As the Self-Assessment tax return deadline of 31st January approaches, some people do delay as much as possible. Some people are often not aware if they need to file a self-assessment tax return or just believe that the deadline is appropriate to file, as it it is still in time. Whilst the main thing is that the tax return is filed before the 31st January, there are several advantages to filing it early. Today we are looking at these reasons:
1. Avoid penalties
The first and foremost 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 31st January. If your tax return is then filed later than 3 months after this, these penalties can escalate and you’ll also be charged interest on late payments.
2. Registration Times
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 become extremely busy as it processes many self-assessments which could cause 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) allowing you to file on time but best to get this sorted no later than the first week of January.
3. Gathering Paperwork
The process of gathering and organising the documents you need to file your self-assessment is the essential part in getting it completed. 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 but should you need to request copies from employers & banks, it may take time to receive.
4. Avoiding the busy period
December is always a busy month for most people and a time you want to be spending with friends and families, not worrying about tax bills. By completing your self-assessment tax return early, you'll be content with the knowledge that you’ve completed your self-assessment before the end-of-year rush and it means you can focus on the new goals in the new year rather than doing paperwork.
5. Payment times
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. By completing this early, you will have more time to pay the tax bills and have a longer period of time to spread this across. If you're due a refund, you could get it even quicker than waiting until the end of the year.
6. Avoiding mistakes
Leaving your self-assessment to the last minute could lead to being in a rush to get it filed and overlooking certain information which may be costly and lead to fines that could have easily been avoided. Filing early allows you longer to review your assessment paperwork to see if anything is missing and can be amended in plenty of time.
7. 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 wanting some extra spending money for your holidays or wanting to decorate the house on a week off.
8. HMRC Queries
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. It also allows more time to correct any missing information and respond to any queries HMRC may have should the return need readdressing.
9. Getting professional help
Filing early allows more time to consult tax professionals, to seek advice and address any complex issues that may arise. The tax season is not just busy for individuals and HMRC but also for professionals as well. Most tax advisers have a large workload when the self-assessment period is coming to an end and capacity in some firms can become limited or even stopped due to the number of returns they are working on. By completing the return early, you're guaranteed a tax professional can help you.
10. Other Support
If you are applying for a loan or a mortgage, have a renewal coming up or you are a sole trader and need finance for your business, 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. By filing early, this information can be provided before your deadline required by your financiers within year and readily available for you in advance of your requirements.
Getting your self-assessment filed early just makes sense. There are numerous advantages, from reducing stress to financial planning opportunities to just simply getting it done for another year. By understanding your tax situation early, you can make informed decisions for future financial planning. Taking this proactive approach not only saves you from the hassle of last-minute rushes but also makes information available sooner for future planning usage and more time to pay your tax bills and solve queries.
If you need any support with your Self-Assessment, don't hesitate to get in touch to see how we can help today!