With the COVID-19 pandemic locking down most of the world, your annual income tax return for the 2019/20 tax year will probably be one of the last things from your mind.
In normal circumstances, there are many reasons to prepare/file your tax return early and, indeed a couple of these reasons, are even more important during this unprecedented coronavirus outbreak.
Below we share four reasons why you should file your tax return in April.
1. Receive your tax refund earlier
Why wait to receive your tax refund? Once you file your tax return, your refund should be processed soon after. This will be a nice boost to your income.
Under or over payments of tax can often arise on employees or directors, where HMRC has made errors with their tax credits. Building subcontractors who have had tax deducted at source through the Construction Industry Scheme (CIS) are often in a tax refund position.
What better way to boost your cash resources than by claiming a refund from HM Revenue and Customs (HMRC)?
2. Calculate your tax bill for cashflow planning
Many businesses are currently trying to forecast their cash needs in the short/medium term and one of the biggest expenses the self-employed will have before the end of the tax year will be their income tax bill.
Knowing exactly how much your tax bill will be in January 2021 will help you to plan effectively for how you will be able to pay it, be that through bank funding or by preparing to engage with HMRC and asking for a phased payment arrangement when the liability falls due.
Remember just because you file your return early does not mean that you must pay the liability immediately. That only becomes due for payment in January 2021.
3. Have more time to focus on your business
While HMRC is looking at granting tax payment deferrals during the COVID-19 crisis, it is advising all businesses to continue to file their tax returns as normal.
This includes your annual self-assessment tax return.
If business is quieter for you now your income tax return is a job that you could get done and out of the way now. When business is back to normal then you will have more time to focus on getting your business back on track rather than on your tax returns.
4. Get your Tax Credits sooner
If you receive tax credits or benefits, your claim needs to be renewed annually by 31st July, which involves letting the Tax Credit Office know what your income is.
Although you can submit temporary estimates, it is far more beneficial for you to submit the actual figures as soon as possible to avoid being over or underpaid while the Tax Credit Office waits for your actual figures.
How we can help
We can help you complete your tax return early, so you know how much tax needs to be paid and by when.
If you are due a tax refund, it makes great sense to receive this as soon as possible. We work with many self-employed individuals and business owners and we can help you too.