Understandably, procrastination is common when it comes to your tax returns. They aren’t the highlight of everyone’s year.
If you put things off until the last minute, you run the risk of running out of time and incurring the wrath of HMRC.
Here’s why Fairmans thinks you should start your tax returns early.
Tax return deadlines
The upcoming deadline to register for your self-assessment tax return falls on 5 October, shortly followed by the deadline for paper tax returns by midnight on 31 October.
Once you’ve done this, you’ll have until midnight on 31 January 2023 to file your online tax returns and pay the tax you owe to HMRC.
This year, more than 10.2 million people filed their 2020/21 tax returns by the 31 January deadline, with more than 630,000 people filing on the deadline day. 20,947 people waited until the final hour to file their assessment.
By delaying your filing until deadline day, you could end up rushing and submitting it with errors which will mean you face penalties and a possible investigation by HMRC.
Here are some benefits to preparing your accounts with time to spare.
Claim a tax refund earlier
Because the traffic for the HMRC website gets busier the closer it gets to deadline day, you’re better off filing early because if you calculate that HMRC owes you a refund, it’ll be processed quicker Why? There won’t be a backlog of later submissions.
While you can get your tax refund earlier, you’ll still be paying your tax on the same date, regardless of when you file.
Avoid any penalties
As mentioned, anyone who files their tax return late will face penalties from HMRC. If you do miss the deadline, you’ll automatically be issued a penalty of £100. If you miss the deadline by 30 days, you’ll also have to pay 5% of any tax due.
The penalties increase the longer you wait. An assessment which is three months late will incur a daily penalty of £10 a day for up to 90 days.
Not only will you receive a fine for late submission, but if you make any mistakes and they are deemed deliberate, you could face a penalty between 20% and 70% of the extra tax due.
If HMRC believes the mistakes occur due to a lack of reasonable care, you’ll incur a penalty between 0% and 30% of the extra tax due.
Saving time and worry
As the self-assessment deadlines are towards the end of the year, many people may find themselves poring over their numbers when they could spend that time with their families for Christmas.
Rushing to meet a deadline can easily be avoided by setting aside time from your day to sit down and focus on your tax return. Also, starting things early will give you more time to plan your taxes carefully.
There are a number of tax reliefs you may be eligible for throughout the year. If you’ve sold a property or any assets over £6,000. Or perhaps you have expenses you had forgotten about, which you can reclaim from HMRC.
Don’t hang around
At Fairman’s, we believe you should do everything you can to minimise your tax liability while making sure you’re in HMRC’s good books.
If you need have any questions about your self-assessment tax return, Fairman’s is happy to help.
Get in touch with our team today.
