5 reasons to complete your Self Assessment early?

With over 10 million customers filing a Self Assessment tax return each year, they are now common practice in the UK. However this kind of volume inevitably puts a strain on HM Revenue and Customs (HMRC) especially with more than 630,000 leaving it until the last minute.

This kind of last minute planning however can lead to stress, panic and even on the spot fines if you miss the deadline. If these aren’t reasons enough to ensure your Self Assessment is submitted in plenty of time, take a look at a couple of other reasons why you should consider filing your return as soon as possible.

1. Fines

   The last thing anyone wants to do after paying their tax bill is forking out extra unnecessary money on a hefty fine that could have been avoided. The fine for missing the 31st January deadline is £100 and unfortunately it only increases from this point on. The fine can even reach 100% of any tax owed, if HMRC believes you’re purposely delaying the inevitable return.

2. Preparation is KEY

   There’s no better feeling than completing a task that’s been weighing heavy on your mind. However it’s not always so straight forward, especially if it’s your first time submitting a return. You need to be prepared and have a number of things in order. If you are a first timer you simply cannot leave it until the last minute as you will need your Unique Taxpayer Reference (UTR) number first, you will have already received this if you have filed a Self Assessment in the past. Alternatively you won’t be sent this until you first register for Self Assessment. The 10 digit code comes by post taking up to 10 days so there’s no point in applying for it on the 31st January.

   There may also be some instances known as ‘exclusions’ every year in which you cannot rely on technology and have to do a paper return. To make things even more confusing the deadline for a paper return is 3 months earlier, on the 31^st October!

   All this before you’ve even got to the rest of the information you need including your p60, records of expenses relating to self-employment, proof of all your untaxed income and contributions to charities and pensions, if applicable.

   In summary submitting your Self Assessment isn’t as easy as logging on to your laptop and putting aside 20 minutes.

3. The potential tax rebate

   Completing a Self Assessment, doesn’t always result in a tax bill, in some circumstances it can result in a tax rebate. This is more common if you’re a contractor moving employment types throughout the course of the year. Or another example of the type of worker who may see a tax rebate is a Construction Industry Scheme (CIS) subcontractor. This is because their earnings are taxed at source, meaning they pay 20% (or 30%) before taking into account any of their personal allowances or any other deductible amounts, such as legitimate expenses.

4. Take advantage of payments on account

   If you are self-employed and your tax liability exceeds £1,000, HMRC gets you to spread your tax payments by paying towards your tax bill for the next tax year in two instalments. The exception to this being if you’ve paid 80% via PAYE. The amount you pay is decided based on what you paid the previous year, for example if your tax bill for the previous year was £4,000 you will be required to pay £2,000 on the 31^st January and another £2,000 on the 31^st July. However as you’re probably aware tax is never that cut and dry.

   The problem arises when your tax bill goes up or down the next year, for example if the bill has gone up to £5,000 you are required to make a ‘balancing payment’ to make up the difference. In this case it would be an extra £1,000. The benefit of a Self Assessment comes however when your tax bill for the following year goes down and you have therefore overpaid, in this scenario if you’re prepared you can get the extra money you’ve paid taken off your July payment.

5. Cash flow

   Another cause of stress for the self-employed and contractors can be cash flow. There’s no point burying your head in the sand, thinking it won’t happen. The sooner you submit your tax return, the sooner you’ll know what your tax bill is. However remember, once you’ve completed your Self Assessment you still don’t have to actually pay the bill until the end of January, so submitting it early means you have more time to budget and plan for the payment.

Using a provider like PayStream that specialises in Self Assessment tax returns means that not only will we ensure you are maximising any possible tax reliefs and allowances but we'll also take the hassle and worry of completing your return away from you, so you can focus on what you do best.

To get in touch with PayStream's Tax Team call 0161 923 0201 or email taxadvisory@paystream.co.uk to discuss your tax needs.