Have you received that letter in the post from HM Revenue & Customs (HMRC) to file your tax return by January 2016?
While January gives you plenty of time to do this, we've come up with 7 great reasons which might make you think twice:
1. You don’t need to pay the tax owed until the tax deadline
A common myth is that once your tax return is filed that HMRC will come knocking on your door for any tax owed.
The truth is, even if you file your tax return early with HMRC, you are only obliged to pay any tax liability by the normal due dates of 31 January 2016 (balance and the first payment on account, if applicable) and 31 July 2016 (second payment on account, if applicable).
2. Tax refunds are accelerated
Why wait to collect your tax refund? The money could be sat in your bank account earning interest if you are owed tax and complete your tax return early. Refunds can often be processed far slower nearer a tax deadline as HMRC staff and systems can be overwhelmed at this time.
Under or over payments of tax can often arise on employees or directors, where HMRC has made errors with their tax codes. Building subcontractors operating under the Construction Industry Scheme are often in a tax refund position.
3. You have time to plan for any tax owed
Filing your tax return and calculating any tax liability arising, allows you the time to start budgeting and managing you cashflow.
If you pay your tax bill late, HMRC will charge you interest and possibly even late payment penalties.
4. You can use your tax code
The other benefit of filing early is that if you owe less than £3,000 in tax and you submit your tax return by 30 December 2015, you can opt to have your tax liability collected through your tax code.
This can be a great option for employees or pensioners, as they can have their tax bill collected from their wages or pension throughout the year easing the pressure on cashflow.
5. Buy yourself some time
If your affairs have changed this year, then preparing it in good time ensures you have the space to think about any tax planning opportunities available to you.
Not rushing to complete your return should also reduce the risk of errors being made. It also allows time for bank statements and any other financial documents you may need to file the return to be collated.
6. Not missing the tax return deadline
If you file your tax return late, you will be issued with an initial, automatic £100 filing penalty. It no longer matters how much tax you had outstanding. If your tax return becomes more than three months late, £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 six months late and again if it becomes over 12 months late. All of these penalties are in addition to one another; rather than in place of. This can mean penalties for late tax returns can top over £1,600!
Despite HMRC’s best endeavours, a large number of taxpayers still choose to leave their return until the last minute. Around 890,000 tax returns were estimated to have been outstanding on 31 January 2015.
7. Collecting the right amount of Tax Credits
If you are in receipt of tax credit or benefits, your claim needs to be renewed annually by 31 July, which involves letting the Tax Credit Office know of your income.
Whilst you may submit temporary estimates, it is preferable to submit the actual figures as soon as possible to avoid you being over or underpaid until the Tax Credit Office has received your actual figures.
How TaxAssist Accountants can help
We are available right now to help you complete your tax return early so you know how much tax you need to pay and by when. If you are due a refund then it makes perfect sense to receive this as soon as possible.
We're working with many self employed individuals and business owners who have already filed theirs and we are ready to help you too.
Call us today on the number below or complete our online form to make that first step.
By Jo Nockels
Last updated May 2015
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.