Every year, as certain as Christmas, we have the self-assessment tax filing deadline. This deadline is always on 31st January. And every year just like getting organised with your presents and Christmas cards in time for the big day, we also need to get organised with gathering the information, preparing the tax return, and submitting it to HM Revenue & Customs (HMRC).
Yet so many of us will leave it to the last minute. You can complete your tax return soon after 6th April so why don’t we? Is it because you think you have longer to complete the forms? Okay agreed sometimes information takes a while to come through in which case, summer should be the target.
Here we set out twelve reasons why you should complete your tax return early.
- Last minute rush could lead to errors
Humans are not machines, and all humans are susceptible to errors. We all make mistakes when we are put under time pressure so it is possible that if you are completing the tax return late it may contain errors.
Simple errors that could easily be avoided if you allowed yourself or your advisor extra time to go over things at a slower pace and time to reflect.
- More time for queries and concerns
Whether you complete your tax return yourself or ask an accountant like us to do it for you, there are bound to be some queries. It takes time sometimes to go through those queries. If you are doing it yourself, you may want to consult a professional which again will take time.
- Time for tax planning
In a given situation there could be some tax planning opportunity. But this is hard to fulfil unless you leave enough time before the filing deadline.
For example, if you have made a large gift aid contribution in the current tax year, you could carry some or all back to the previous tax year if it saves extra tax or reduces payments on account.
However, if we are completing the tax return on 30th January we are not able to do this due to lack of time to make revisions before the deadline.
Where we prepare the tax returns, we also pick up on areas where more tax efficient ways could be adopted. The closer you leave the return to the deadline, the less time you leave us to do the best for you.
- Repayments due come back sooner
When your profits vary and there is a downward turn or you are normally due a refund, the earlier you complete your tax return, the earlier you get any refunds.
HMRC does not have dedicated dates when they make the repayments. They repay you soon after submission of your return.
If you know you always get a refund, you should always have your return done early.
- Inability to code out tax liabilities
Did you know that you can pay your Self-Assessment tax bill through your PAYE tax code?
Paying via your PAYE code allows you to spread the liability giving you a cash-flow advantage.
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
- Plan for tax liabilities
Sometimes people struggle to find the cash to pay the tax liabilities by the January deadline when not much planning has been done. If you leave it to the last minute to complete your tax return you will have even less time to discharge the liability.
With time you can save, you can move money between your accounts, you can ask for time to pay from HMRC etc.
- HMRC system failures
You will not be surprised to find that HMRC systems sometimes fail. This basically robs us all of the time we have not taken into account. HMRC will not give you extra time if you are not able to log onto their systems to complete your tax return.
- Delays due to incomplete information
From our experience despite sending questionnaires and reference to previous tax years, on many occasions there is omissions of key information. This could be due to oversight or lack of availability of the information.
Either way it creates more delays in an already busy time of the year. On numerous occasions taxpayers would need to go back to request the information from the financial advisors or institutions who are themselves very busy at this time.
- Estimated figures
In case of delays in getting further information, 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. If it transpires that you have underpaid tax, then it could result in interest and penalties.
- Stress and anxiety
We know leaving completing your tax return to the last minute causes stress to a lot of you. In fact, every January we get number of calls from potential clients seeking help because they are so worried and stressed about the looming deadline.
But why wait until January? Call us earlier and we can relieve the stress for you. Give us the information earlier and we can take away that anxiety.
- Potential of penalties
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.
Regular late filing will also bring your case to their attention and therefore may lead to an investigation.
Not forgetting interest and surcharges on late payment of tax.
- Helps you feel in control of your financial position
Everyone wants to be in a position where they have total control of their affairs (tax or otherwise). Everyone also has the potential to be in this position. All you need is to dedicate some time or if that is short appoint an advisor and just give them the information with plenty of time. Doing your tax return on time will make you feel in control, dare we say it would be good for your mental health.
This year we have the added complexity of reporting the various government grants, so it is going to mean more information gathering and reporting, so don’t leave it too late.
If you think completing your tax return is a mere “evil” that you must do, you are likely to push it back at every opportunity. But try looking at it differently. Look at it as an opportunity to take control of your tax affairs early enough so there is a scope for planning and perhaps even saving some tax.
If you need help submitting your tax return, please get in touch. Contact Priya at firstname.lastname@example.org and see how we can help.