10 Reasons Why You Should File Your Self Assessment Tax Return Early
Updated: Feb 7
Xtract Accounting, the small business Accountants for Directors and Limited Companies, explains why making the effort to file your tax return early could pay dividends in the long run.
Ok, so you receive the HMRC letter in April that tells you to submit your Self Assessment Tax Return. You know it needs doing by the end of January, but what do you do next? Let’s be honest, you put the kettle on and forget all about it, hoping that somehow it’ll do itself. Suddenly Christmas has come to pass and then the panic sets in.
You’re not the only one procrastinating – in January 2020, more than 3 million people (over a quarter of those due to file) had still not filed their return by the 24th January, leaving them just one week to beat the January 31st deadline.
It should come as no surprise that, historically, deadline day is the busiest single day for filing. This year saw 6% of total returns due (702,171) being filed in the final 24 hours, and incredibly, 26,562 of those came in the final hour (11pm to 11.59pm).
And yet, some 958,296 people still missed the filing deadline, resulting in fixed penalties for them and a bumper payday for HMRC.
Unfortunately, deadline day hasn’t been all plain sailing for HMRC in recent years. In 2012 the deadline was extended after call centre staff went on strike on January 31st, and in 2014 certain individuals were given a two-week extension. HMRC has also faced stability issues with its Online Services – the website used to complete Self Assessments online. At its peak, HMRC Online Services processes around 15 returns per second.
With more than 3 months to go until the 31st January deadline you might be reading this and still thinking to yourself, nah, I have plenty of time… and Christmas shopping takes priority!
If that sounds like you, this blog gives 10 great reasons why you should file your tax return sooner rather than later.
1. You might need to register first
HMRC is not a post office – you can’t just turn up, put a stamp on it and send it in!
HMRC must be expecting your return, which means you need to register with HMRC in advance, and that process takes time.
How long? Well, that depends on the time of year but in general, the closer you leave it to the 31st January deadline, the longer it will take HMRC to process. Leave it until January (when HMRC’s customer service commonly grounds to a halt), and you probably won’t even be registered in time to submit before the deadline.
We therefore recommend leaving it no later than October following the end of the tax year – at this time, the registration process should take no longer than a fortnight and you’ll receive your Unique Tax Reference (UTR) through the post shortly after. But it doesn’t end there…
If you plan to submit the tax return yourself, you’ll also need to register for access to HMRC’s Online Services. Again, you’ll be reliant on HMRC and Royal Mail, and it can take up to another fortnight before you’re ready to go.
2. Asking an accountant for help still takes time
If you plan to ask an accountant for help to submit your tax return, they can also submit your Self Assessment registration for you, often for no extra charge – So that’s one less thing for you to worry about.
That being said, the registration process won’t be completed any quicker just because an accountant is doing it for you, and in fact, it could take a little bit longer!
This is because the accountant will be required to submit an “Agent Authorisation” to HMRC to allow them to submit your tax return on your behalf through their own dedicated filing service. Depending on the method used to submit the Agent Authorisation to HMRC, you could be looking at another fortnight on top, at the very least.
The only saving grace is that the accountant can at least commence the preparation of your tax return whilst waiting for your registration and their authorisation to come through.
3. You have time to plan for any tax owed
A common myth is that once your tax return is filed, HMRC will expect you to pay any tax due.
Not true! Regardless of when you submit your Self Assessment Tax Return, your tax bill isn’t actually due until the 31st January following the end of the tax year. This means, the earlier you submit your tax return, the more time you have to save for your tax bill, making budgeting for future expenditures (like Christmas, for example) much easier.
4. You’ll avoid penalties
File your tax return later than 31st January, and you’ll likely land one of HMRC’s famous on-the-spot £100 fines. But that’s not the only penalty you could face… Find out more on HMRC’s website.
5. Tax refunds are accelerated
Nobody likes waiting to receive a refund – why should you? If you have overpaid tax during the last tax year, filing your tax return early could mean receiving your tax refund early too. You might even receive a small amount of “Supplement Interest” (compensation) from HMRC on top – so it really can pay to file your tax return early!
