Exactly Why You Should File Your Self-Assessment Early
We know it feels like the 31st of January is a long way away, but this date can creep up on you quickly. And you don’t want to be on the wrong side of HMRC or facing fines or penalties.
It’s rare that anyone wants to think about filing their tax return, but it’s something that we should consider as early as possible. While the 31st of January seems like a long way away, this date can creep up on you in no time.
At Osome, we help a lot of small businesses and sole traders with their accounting and often self-assessment is the last thing our clients want to talk about. This is why it’s our job to explain the intricacies of filing self-assessment tax returns and try to reduce the anxiety people feel about the subject.
So, a big part of our initial advice is to always be organised and take the early tax route. Here’s our top five reasons to file early.
Registration Takes Time
You have to register with HMRC before you can file your tax return. This is a straight forward process, but if can take a couple of weeks for you to receive your Unique Taxpayer Reference (UTR) and your PIN. For security reasons these have to been sent to you separately, and you’ll need both before you can access the online services.
You might also have to bring together other documents that you hadn’t been anticipating such as expenses, bank statements, invoices, P60s and P45s. This could take more time to collate and put you under pressure as the deadline nears.
And the couple of weeks it could take to get your UTR and PIN? That’s not during peak times. You can double it if you leave it to January.
January Is a Busy Time for HMRC
This is the month where that January 31st tax deadline that seemed so far away, suddenly doesn’t just creep up, but leaps on everyone and we all feel we should be first in the queue to be served. But the reality is that HMRC’s call centre is stretched to capacity at the best of times, so in January you can expect delays at every turn.
According to HMRC’s own 2021 data, the average waiting time for a customer on the phone in January is almost fourteen minutes. So the more you can get early tax filing into your head, the less painful hold music you’ll have to endure.
Manage Your Cash Flow
What keeps your cash flow positive?
We've put together a list of eight actionable ways you can manage your cash flow and make more profitable decisions for your business.
One of the battles self-employed Sole Traders and small businesses face every month is keeping cash flow consistent. No one wants the roller coaster of having to just scrape through financially on those lean months or get hit by a large tax bill when you least need it.
Early Self-Assessment allows you to plan your tax bill and insert it into a period that makes sense for your finances. By being organised, you may be able to put aside some money for a few months so it doesn’t sting so much when you make the payment.
Avoid Making Mistakes and Getting Penalties
A slap on the wrist from HMRC for filing late will cost you — even if you file only one day late. The fines can stack up, for example:
- 1 day late = £100 fine
- More than 3 months late = £10 daily penalty for up to 90 days (max. £900), plus the above initial £100 fine
- More than 6 months late = 5% of tax due or £300 (whichever is greater), plus the above penalties
- More than 12 months late = An additional 5% of tax due or £300 (whichever is greater), plus the above penalties. In the most serious cases, you may be fined 100% of the tax due.
And if you leave it to the last minute you’re more likely to make mistakes. This could mean you have to resubmit which could cause you to miss the deadline and, yes, be fined.
It Could Be Good News!
Let’s not just be pessimistic when it comes to your tax return. The flip side of the coin is that you might be entitled to a refund!
The amount of tax you owe will vary from year to year and if you overpaid, HMRC will refund you based on the tax return you submitted. It might take a few weeks to process the refund, but the sooner you submit your tax return the sooner it will arrive.
Do It Early
The bottom line is very simple: get your self-assessment tax return in well ahead of time and you’ll save yourself a lot of stress. HMRC don’t want to fine you, they want to help you, but they have to follow rules and sometimes tax can be confusing to the uninitiated.
If any of this seems overwhelming, or you just want an easy solution to helping you with all of your accounting online, we’d love to chat.
