The most striking reason for filing a Self Assessment tax return early is that it removes the last-minute panic and reduces the potential for late penalties or interest. However, there are several other benefits that people often forget to take into account.
Whilst the 31 January deadline seems a long time away, HMRC reported that 630,000 individuals filed their return on deadline day this year, and over 20,000 in the last hour. However, tax returns can be filed as early as the first day of the new year, giving you time to arrange the appropriate payment of tax to be made on time. Not only does this let you plan out your cash flow better and plan finances for the year ahead, you avoid fines and penalties stemming from rushed last minute work. If a refund is due, this will be sent to you sooner as well.
Contrary to popular belief, filing early does not give HMRC more time to enquire, nor does it affect the date in which your tax is payable. The payment date remains 31 January no matter how early or late you file.
Payments on account are required towards the following year's liability in January and July; these payments are 50% of the prior years liability with a few exceptions:
The last Self Assessment tax bill was lower than £1,000
More than 80% of tax owed has been paid already
Each payment is half of the tax bill in the previous year.
You can ask HMRC to lower your payments on account if you know your tax bill is lower than the previous year. This will reduce the amount you have to pay for the year ahead.
If you have already paid the July payment on account, you may be able to request a refund and the following payment at the end of January might also be lower.
If you require assistance with Self Assessment tax returns, our experienced team can help.