Nine months from the end of the tax year seems like a pretty good excuse to put your feet up and ignore those tax returns. But blink and you’ll miss it – January 31st is looming, and the last thing you want to do is risk delays.
If you’re self-employed, you’ll know by now that either you or your trusted accountant has until the end of January to get those returns in. (Sadly, paying the final sum is up to you.) If you have an accountant or run a limited company, your accountant will process the paperwork for you – but you need to give them that helping hand.
It’s been a difficult year and the last thing you need is to be drowning in receipts. But take it from someone who’s used to getting these receipts on deadline day. In fact, take it from the Scouts: always be prepared.
Short of saving you tearing your hair out, getting your tax return in before January 31st could also save you money.
Benefits of getting your self-assessment in early
First things first – you can still pay the self-assessment on January 31st. In theory, you could fill out the paperwork on April 6th and not pay until nine months later. If you’re that organised, my work here is done.
For the mere mortals among us – there are multiple benefits to getting the admin sorted now.
Don’t delay those rebates
You’d be forgiven for thinking that the HMRC will hound you when you owe them money, but twiddle their thumbs when it’s the other way around. The truth is that tax rebates can take anywhere from days up to 12 weeks to process.
Keep onside, however, and you’ll get your rebates faster. If you hand in your self-assessment late, you can expect any rebates the HMRC owes you to be equally as late, if not more. So, hand it in today and look out for that little bonus.
Never underestimate the power of red tape
If only it were as simple as logging into your HMRC account and filling out the forms. Ideally, you should give yourself a few weeks to gather all the necessary paperwork, either to support your forms or pass on to your accountant.
Remember that banks and suppliers may be slow to respond. If you’re waiting for bank statements, invoices or any other kind of paperwork, this could delay your calculations. And if we delay those calculations too long…
You could face a fine!
There’s a reason why the HMRC hammers you to get your self-assessment returns in early. It’s to save you money. (It probably makes their lives easier too, but let’s focus on you.) Don’t forget – if your tax return is between one day and three months late, you could be liable to pay a £100 fine.
Leave it longer and the fines start creeping up – the HMRC will add interest and more penalties for getting your return in late. For example, let’s say you have an old bill from the 2014/15 year for £6,000. You’d be liable to pay:
£1,600 for sending the return late
£6,000 for the tax bill
£1,120.74 for interest
£900 in penalties.
That comes to £9,620.74 – adding more than half of your original bill! Let’s hope you’d not leave an old bill from six years ago lying around, but it’s something to think about. The HMRC can be quite lenient if you’re not able to pay right away, but it’s best to be organised.
A word of caution
As you can see here, you can save a lot of headaches by getting your house in order – which is where I come in. If nothing else, you’ll have a clear view of your upcoming bill for January, and your ‘payments on account’. (This is a second payment which you are charged in July if you make more than £1,000 in profit – the good news is that it will come reduce the next year’s payment!)
If you still need to pay your return this year, take note. The government gave us a much needed ‘break’ from our July payments on account this year. That means they will be added onto your January bill, so don’t get caught out.
Keep us accountant folk happy and get your paperwork in now – it’ll be one less thing to worry about in 2020.
Update: 19 April 2021
Check out my new course, Self Assessment Success which will teach you how to do your tax return and save you money in the long run! The course starts 5 May 2021.