You might think it’s unusual that, almost immediately after the Budget and with the current tax year almost over, we’re recommending that you submit your tax return.
However, the facts speak for themselves – filing your Self Assessment just short of the deadline is a dangerous game. HMRC is under pressure, you may not have the documents you need, and it doesn’t exactly leave you much time to save for your tax bill.
Filing in April, on the other hand, solves all of the above and steers you clear of any late-filing penalties. But don’t just take our word for it. We’ve asked Mike Parkes from GoSimpleTax to explain the benefits of filing early in full detail below, along with details on how to claim your member discount.
Give yourself time
Although it occurs every year, almost a million people missed the Self Assessment tax return deadline for 2018-2019. More than 700,000 submitted on deadline day, 31 January 2020. Most of them haven’t forgotten, they’ve just underestimated the time it takes to register.
HMRC’s customer service team is already run off their feet in January, and supplying you with a UTR code and registering you for their online services isn’t a quick job. They send you the activation code you need to log on via post, which also takes some time. And you can’t skip any stage of the enrollment.
What’s more, if you also want to reduce your tax liability through allowances, you also need to find all of the information and paperwork necessary. Expenses, invoices, receipts, and bank statements are hard to track if you’re submitting in January, almost two years after the tax year you’re filing for.
Avoid the rush
HMRC aren’t the only ones exhausted in the lead-up to the Self Assessment deadline. The postal service will also be struggling under the weight of the holiday-season rush – as will your accountants before they enter their busiest period. By being proactive and filing when last year’s accounts are still relatively fresh in your mind, you can avoid a lot of unnecessary stress.
As an on-demand driver, your time is money, quite literally. Wouldn’t you rather be earning money with the energy and time you’d otherwise waste chasing down accountants and pulling together the paperwork in the last minute?
Also, the anxiety of leaving your tax bill to the very last second can impact your productivity and drain your resources. Devoting yourself to your taxes in January – a slow time for most individuals anyway – can harm your motivation and finances.
Manage your cash flow
Filing early does have its financial perks. For example, if you’d overpaid in your previous year, HMRC will notify you and will return what they owe you within a few weeks.
An early tax bill isn’t such a bad thing for the rest of us, either. Your cash flow will be better-informed for the new tax year, and you can allocate resources with more confidence.
Remember, your tax bill isn’t due until 31 January of the following year. Filing early just gives you that visibility over what you owe. Effectively, all you’re doing is giving yourself the heads-up to allow for better budgeting.
Finally, the most important benefit: if you get your Self Assessment tax return out of the way, you avoid the late-filing penalties. No, there’s not just one.
Firstly, you’ll receive an instant £100 fine if you miss the 31 January deadline. For the next three months, if you still haven’t filed, you’ll be charged £10 a day for up to 90 days. After that, you’ll face an additional £300 fine (or 5% of the tax you owe – whichever is greater). And there’s more: if you still haven’t filed within a year, they’ll you’ll be issue this last fine once more. At this point, HMRC may believe you’re intentionally delaying your filing and they may charge you an additional 100% of the owed tax.