Filing Your Tax Return Early – The Benefits
There are now only 3 months to get your 2017 tax return submitted and despite HMRC writing to taxpayers in April and May, many taxpayers often put off preparing their tax return until the festive winter period. However, this really doesn’t leave very long to file and pay any tax owed before the January deadline and it’s easy to get distracted by the celebrations and parties.
In this blog, we will highlight the main advantages of filing tax returns early and persuade taxpayers not to drag their heels when it comes to dealing with their tax affairs.
You do not have to pay your tax bill any earlier
Even if you file your tax return early with HMRC, you are only obliged to pay any tax liability by the normal due dates.
- 31st January 2018 (balance and first payment on account – if applicable)
- 31st July 2018 (second payment on account – if applicable)
…But refunds are accelerated
If you file your tax return before the filing deadline, you should receive any tax refund you are due with 4-6 weeks, HMRC do not wait until 31st January to refund you. Therefore, if you suspect you have overpaid tax and are due a refund, you should really prepare your tax return as soon as possible so that you can get the cash earning interest in your bank account and not HMRC’s!
Cash flow management
Filing your tax return and calculating any tax liability arising allows you to start saving for the bill and to manage your cash flow. If you pay your tax bill late, HMRC will charge you interest and possibly even a late payment penalty.
If you submit your tax return before 30th December 2017 and your tax liability is under £3,000, you can opt to have your tax liability collected through your tax code. This means it will simply be deducted from say your wages/pension each week/month.
If your affairs have changed this year and you have losses or a significant amount of additional income, then preparing your return early can make a huge difference as it gives you time to consider any tax planning opportunities which could lead to tax savings.
Having plenty of time to prepare your return reduces the risk of errors being made, because you are not rushing to get it finished. It also allows time for you to gather all the bank statements and any other financial documents you may need to complete the return.
Contacting HM Revenue & Customs
Trying to contact HMRC can be pretty difficult at any point during the year, but its even more difficult around the tax return deadline. Avoid leaving your tax affairs until December or Later, just in case you need to speak with the department and are unable to get through.
If you are due a tax refund, you are also likely to experience a longer turnaround time if you file your return during their peak times.
HMRC’s penalty for late tax returns is significantly more than it used to be. If you are late filing your tax return, you will receive an automatic penalty of £100 and if you return is more than three months late, the £10 daily penalties start to accumulate up to a maximum of £900. A penalty of the higher of £300 or 5% of your tax due is then charged if your return is 6 months late and again if it becomes over 12 months late. These penalties are in addition to one another, rather than in place of. This can mean penalties from late tax returns can top over £1,600.
Using an accountant will take away the stress of filing tax returns and leave you to concentrate on running your business. Not only should penalties and interest be avoided, but accountants may be able to save or defer you tax. They can also keep you informed of your tax position and abreast of any changes in the tax regime. Please contact Simon on 01621 772532 or email@example.com for a personalised quote.