With the cold months over and summer in sight, self-assessment tax return season is probably the last thing on your mind.
That makes sense. The end of the 2020/21 tax year wasn’t that long ago, and there’s a good number of months before the 31 January deadline for online submissions. Plenty of time to relax before you even think about getting your paperwork together and logging into the Government Gateway.
But before you drift off into dreams of holiday planning, just hear us out on this one – we think you should be getting your self-assessment tax returns done now. We have talked about this subject before here is last years blog why do your self-assessment tax return early, with the right planning there is no need to be doing your tax return at the last minute.
It’s much less stressful
Every year, HMRC releases statistics on the number of people who filed their tax returns on time, those who didn’t, and those who cut it fine by sending theirs in on deadline day.
This year was a little different to usual, as COVID-19 disruption meant that the usual deadline was waived. But on 31 January 2020, before the pandemic, 702,171 people filed their tax returns on the last possible day, and 958,296 missed the deadline altogether.
Much is also made of the number of people who file their returns over Christmas – some 20,200 people on Christmas Eve in 2020, with a peak hour between 11:00 and 11:59 – although this might not necessarily be such a tragedy for people who don’t celebrate the holiday, aren’t that interested in it, or just wanted to make the most of a quiet moment over the break.
But let’s face it, if you do celebrate Christmas and couldn’t spend it with your friends and family in 2020, you’re probably going to want to enjoy it this year without an incomplete tax return weighing on your mind.
Plus, if this is your first time filing a self-assessment tax return or you didn’t do one last year, this also gives you plenty of time to register before the 5 October deadline.
COVID19 support just made tax return more complex
Some of you may have received self-employed income support grants (SEISS), or coronavirus job retention (CJRS) scheme payments in the last tax year. If so, your tax return just got a little bit more difficult to complete, so you’ll definitely not want to leave it until the last minute, and risk calling the HMRC for help!
Under the rules of these grants, they need to be disclosed on the self-assessment tax returns separately so that the HMRC can undertake checks on the validity of claims.
With many being eligible for tax refunds this tax year due to the downturn caused by the pandemic, the claims with either of these grants included are being stuck in compliance checks, and as a consequence refunds are taking longer to process.
Couple that with the vast numbers of taxpayers who leave their tax returns until near the deadline, this delay is only going to get longer. With cash flow concerns being even more paramount this year, it’s important to get any tax refunds swiftly.
You’ll have more time to budget
Extra information can only be a good thing, especially when it comes to budgeting and planning.
By filing your tax return early, you’ll be able to find out what you owe early. With that in mind, you can save up and reduce any cash flow impacts on your business.
On the flip side, it might even be good news. If you’ve overpaid tax in the past year, you could be owed a refund from HMRC.
This is particularly likely to be the case if you’re both employed and self-employed, or if you worked less than a complete tax year and haven’t used up your full personal allowance as a result.
Getting your return done now means quicker access to that money, and more time to decide how to spend it.
You might be able to save money
Aside from the potential for savings through cashflow efficiencies, filing early means you’re also removing all risk of missing the deadline and incurring penalties as a result.
Those fines start at £100 if your return is one day late, and they increase the longer you leave it. With interest on top, that can really add up.
Plus, we’ll be completely honest here. Completing self-assessment early is easier for you, but it’s so much easier for us, too. It means we can go through each of our clients’ returns carefully and efficiently, without a last-minute panic.
If you do leave it until later in the year, we’ll still complete your tax return to our usual high standards of accuracy, but because of the extra pressure that puts on our team, our fees increase the closer to the deadline you get.
Like us, HMRC’s also busy in January, so it can also be hard to get hold of their support lines if you need to.
By getting your tax return out of the way now, you can get as much support as you need at a relaxed pace, and avoid our surge pricing too. What’s not to like?
Upcoming deadlines for self-assessment
Now you’re (hopefully) convinced about the benefits of filing an early tax return, we’ll finish with a few reminders for self-assessment taxpayers.
Firstly, if you make payments on account, your second one is coming up on 31 July 2021.
Secondly, and it’s worth repeating if you’re new to self-assessment the deadline for registering with HMRC is on 5 October 2021.
Then there’s the deadline for 2020/21 paper tax returns at midnight on 31 October 2021, before the online deadline for tax returns, balancing payments and first payments on account, on 31 January 2022.
Finally, this deadline is a while off but well worth planning for now – Making Tax Digital (MTD) is set to extend to self-assessment from 2023. If you don’t know what that is, now’s the time to find out, and to get set up with MTD-compatible accounting software such as Xero.
If you need a hand preparing for any of these deadlines or want to know more, get in touch and we’ll be happy to help.