It’s tempting to wait until the 31 January deadline to file your self-assessment tax return, but there are some good reasons to get started early:
Get more time to organise the information you need to file.
Remember the HMRC publicity ads where they tell us that tax doesn’t have to be taxing? Well if you leave it to the last minute, you will surely put that to test! It’s also more likely that you will make mistakes in the rush to file before the deadline. Instead of rushing around at the last moment looking for receipts, bank statements, P45’s, invoices and expenses, you can take the time now to get all your information together.
Cash flow management
Filing your tax return and calculating any tax due early allows you the time to start saving for the bill and to manage your cash flow. If you pay your tax bill late, HMRC will charge you interest and possibly even late payment penalties.
The other benefit of filing early is that if your tax liability is under £3,000 and you submit your tax return by 30th December, you can opt to have your tax liability collected through your tax code. This means it will simply be deducted from say your wages or pension each week/ month.
HMRC is not ‘easy’ to get hold of in January
If you call HMRC’s telephone service ‘worse than abysmal’ you’ll most likely be told that you are putting it mildly. A survey carried out in December 2015 found that taxpayers had to wait an average 38 minutes for an answer. This is higher than last year’s average of 18 minutes. Imagine the situation in January when millions of taxpayers are trying to get through. Filing now will help you avoid the rush.
You won’t overspend on Christmas
Christmas is the most wonderful – and expensive – time of the year and it’s easy to spend more than you have. It’s much better to find out what your tax bill is so you can budget to pay and know what you have left over to play with.
Avoid HMRC’s infamous £100 penalty
If you want people to do what you want, fines can be an incredibly useful tool. At least that’s what HMRC thinks. Filing early will help you avoid HMRC’s progressive late-filing penalty system:
- An instant fine of £100 if you miss the January 31 deadline
- A penalty of 5% of tax due if you fail to file within 30 days
- If you don’t file by 30 April, you get a daily penalty of £10 per-day (for up to 90 days)
- A £300 (or 5% of the tax you owe, whichever is greater) fine if you still haven’t filed after another 90 days
- Another £300 (or 5% of the tax you owe, whichever is greater) if you haven’t filed within a year
- More penalties – including up to 100% of the tax owed, if HMRC believed you are deliberately delaying
What this means is you will be looking at a minimum fine of £1,600 if HMRC fails to see your tax return within a year. Penalties are not the best way to spend your hard-earned cash. We think it’s better to pour yourself a cup of coffee and get started.