As the Self-Assessment tax return deadline of 31st January approaches, it does fill some people with dread who put it off and delay as much as possible. Whilst the main thing is that the tax return is filed before the 31st of January, there are some advantages to filing it early.
The most obvious reason to complete your self-assessment early is to ensure you do not incur any late filing penalties. A large percentage of individuals leave filing their self-assessment to the last few days, if not hours, before the filing deadline. This can be risky as if you have computer or internet issues, or can’t find all the necessary paperwork, this could delay your submission.
There is a late filing penalty of £100 if your tax return is not filed on, or before, 31 January. If your tax return is then subsequently filed later than 3 months, these penalties can escalate and you’ll also be charged interest on late payments. By filing early, you’ll eliminate this risk.
Take the time to register
Submitting your self-assessment tax return is not just done with a click of a button. You must register first before you can submit a return. During peak periods (and the nearer to January you get), HMRC can be overwhelmed, causing delays and difficulties in getting assistance. If this is done off-peak the process can take about two weeks. Once registered, you will receive a unique taxpayer reference (UTR) by post.
Getting the paperwork ready
The process of gathering and organising the documents you need to file your self-assessment can be stressful. You may require P45s, P60s, expenses, invoices, bank statements, and more. If you leave your tax return until January to file, you will need to ensure you have collated all records from the previous tax year. If you need to request copies from employers/banks it may take time to receive hence better to file as earliest as possible.
Peace of mind
December is always a hectic and busy month, and coupled with new year, time can soon get away form us. The knowledge that you’ve completed your self-assessment before the end-of-year rush will mean you can start your year focusing on other areas of your business rather than doing paperwork.
It doesn’t affect payment
Submitting your self-assessment early does not mean you’ll have to pay any tax due early too. Any tax payable in that tax year will need to be paid on, or before, the 31st January regardless of when the tax return was actually submitted.
Leaving it to the last minute could lead to missing information which may be costly and lead to fines that could have easily been avoided. Filing early allows you the luxury of time to review your return thoroughly, and ensures you have time to gather the necessary documents.
Avoid the backlog
If you’re due a tax refund, filing early means you could receive it sooner. The earlier you file, the quicker you might get your refund, which can be especially helpful if you’re counting on that money.
There are some cases where you will need to contact HMRC if you have a query. Starting your self-assessment early will limit the amount of time you spend in annoying phone queues, as the nearer to the deadline it is, there will inevitably be long queues on the phone due to the volume of people trying to do the same thing.
Opportunity for professional help
Filing early allows more time to consult tax professionals, seek advice, and address any complex issues that may arise.
Helps for loans
If you are applying for a loan or a mortgage you will often be asked for proof of income. For those that are self-employed, you are required to provide your SA302 together with a supporting tax year overview. This is only available from HMRC once your self-assessment has been submitted.
Getting your self-assessment filed early just makes sense. There are numerous advantages, from reducing stress to financial planning opportunities. By understanding your tax situation early, you can make informed decisions for future financial planning. Whether it’s investments, savings, or business strategies, knowing your tax position is crucial for making these choices. Taking this proactive approach not only saves you from the hassle of last-minute rushes but also sets a positive tone for your financial year.
If you want to need any advice or guidance with your Self-Assessment, get in touch with a member of the team.