Every year, many individuals wait till the last second to file their self-assessment returns. Despite this trend, there are several reasons to submit your taxes early.
There are certain advantages to filing early for individuals with a balance due.
More and more individuals realise that it makes sense to file their tax return earlier as deadlines draw near and penalties rise.
Whether it be the advantage of tax planning or getting a tax refund earlier than expected, we’ve compiled our top 5 benefits of filing your self-assessment early.
Table of contents
5 reasons to be a Self Assessment early bird
- Five reasons to be a Self Assessment early bird
- How to pay your tax?
- Penalties for filing a late self-assessment tax return
- Final thoughts
Five reasons to be a Self Assessment early bird
1. You’ll have access to bank records
Many online banking services show only the last 12 to 18 months of transactions.
Suppose you wait until January before filing the self-assessment. In that case, some of the bank transaction records you will need could be up to 21 months old, making it difficult to access the appropriate information online.
You can avoid searching through heaps of paper bank statements or visiting your bank branch to request historical transaction data by submitting a self-assessment early when all the necessary transaction history is accessible at the click of a button.
2. You’ll have the correct receipts.
Even though it probably goes without saying: the longer you wait to file your Self-Assessment Tax Return, the more likely you will lose, overlook, or unintentionally discard necessary invoices and receipts. Not only will this make the already stressful process of filing your tax return even more difficult, but if you can’t find the necessary receipts, you might not be able to claim all of the allowable expenses.
By completing your tax return earlier, you will have fewer invoices to sort through, less time to overlook them and to miss something important.
3. You’ll know how much you owe
Many business owners are reasonably aware of how much income tax they will owe when they do come to file their self-assessment.
But some people experience a bit of a shock when they calculate how much tax they owe because they may not have maintained such strict control over the “funds in” and “funds out” of their businesses.
By completing your self-assessment early, you will have more time to manage income tax liabilities and save more if you haven’t kept aside enough to cover the taxes.
4. You’ll receive quicker tax refunds
Have you ever experienced the unsettling feeling that comes with waiting weeks and weeks for your tax refund to land in the mail? When you submit your return at the last minute, you’re always nervous since you know that HMRC will probably take a while to process your refund because it will likely be one of many that must be processed.
However, the truth is that you’ll get your refund faster if you file your taxes earlier because HMRC is less busy processing returns. Unlike the deadline for filing a return, HMRC doesn’t wait until 31 January to refund you.
5. You’re less likely to make a mistake
You can avoid rushing your tax return by giving yourself additional time, which may result in careless errors. Before sending the information to HMRC, verify it twice or three times to prevent any mistakes.
It’s essential to ensure your tax return is correct, as HMRC can impose fines for errors. The penalties are dependent on the amount of tax you owe and are determined by the type of error HMRC deems you to have committed:
- 0% charge: You’ve taken “reasonable care” to complete your tax return as needed.
- 0%-30% charge: You’ve been irresponsible and made mistakes
- 20%-70% charge: You’ve knowingly underestimated your tax
- 30%-100% charge: You intentionally underestimated your tax and made an effort to conceal it.
Make sure you have all you need to calculate the tax due accurately before beginning the self-assessment procedure. Essential documents and details include your UTR number, P60, P45, student loan statement, national insurance number, pension statement, invoices and receipts.
How to pay your tax?
When filing online, HMRC will inform you of your tax liability after you have completed your Self Assessment return.
Each of the two payments on account is half your previous year’s tax bill. After making payments on account, any outstanding tax must be paid by midnight on 31 January of the following year.
If you’re paying your tax bill with a debit card, wait two business days for the transaction to clear. If you wish to pay more regularly throughout the financial year – like weekly or monthly – you can use HMRC’s budget payment plan, but only if your prior payments are up to date and you are paying in advance.
Penalties for filing a late self-assessment tax return
You’ll usually pay the fine if you file or make a payment after the deadline. If you have a reasonable excuse, you can appeal the penalty.
If your tax return or tax bill payment is up to three months late, you can expect a £100 fine. You’ll have to pay extra if it is later, and HMRC will add interest to your late payments.
After the first three months, there is a more complicated system of penalties depending on daily fines and tax geared penalties. HMRC also offers a tool for estimating penalties.
It’s critical to understand the data required to file a tax return.
You can significantly reduce stress when submitting a self-assessment tax return by organising receipts and scheduling time ahead of deadlines.
Ultimately, there are many benefits to filing your tax return early. Similarly, rushing your tax return may lead to errors that could result in penalties. Giving yourself plenty of time means you won’t have to rush to gather all the necessary information required to complete the self-assessment tax return.