Hundreds and thousands of people file their tax returns at the last minute every year. But filing it early could save you a lot of money and stress. You should already have everything you need to file your tax return. If you file a self-assessment return and you are employed, your employer should have sent you your P60 by now – the last piece of the puzzle – so there really is no reason to wait around. Some 700,000 people submitted their tax returns on the deadline day last tax year, with 26,562 people filing in the final hour. Avoid the mad rush at the start of 2021 by filing yours now, for the following reasons…
Reason 1: You’ll have more time to put together all your information
Rather than rushing at the end to find receipts, you can take the time now to gather together your financial information. The more time you give yourself to gather all the information you need to prepare your tax return, the better. This will reduce the risk of errors and mistakes being made, which may not only be costly but could also mean you end up paying more tax than you need to and having to re-submit your tax return.
one tip is to stay organised and download bank statements in CSV format on a monthly basis and store them. This is worth doing because on January 31st mistakes can very easily occur so it’s better to notice them sooner rather than later. so file that return early and overcome and bank statement-related SNAFUS. Depending on your bank and the type of account you have, you may need to order historic statements either in a digital or paper format. If you bank with a particularly archaic financial institution, you may also have to pay for them. File early to avoid issues related to requesting information from the bank!
All of this may lead you to one inevitable conclusion: it makes sense to file early. Still not convinced? Let’s take a look at the other dangers if you leave it all to the last minute.
Reason 2: It takes time to register
If this is your first year filing a return, you will need to register with HMRC to file your returns online if you have not already. HMRC will send you a PIN code, which could take seven working days to arrive – so it is worth getting that sorted now!
Reason 3: You’ll avoid penalties
Speaking of penalties, filing early will obviously give you time to address any problems and avoid HMRC’s late filing penalties. For the uninitiated, those penalties are:
- A £100 instant fine if you miss the January 31st deadline
- £10-per-day fines (for up to 90 days) if you have not filed by 30th April
- A £300 fine (or 5% of the tax you owe – whichever is greater) if you still haven’t filed after another 90 days
- Another £300 fine (or 5% of the tax you owe – whichever is greater) if you still haven’t filed within a year
- Additional penalties – including up to 100% of owed tax – if HMRC believes you are intentionally delaying your filing.
There were some changes to the rules and fines in January 2021 because of the Coronavirus pandemic, but they are unlikely to be repeated next January.
Reason 4: You’ll have more time to budget
If your tax bill is higher than you expected, it is better to know as soon as possible so you can budget to pay your tax bill. You can file early and still pay closer to the deadline – the money just needs to be with HMRC by the 31st January deadline.
The sooner you complete your self-assessment, the sooner you will get your tax bill. That means you know exactly how much you need to set aside each month to make sure you can afford it.
If you file an online tax return and have earnings taxed under PAYE (from other employment), you can choose to pay your self-assessment tax month by month via PAYE too. You must have a tax bill of less than £3,000 to be eligible, though. The deadline for this is not actually until 30 December 2020, but that is still a month earlier than the 31 January 2021 deadline for filing the return online.
Reason 5: Your Christmas won’t be ruined
Filing early will mean you can avoid the mid-January dread felt by many freelancers and contractors and enjoy a well-earned worry-free rest over the festive period. HMRC even used this angle in its most recent advertising push, promising taxpayers they would “find inner peace” by filing on time.
So, do not leave it to the last minute, get on top of things and file early! If you are a client of Outsourced ACC, please feel free to email information for 2020/21 Tax Return to firstname.lastname@example.org or pop into our friendly office in Beckenham.
Get in touch on 0208 249 6007 if you have any questions or concerns, we are always happy to help!
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Written By Irina Strucere