This article was first published on 23 December 2015 and was last updated on 21 December 2016.
It’s tempting to wait until the January 31 deadline to file your self-assessment tax return, but there are some good reasons to get started early:
1. Avoid an upfront bill by spreading your payments
Taxpayers with small tax bills can secure a cash flow advantage by filing early. However, the option is only available to those in PAYE employment who earned additional income during the year on which they owe tax.
If the tax owed is less than £3000 you can request HMRC to calculate whether the underpaid tax can be taken from your salary or pension in equal instalments.
As per HMRC five thousand taxpayers qualified last year but failed to file in time.
2. Registering with HMRC can get ‘taxing’
If this is your first year filing a return, you will need to register with HMRC for online services. The process can get ‘taxing’ as it takes almost 2 weeks for HMRC to generate a UTR code once you register. If you are start now you can get everything sorted but if you wait until the January rush it might take longer. The registration process should become simple once HMRC rolls out online tax accounts, but for now you have to rely on postal communication.
3. HMRC is not ‘easy’ to get hold of in January
If you called HMRC’s telephone service ‘worse than abysmal’ you’ll most likely be told that you are putting it mildly. A survey carried out in December 2015 found that taxpayers had to wait an average 38 minutes for an answer. This is higher than last year’s average of 18 minutes. Imagine January when millions of taxpayers are trying to get through. Filing now will help you avoid the rush.
4. Get more time to organise the information you need to file
Remember the HMRC publicity ads where newsreader Moira Stuart tells us that tax doesn’t have to be taxing? Well if you leave it to the last minute, you will surely put that to test! It’s also more likely that you will make mistakes in the rush to file before the deadline. Instead of rushing around at the last moment looking for receipts, bank statements, P45s, invoices and expenses, you can take the time now to get all your information together.
5. You won’t overspend on Christmas
Christmas is the most wonderful – and expensive - time of the year and it’s easy to spend more than you have. It’s much better to find out what your tax bill is so you can budget to pay and know what you have left over to play with.
6. Avoid HMRC’s infamous £100 penalty
If you want people to do what you want, fines can be an incredibly useful tool. At least that’s what HMRC thinks. Filing early will help you avoid HMRC’s progressive late-filing penalty system:
- An instant fine of £100 if you miss the January 31 deadline
- A penalty of 5% of tax due if you fail to file within 30 days
- If you don’t file by 30 April, you get a daily penalty of £10 per-day (for up to 90 days)
- A £300 (or 5% of the tax you owe, whichever is greater) fine if you still haven’t filed after another 90 days
- Another £300 (or 5% of the tax you owe, whichever is greater) if you haven’t filed within a year
- More penalties - including up to 100% of the tax owed, if HMRC believed you are deliberately delaying
What this means is you will be looking at a minimum fine of £1,600 if HMRC fails to see your tax return within a year. Penalties are not the best way to spend your hard-earned cash. We think it’s better to pour yourself a cup of coffee and get started.
7. Get professional advice at reasonable rates
What is the one similarity between advisers and airlines? They both get expensive during peak seasons. Enrolling a professional to file on your behalf gets expensive as you move closer to the deadline mostly because existing clients get priority during tax season. Start looking now and you will have a better chance of finding the right professional. They will definitely charge you to file on your behalf, but it is also likely they will cut your bill by far more than they cost.
It might surprise you that close to 870,000 taxpayers missed the deadline last year. If you think you will be one of them, get started now!
If in doubt, call us on 020 8303 1287 or email firstname.lastname@example.org