DMS Posts

Self-Assessment tax return: less fuss if you file early

We know that just the words ‘self-assessment tax return’ uttered in succession can induce feelings of trepidation in those required to file one. This often leads to a reluctance to tackle the task at hand, head-on.

Though the 31st January deadline remains a constant in the tax calendar, procrastination still sees thousands of taxpayers filing their return at the last minute, year in and year out.

As the festive period comes and goes, they watch the days in January tick past until their time is almost up and they eventually conclude that they can’t avoid the inevitable any longer.

If this sounds familiar, revel only briefly in the fact that you are not alone. In January 2018, 2.6 million people had still not filed their return by the 29th January. Over 6% of all returns due were filed in the final 24-hour window – yet, some 745,588 people still missed the deadline completely.

The truth of the matter is, it’s far better to file early than to risk finding yourself in tax-related trouble.

It’s all in the timing…

“Time is what we want most, but what we use worst.”
― William Penn

Preparation and submission of your self-assessment tax return takes time; whether it’s registering for self-assessment (if it’s your first time), sourcing and assembling all the necessary documentation or prospective tax planning.

Be aware of how much of it you have at your disposal and, more importantly, use it wisely. Doing so will undoubtedly give rise to a better outcome than if you find yourself still agonising over the details fifteen minutes before the deadline.

Procrastination = penalties

“You may delay, but time will not.”
― Benjamin Franklin

No matter how long you spend procrastinating, the self-assessment tax return deadline will still arrive at midnight on 31st January 2019, as it supposed to. If, by this time, you have not filed your return, you will unfortunately incur penalties.

The initial penalty for failing to meet the 31st January deadline is £100. After this point, the penalties increase steadily depending on the amount of time that has passed since the deadline.

If HMRC believe you are deliberately neglecting your responsibilities, you may be liable for a fine amounting to 100% of the tax owed.

It’s less fuss if you file early…

“Better three hours too soon than one minute too late.”
― William Shakespeare

Take Shakespeare’s advice and get the ball rolling sooner rather than later. Taking your time, whilst time is on your side, and filing ahead of the deadline can eliminate the frantic fussing and fretting you might otherwise experience if you leave it too late.

Aside from the obvious advantages of being proactive and filing ahead of the deadline, such as avoiding penalties, improved tax planning, time to prepare thoroughly and the ability to budget, it can also give you peace of mind. This can be particularly beneficial during the festive period which, for some businesses, can be their busiest time.

What happens if… I leave my self-assessment tax return until the last minute?

No matter when they are uttered, the words ‘self-assessment tax return’ can often induce feelings of fear and unease in those required to file one. This lack of enthusiasm then often leads to a lot of ‘foot-dragging’.

Though the 31st January deadline remains a constant in the tax calendar, procrastination still sees thousands of taxpayers cutting it fine every year. As Christmas comes and goes, they watch the days in January tick past until their time is almost up and they realise that they can’t avoid the inevitable any longer.

If this sounds familiar, revel only briefly in the fact that you are not alone. In January 2018, 2.6 million people had still not filed their return by the 29th January. Over 6% of all returns due were filed in the final 24-hour window – yet, some 745,588 people still missed the deadline completely.[1]

The truth of the matter is, it’s far better to file early than to risk finding yourself in tax-related trouble. If you still need convincing, then read on…

To file or not to file: How do I know if I’m eligible?

You will need to file a tax return if, in the last tax year:

  • your income from self-employment was more than £1,000
  • you received more than £2,500 from renting out property
  • you received more than £2,500 in other untaxed income
  • your income from savings or investments was £10,000 or more before tax
  • your income from dividends from shares was £10,000 or more before tax
  • you made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax
  • you were a company director – unless it was for a non-profit organisation and you did not get any pay or benefits (e.g. company car)
  • your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit
  • you had taxable income from abroad or if you lived abroad and had a UK income
  • your taxable income exceeded £100,000
  • you were a trustee of a trust or registered pension scheme
  • you had a P800 from HMRC saying you did not pay enough tax last year – and you did not pay what you owe through your tax code or with a voluntary payment
  • your State Pension was more than your Personal Allowance and was your only source of income – unless you started getting your pension on or after 6 April 2016

A comprehensive list of eligibility criteria can be found on the Government website here. HMRC will contact you if they deem that you need to file a tax return; if they haven’t and you think you may be eligible, you should contact them at the earliest opportunity. Likewise, if HMRC have asked you to file a return but you don’t think it applies to you, you should notify them as soon as possible.

Time is of the essence

Preparing your tax return takes time and so you need to ensure that you allow yourself plenty of it.

The first thing to consider is whether you are already registered for self-assessment. If you haven’t filed a return before today, the likelihood is that you will need to register – a process that can take up to two weeks, if not longer.

Once this is done and dusted, the next challenge you face is gathering together all the paperwork required to prepare your tax return; from P45’s, P60’s and P11D’s to expenses, invoices and bank statements. Being organised and keeping your documents in an orderly fashion will drastically reduce the risk of potentially disastrous oversights.

Not only this, but your accountant, if you have one, will need you to hand over all the appropriate documents to accurately complete and submit the return on your behalf before the deadline, so it pays to make sure paperwork isn’t mislaid.

Getting the ball rolling sooner rather than later can also give you the perfect opportunity to budget for your tax bill. It’s as simple as it sounds; if you file six months early, it follows that you have six months to save if you need to.

If all of this isn’t enough to get you motivated, then consider how much nicer Christmas will be without the dreaded 31stJanuary deadline looming over you.

Guilty of procrastinating? You’ll pay for it…

Filing well in advance of the deadline means you have more time to address any issues that do arise and avoid any nasty penalties. For those who aren’t familiar with HMRCs penalties, they are as follows:

  • A £100 fine if you miss the January 31st deadline;
  • £10-per-day fines (for up to 90 days) if you still have not filed by 30th April;
  • whichever is the greater of £300 or 5% of the tax that you owe if you haven’t filed after another 90 days;
  • another £300 or 5% of the tax owed if you still haven’t filed within a year;
  • additional penalties – including up to 100% of owed tax – if HMRC believes you are purposely putting off the filing of your return.

Working close to the deadline also means you have less time to identify any opportunities to compliantly reduce your tax liabilities, meaning you could end up paying more than you need to. Tax returns are as much about effective planning as they are compliance.

The danger of going it alone

The DIY approach to self-assessment tax returns comes with a whole host of potential ‘dangers’ and under all but the simplest of circumstances is best avoided.

When juggling the preparation of your tax return and the day-to-day running of your business, it can be all too easy to miss important details and make costly mistakes. You may also find that you fall into the trap of evaluating your tax affairs purely in terms of the ‘here and now’ and as a result fail to protect your best interests.

You might argue that with so much online guidance available, you would be hard pushed to put a foot wrong – but this is not the case. The content that your search engine returns, for the most part, is designed to appeal to a very ‘standard’ set of circumstances, which your own may not align with.

Is it worth the panic, puzzlement and potential miscalculations?

Silly mistakes can make HMRC suspicious

If you submit your tax return on time, by the skin of your teeth, but it contains errors or anomalies as a result, then that may attract the attention of HMRC. This could prompt HMRC to launch a tax investigation, which can be a lengthy and expensive process.

Work with us = less fuss

As we’ve said already, preparing and filing your tax return takes time; time that would be better spent on running your business. Not only this, but in the absence of expert knowledge and years of experience you run the risk of making costly errors that will ultimately cause delays and leave you feeling unnecessarily stressed. Seeking online help may seem like the obvious answer, but the information is likely to be inadequate.