9 big benefits of getting your tax return done early
Posted on 2nd May 2019
31 January! Perhaps the only date that has the ability to cause any business owner irrational levels of panic and stress…?!
There were 2.6 million people who, on 29 January 2018, still hadn’t filed their return.
That’s 2.6 million people who no doubt spent those last two days before the deadline stressing out and feeling frazzled – and panicking about fines.
But it needn’t be this way! Did you know that there are heaps of benefits to be gained by getting your self-assessment done early including better cashflow, earlier refunds and, in some cases, reductions on payments on account?
Read on to find out exactly how you can benefit by getting your tax return in early – and why we have an extra incentive for you to do so.
1. You don’t actually have to pay your tax until the deadline – no matter how early you file.
You’re forgiven if you’ve avoided doing your tax return until the last minute because you’ve mistakenly thought you’d have to pay your tax bill as soon as you get your self-assessment in. It’s a common misconception which has probably held back thousands of business owners from filing their self-assessments with HMRC early.
Bear in mind, though, that you may need to watch out for payments on account – we’ll cover those later.
2. You have nine months to save up for the tax bill!
One of the biggest reasons to get that self-assessment in sooner rather than later is because you will have a much longer time to save for that dreaded tax bill. We recommend saving a certain percentage of money each month anyway (depending on your earnings), so that if you’re last minute doing your tax return you have the funds set aside to pay.
But it doesn’t always work this way, and there are many business owners left scrimping and saving at the last minute, which can cause huge amounts of unwanted stress – stress that can be easily avoided. Being the month after Christmas, January tends to be a tricky month for money anyway. An unexpectedly large tax bill certainly won’t be helping matters!
3. Avoid hefty penalties – they only add to the bill overall!
As soon as the clock strikes 00:01 on 1 February, you incur a £100 fine if you haven’t filed your self-assessment. This includes all partners filing their tax returns in a partnership as well.
After you’re three months late, your fine will increase by £10 per day (for up to 90 days) starting from 30 April. If you still haven’t filed after another 90 days, so 30 July, you’re fined another £300.
If you still haven’t filed by the next year’s January deadline, you’re charged another £300, or 5% of the tax you owe – whichever figure is greater.
HMRC can also charge additional penalties, including 100% of the tax you owe, if it believes you are intentionally delaying filing your self-assessment.
It really isn’t worth risking being late to the party…
4. The earlier you prepare, the less likely you are to make mistakes.
You need lots and lots of paperwork in order to file your tax return. It isn’t just a case of listing your earnings. You need bank statements, invoices, expenses and various forms in order to successfully file your self-assessment.
Certain banks require pre-ordering and, in some cases, payment for bank statements – and if you are filing in January, you’ll need those statements going back almost two years, which can be trickier to access.
All in all, the earlier you start filing your tax return, the less likely you’ll be to make errors. You will have more time to go over and check that you’ve collated and declared everything accurately, and, of course, you won’t be rushing around come January to extract all the information you need from your bank.
5. Avoid long queues on hold to HMRC.
If you think you may need assistance with filing your tax return, or if you end up having any queries at all about the process, you will need to call HMRC. As you can imagine, January is the busiest month for that department – and you’re likely to end up learning their ‘hold’ music off by heart if you call them in the weeks running up to the deadline.
It’s only set to get worse, unfortunately. HMRC revealed that 14% of customers were left waiting on hold for longer than ten minutes for their call to be answered by an operator between February 2017 and February 2018. Furthermore, HMRC staff answered 94% of calls in 2017, which dropped to 89.5% in 2018. If trends can be relied on, we are predicting that the percentage will drop again in 2019 – so it really is best to start preparing for your self-assessment sooner rather than later, just in case you need any help.
6. If you have a payment on account due by 31 July 2019, you might be able to reduce it!
This is one of the big reasons that you should file your tax return early.
Payments on account are advance payments for your tax liability for the next tax year, and you are legally required to make payments on account if your tax liability is over £1,000 and less than 80% of your tax is deducted at source – i.e. through PAYE. If you believe that your income for the next tax year is going to be lower than the previous year, you can apply to HMRC to reduce the payments on account.
We have a detailed blog post about payments on account here, which we highly recommend you read if you think your income for next year may decrease (or increase).
7. HMRC fulfils tax refunds as soon as you have filed your self-assessment.
It’s true! Within a few weeks of receiving your tax-return, any refunds owed to you from the previous tax year will be processed and paid to you within a few weeks. Nobody ever said no to an extra cash injection into their budget, right? You could use those tax refunds towards paying for your tax bill for the year ahead, meaning less saving and better cashflow.
8. You’ll be able to relax over Christmas and New Year.
How many Christmases and New Years have you spent with that niggling reminder to get your tax return sorted at the back of your mind? It’s the one time of year you’re supposed to be able to let loose, relax and do nothing other than have family time and spoil yourself with all that amazing festive food and drink. Do you really want to be worrying about finding the time in January to get your self-assessment in?
January is always such a hectic month for business owners as it is, and it will do you the world of good to have that week or so of pure relaxation – and indulgence! – before the new year kicks in.
And, perhaps the best reason of all…
9. Your accountant will love you forever! (We really will.)
January is the most stressful, hectic and busy month for us accountants. We understand that everybody is busy, and that life can get in the way, but we absolutely adore our clients when they get their documents over to us well before the January deadline.
If we haven’t received your documents in plenty of time for us to be able to prepare your accounts, our lives are just made even harder in January. If we are late filing your self-assessment because you have not given us the relevant documents, you will be the one getting fined, unfortunately.
Nicola J Sorrell -
Founder | Xero Champion | IR35 Expert
Tagged as: Budget & Tax Rates, FAQ, For - Contractors, For - Property Owners & Landlords, For - Self-Employed, Personal Tax
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