3 reasons to file your self-assessment early

3 reasons to file your self-assessment early

More than 63,500 people filed their 2020-2021 self-assessment tax return on the first day of the tax year, HMRC has revealed.

Figures show that the number of people filing on the first day has almost tripled in the last 5 tax years.

Sending in your self-assessment tax return maybe a job you would rather leave. But the last thing  you want is to be doing is pulling it together in December or January!

Your next return is for 2020-2021, which takes into account your business income between 6 April 2020 and 5 April 2021. Even if you were hit by the pandemic and made lost money, you must still file your tax return.

3 reasons to file self-assessment early

There are lots of reasons why filing early is better for you.

You can plan for your tax bill

Leaving your return until Christmas not only adds to your workload it adds to your stress. Finding out what you owe during the festive season will add even more stress.

By filing your self-assessment tax return early, you will be able to plan your payment. There is plenty of time to save up or make arrangements. 

Remember that no matter when you file your return, don’t have to make the first payment until 31 January. So the early you file, the more time you have to save.

Less chance of making a mistake

It is important that your tax return and any money you owe is submitted on time. HMRC can impose fines if you make careless or purposely misleading mistakes.

Making a careless mistake is easier when you are in rush. If you leave your return until the third week of January next year, there’s more chance of that happening.

The penalties are based on the amount of tax you owe and depend on the kind of mistake HMRC says you made:

  • 0% charge: You have taken ‘reasonable care’ to fill out your tax return correctly
  • 0%-30% charge: You have been careless and made mistakes
  • 20%-70% charge: You deliberately underestimated your tax. 
  • 30%-100% charge: You deliberately underestimated your tax and tried to conceal it.

The best way to ensure mistakes aren’t made is by employing the services of an accountant. They should find your errors before HMRC does!

You won’t be fined for being late

Being early also means you won’t be given a fine for late filing. Even if you’re just one day late, there is a penalty of £100!

If money is already tight, the last thing you want to do is face finding money to pay avoidable fines. Here are the penalties and fines HMRC imposes for late filing:

  • One day late: £100 
  • Up to three months late: additional £10 for each day late (capped at 90 days) 
  • An additional £300 or 5% of the total tax due – whichever is bigger – for being up to six months late 
  • Up to 12 months late: an additional £300 or 5% of the total tax due – whichever is bigger

While it may appear you’re doing the taxman a favour by filing your self-assessment tax return early, the reality is you’re doing yourself one.

If you have little time, using an accountant makes a lot of sense. To find out more about self-assessment contact us today.