You may think that 31 January 2017 is months away but completing your self-assessment tax return is something many people fail to do straight away, and often it is not completed until quite late in the year. There are many reasons why completing your tax return NOW may benefit you;
December and January are accountant’s busiest months
Leaving it until the last minute causes your accountant to be stressed. There are only 38 working days in these 2 months and accountants generally produce 30% of their annual work in 15% of the calendar year. So be gentle with us and bring your books in early, please!
We only guarantee the filing of tax returns when the majority of information is provided to us by the 30 November and we work on a strict first come first served basis, after all, it’s only fair to those who make the effort to get the information to us in a reasonable time.
That said, the only time we don’t manage to file them is where a client turns up less than 5 days before the deadline, unbelievable you may think, but we get at least 10 people a year who do and some of those end up receiving a penalty!
Don’t get caught out by the unknown
If you do not file your tax return information until the last minute, unknown factors such as illness, mislaid information or disruptive weather could add additional stress. Being organised in dealing with your tax affairs avoids the further headache of missed deadlines and HMRC interest and penalties.
One job done
Many people do not like completing their tax return and may put it to one side. Filing now, gives one less thing for you to think about, especially with Christmas coming!
You don’t need to pay the tax owed until the tax deadline
You are only obliged to pay any tax liability by the normal due date of 31 January. You may need to watch out for payments on account though – read more about them below.
Tax refunds are accelerated
Why wait to receive your tax refund? Once you file your tax return, your refund should be processed soon after. That means the money could be sat in your bank account earning interest sooner. If you wait until January, refunds usually take longer to be issued as HMRC staff and systems can be overwhelmed at this time.
Under or over payments of tax can often arise for employees or directors, where HMRC has made errors with their tax codes. Building subcontractors operating under the Construction Industry Scheme are often in a tax refund position.
Reducing your payments on account?
If you complete a tax return, your tax bill is under £1,000 and you don’t pay much tax at source (like PAYE for example), you’ll probably only make one payment of tax a year in January.
However, many sole traders and partners are normally expected to make additional payments in advance (so-called ‘payments on account’) for next year’s tax bill. There are two payments on account to make – one in January and one in July. They are estimated based on this year’s position and will each be half of the current year’s bill.
If your profits are fluctuating, it would be advisable to prepare your tax return as swiftly as possible and preferably before July. That way if the actual figure turns out to be lower, you can revise your July payment on account. This is better for your cashflow!
You have time to plan for any tax owed
Filing your tax return and calculating any tax liability arising, allows you the time to start budgeting and managing you cashflow. If you pay your tax bill late, HMRC will charge you interest and possibly even late payment penalties.
Collecting the right amount of Tax Credits
If you are in receipt of tax credit or benefits, your claim needs to be renewed annually by 31 July, which involves letting the Tax Credit Office know of your income. While you may submit temporary estimates, it is preferable to submit the actual figures as soon as possible to avoid you being over or underpaid until the Tax Credit Office has received your actual figures.
You can use your tax code
The other benefit of filing early is that if you owe less than £3,000 in tax and you submit your tax return by 30 December, you can opt to have your tax liability collected through your tax code. This can be a great option for employees or pensioners, as they can have their tax bill collected from their wages or pension throughout the year easing the pressure on cashflow.
Buy yourself some time
If your affairs have changed this year, then preparing your tax return in good time ensures you have the space to think about any tax planning opportunities available to you. Not rushing to complete your tax return should also reduce the risk of errors being made. It also allows time for bank statements and any other financial documents you may need to file the return to be collated.
If you file your tax return late, you will be issued with an initial, automatic £100 filing penalty. It no longer matters how much tax you had outstanding. If your tax return becomes more than three months late, £10 daily penalties start to accumulate up to a maximum of £900.
A penalty of the higher of £300 or 5% of your tax due is then charged if your return is six months late and again if it becomes over 12 months late. All of these penalties are in addition to one another; rather than in place of. This can mean penalties for late tax returns can top over £1,600!
How we can help
We are available right now to help you complete your tax return early so you know how much tax you need to pay and by when. If you are due a refund, it makes perfect sense to receive this as soon as possible. We work with many self-employed individuals and business owners who have already filed theirs and we are ready to help you too. Call us today on the 01904 691141.