April marks the end of the financial year and the start of a new one. It is the starting point for new yearly budgets and a time to reflect on our financial profiles. If you missed our previous blog post on Bookkeeping Myth’s Busted, perhaps you didn’t realise that you can submit your tax return early – any time after the 6th of April until the 31st of January.
Here are eight reasons to file your tax return early and save yourself some hassle instead of being a deadline dancer.
1. It gives you longer to save up
Just because you can submit your tax return early does not mean you have to pay the tax bill immediately. The tax bill will still be due the following January. This gives you more time to save up before paying tax to HMRC. Suppose you submit your tax return early, at any point between April- December, you are still giving yourself a longer chance of saving up rather than doing a last-minute dash to submit your tax return on time in January.
Calculating your tax liability allows you to budget accordingly and manage your cash flow better. If you leave the payment too late and miss the payment deadline, you will be charged interest and even late penalty fees. For those that submit late, they will be charged an initial automatic £100 penalty. From there on, the fine can keep creeping up the later you submit.
Think of how less stressful being able to budget over time will be for you and your business. You won’t have to magic up money seemingly. If the bill is more than anticipated, it gives you that much-needed time to save and pay HMRC.
So that you know for sure – when to pay tax to HMRC? The deadline is 31st January every year.
2. December and January are busy months – It’s Christmas and New Year
Think of the chaos at Christmas in December and the joy, of course. January is fully fuelled with people and businesses ready to get going for the New Year, and when you get back to it after your festive holidays, you usually want to hit the ground running. For most companies, these end up being two of the busiest months of the year.
Imagine having already submitted your tax return early and getting to just juggle the usual business activities and the social festivities without the stress of dealing with additional tax return processes. Have your time off and enjoy it smugly, knowing your tax return was done early. No cramming into your busy schedule.
3. Doing your tax return early gives you an overview of your finances
By having an overview of your finances, you can look ahead to the rest of your year in business and think about things accordingly. Maybe your tax bill was lower than expected? You may have saved up too much money and can now buy something else you may need for the business, whether new equipment or the ability to undertake more training.
If you know how much you need to save up for, you know how much you can use for other things, such as your wage and budgeting business needs. It also helps you see how your business has done annually, which is an essential piece of knowledge.
4. If you would like to use a bookkeeper, it’s best to get booked in early
Getting close to the tax return deadline is extremely busy for your bookkeeper. Here at McCarthy Browne Bookkeeping, we are usually inundated with tax returns around this time of year. It is essential that if you want to use a bookkeeper, you get booked in earlier rather than later, as you may end up disappointed and quite overwhelmed if they have no slots available for you.
Please don’t end up without the help you need, and try to contact a bookkeeper before the tax return deadline suddenly dawns upon you. I love to be able to give my client’s tax returns the time and attention that they require, which is why I encourage the to submit their tax return early; we can submit them for you all through the year to save you the headache as the tax return deadline looms.
5. Benefits with your tax code
If you submit your return early enough – before the 30th of December, to be precise, you then have the chance to use your tax code to collect tax liability. This eases cash flow and is excellent for pensioners and employees.
6. Refunds are quicker when you submit your tax return early
If you file your tax return early, any tax refund owed to you will also be accelerated. This money can then be in your bank and gaining interest throughout the year.
It often takes longer for refunds to be issued when tax returns are submitted in January; this is due to the high demand of the HMRC services and the system being overwhelmed.
7. The implications on Tax Credits
If you receive tax credits, the renewal is annually on 31st July. So, although you can put in estimates and update them at a later date, imagine how much easier it would be if you were able to give the Tax Credit Office your actual up-to-date figures.
This would save the headache of either getting over payments or getting too little.
8. No need to rush
By submitting your tax return early, you are allowing yourself the time to collect what you need to submit it calmly. When you do it this way, you avoid making quick mistakes from rushing.
You may find life has changed in the last year, by filing early, you are able to think ahead of tax planning opportunities. You also have the time to gather everything you need, such as bank statements, without the stress of rushing.
I hope that this blog has given you some great insight into why submitting your tax return early can give you some advantages in the financial year.
If you would like to discuss these benefits further, then get in touch today with McCarthy Browne Bookkeeping.