submitted your paper tax return by 31 October or your online tax return online by 30 December so plenty of time before the deadline.
Stress and anxiety
In January every year many clients get concerned and stressed about the filing deadline. We find that those who leave it until the last month to focus on their tax return then get anxious about what their tax liability will be. They may even get worried not knowing if the Return is going to be filed on time.
So why wait until January? All you need to do is complete the tax return earlier. This will mean that you have time if things turn out to be a bit more complicated. That time will create the space and keep the stress in check.
If an Accountant is completing your tax return for you than you will give them time to think around your affairs and give them time to do their work. And in the process you will save them some stress too.
Delays due to incomplete information
Each April we send out a questionnaire to clients asking for information to complete their tax return. The questionnaire has reference to previous year’s data and serves as a reminder of the information needed.
When you start gathering the data for your tax return you may find that some information is missing. You may have misplaced that certificate or email or receipt. You may need to go back to third parties to request the information again causing more delays and you guessed it more stress!
It is also important to provide all the relevant information, even if it is the same as the previous year – positive confirmation is necessary because things change.
Omissions and missing information cause delays.
You can submit a tax return with provisional figures, but this decision should not be taken lightly. Provisional or estimated figures will result in estimated tax liabilities, so your task remains outstanding.
You will then need to spend more time chasing and gathering the missing information and making more submissions. And how much tax do you pay? If it transpires that you have underpaid tax, then it could result in interest and sometimes even penalties.
In the end it creates more work.
Penalties from HMRC
HMRC will charge the fixed £100 penalty from day one if your tax return is up to 3 months late and then they move to daily penalties. Not forgetting interest and surcharges on late payment of tax.
Regular late filing will also bring your case to their attention and therefore may lead to an investigation.
One of the most common excuses we hear from clients when they send us their information late is that they are busy. Busy is a word we all use quite commonly almost to a stage that it has lost most of its potency.
We will always be busy when working and spinning a lot of other plates, so it is a matter of priority. If you give your tax affairs some priority, then you will give it the time it deserves when it matters.
Making Tax Digital (MTD) which is going to be introduced in less than two years will mean that you may need to make submissions on a quarterly basis so getting organised now will only help.
We have already started talking to clients and putting together plans on how we can work together to deliver to HMRC without causing stress or anxiety.
If you want to feel calm and confident about your taxes have a look here
If you are already working with us and have any specific questions please do not hesitate to contact your normal manager.