They say nothing in life is certain except for death and taxes. There’s some truth to that as there’s no getting out of it if HMRC sends you a self-assessment tax return.
Many of us are legally obliged to file our tax returns, and yet, many of us are guilty of putting it off until the last minute.
As accountants who offer self-assessment services, we know that’s not the best way to approach your tax return. Here are just four reasons why you should get your tax return done now.
It can take longer than you expect
A mistake people make all the time is underestimating how much time something will take them, whether that’s getting in a report to their boss by a certain time or getting to the pub by 8pm. We all do it.
The same is true for tax returns. They take time and effort to prepare, and need to be done accurately, so you can avoid overpaying in tax or getting an inquiring letter from HMRC.
Don’t pile pressure onto yourself by leaving it to the last minute when your attention needs to be focused on your business or spending Christmas with your family.
Avoiding pressure also means you’re also far less likely to make mistakes and miss the filing deadline.
You’ll avoid penalties
The deadline for paper self-assessment tax returns for the 2020/21 tax year is on or before midnight 31 October 2021, or 31 January 2022 if you’re filing electronically.
Missing that will result in an instant £100 instant fine – a significant amount of money for failing to fill out some paperwork or a digital form.
If you are filing digitally and still haven’t filed your return by 30 April, you’ll then be fined £10 for every single day your return isn’t filed, for up to 90 days.
After this point, HMRC will demand a £300 fine or an extra 5% of the tax you owe – whichever is greater – if you still haven’t paid.
Additional penalties, including up to 100% of owed tax, could be applied if HMRC believes you are intentionally delaying your filing.
Of course, late filing won’t automatically mean you have to pay twice what you owe HMRC, but keep that first fine in mind – an instant £100 penalty if you miss your deadline.
You might not be able to file digitally
Almost everyone files their self-assessment tax returns online nowadays, given how convenient it is to do so. And the 31 January deadline, compared to the 31 October one for paper-filers, gives you more time to sort them.
However, if you’re a non-UK resident, you won’t be able to file digitally because HMRC’s free digital self-assessment service doesn’t include the pages necessary to indicate you’re a non-UK resident.
To file online as non-resident, commercial software is needed, so you must check if you’re a UK-resident if you’re unsure of your status.
If you aren’t and haven’t completed your tax return, you absolutely should get started on it today to beat the 31 October paper deadline.
It gives you time to review allowance and reliefs
A major reason you should get your tax return now is so you don’t miss out on a single opportunity to save some cash for yourself, your family or your business.
For instance, if you’re a sole trader, you can deduct some of your business’s running costs from your taxable profit as long as they’re allowable expenses in the eyes of HMRC.
To count as an allowable expense, an asset or purchase must be used entirely for business purposes, and can range from office equipment to training courses. You need to be thorough and accurate on your return to deduct every eligible expense from your tax bill, therefore.
Limited liability company directors will also benefit from starting their self-assessment early by making sure their tax planning is as healthy for their wallet as possible.
Read our previous blog for more information about this, but just know that it takes time to make sure you’re not paying more in tax than you should be by taking advantage of allowances and splitting your income between a salary, dividends and pension contributions.
At HW Associates, we can take care of your tax return and always keep an eye out for all relevant tax reliefs and allowances, all the while ensuring you never miss a self-assessment deadline again.
Contact us for more information.