On the other hand, leave it until January, and it could be significantly delayed or worse still, kept by HMRC and offset against future tax due.
6. You can use your tax code
Another benefit of filing your tax return early is the opportunity to pay any tax due through your tax code in a future tax year, giving you almost 2 years to pay the tax you owe.
However, this is only available in certain, usually rare, circumstances.
7. You might be able to save tax
In some cases, preparing your tax return early can provide you with tax planning opportunities, particularly if you know your tax affairs have changed or will change from one year to the next.
Getting help from an accountant in this respect is advantageous.
8. Getting help from HMRC is much harder in January
The longer you leave it, the harder it will be to get any help from HMRC. And if you’ve ever called HMRC’s personal tax helplines in January, you’ll know exactly what we mean.
January is silly season, and despite HMRC call centres being open for longer hours, and manned with more staff, they almost always struggle to answer calls within a reasonable timeframe. In fact, according to HMRC’s own statistics released in March 2020, a staggering 27% of callers in January 2020 had to wait more than 10 minutes to speak to an advisor.
And even if you do manage to speak to an advisor, the chances are that they may not be able to give you the information over the phone, in which case, they may instead send it to you in a letter, which of course will take a good couple of weeks to get to you.
The moral of the story… If you think you might need to contact HMRC for help with your tax return, don’t leave it until January! Unless of course you enjoy HMRC’s hold music.
9. It can take time to gather the necessary information
To file your tax return, you’ll need all kinds of paperwork including P45’s, P60’s, bank statements, interest statements, pension statements, and maybe even expense receipts.
Whilst getting information from your employer, past or present, may not be too difficult, have you ever tried getting information out of you bank? We can tell you it’s almost as difficult as is it to get anything useful out of HMRC. Some banks require you to use Online Banking, and others say they will send the information by post – some even charge you for the privilege!
Either way, leaving this task until January will almost certainly leave you a sitting duck.
The trick is to be organised; record information as you receive it throughout the tax year, on an excel spreadsheet perhaps. Then, when it comes to filing your tax return, it will seem less of a daunting task for you if you have done half the job already.
10. Enjoy a stress-free festive period
Admit it, you feel a sense of relief once the tax return has gone in… So why delay it? Filing early means you can avoid the mid-January stress and hassle experienced by so many, and instead enjoy a well-earned, worry-free rest over the festive period.
How Xtract Accounting can help
We are available right now to help you complete your tax return early so you know exactly what to pay and when by. We can review your tax affairs for any tax saving opportunities, and if you are due a tax refund, it makes perfect sense to receive that now in time for your Christmas shopping.
Our fees start from as little as £90+VAT (or possibly free if you are a client who enjoys the benefits of our proactive and fixed fee Monthly 'FD' service), so stop procrastinating and Contact us today.
About the Author of this Blog post…
Hi, my name is Gordon Roe and I am the Founder and Managing Director of Xtract Accounting. Having worked in an accountancy practice setting for well over a decade, I had become accustomed to the same annual routine for clients - Books in… Analyse… Queries out… Answers in… Finalise… Accounts and Tax Advice out.
Then, in 2020 I realised I could use advancements in technology and software to significantly improve the relationship between accountant and client, and at the same time, provide an insightful and real-time tax advice service. After all, that is what the modern client expects and deserves!
And so, Xtract Accounting was born…
Xtract Accounting are online accountants based in Lincolnshire, who offer proactive small business accountancy services exclusively to Directors and Owner Managed, Micro and SME Limited Companies throughout the UK.
We specialise in helping Directors Xtract more out for the work they put in!
Our monthly 'FD' service with fixed monthly fees, sees us take on the more proactive role of Finance Director for your business, and offers a plethora of benefits including:
Inclusive accounting software provided by FreeAgent,
Your very own dedicated accountant,
Regular insights into how to maximise your tax efficient (or even tax free!) income,
Jargon-free telephone and email support,
Plus, much, much more!
With Xtract Accounting, you can be sure your accounts and tax will be kept up-to-date and organised.
Find out more about us or connect with us on Social Media (below)