TAX TIPS: 6 Reasons to file your Self Assessment early!

The Self Assessment is  necessary evil of the business world – you know it needs doing, but you put it off again and again, hoping that somehow it’ll do itself. Eventually January rolls around and you realise there’s no avoiding it any more.

You’re not the only one procrastinating – in January 2014 2.8 million people (over a quarter of those due to file) completed their return in the final four days before January 31st. Predictably, deadline day is historically the busiest single day for filing. Over 5% of total returns due – 569,847 – were filed in the final 24 hours this year. Some 710,000 people still missed the filing deadline in 2014 though, and in the last six years HMRC has raked in over £70 million in fines from those filing late.

HMRC have a torrid history of flaky service during Self Assessment season. In 2012 the deadline was extended after call centre staff went out on strike on January 31st, and this year certain groups of filers 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 12 returns per second.

All of this may lead you to one inevitable conclusion: that it makes sense to file early – and you’d be right! But avoiding fines isn’t the only advantage to expeditious personal tax filing.

1. It gives you time to save for your tax bill

Although you may choose to file your Self Assessment early, your tax bill still isn’t actually due until January 31st. So if you file in July you’ll have a full six months to budget for any tax you owe. Conversely, if you file in January but find you don’t have enough money to actually pay your taxes, you’ll be in line for one of HMRC’s famous on-the-spot £100 fines.

2. You might get a refund

Every so often you’ll have overpaid your personal tax, and HMRC will actually owe you money. In these rare instances you’ll often get your refund shortly after you file – meaning you’ll get a potentially sizeable cash bonus and can buy yourself something nice – or go the responsible route and save it.

3. You can get help easily

If you’ve ever attempted to get in touch with HMRC’s personal tax helplines in January you’ll most likely know their hold music by heart. Wait times stretching into hours are not uncommon – an internal HMRC report in March this year even found that as many as a quarter of calls to HMRC’s helplines go totally unanswered.

Filing early will help you avoid the rush, and get help direct from HMRC when you need it.

4. Your Christmas won’t be ruined

A survey last year found that one in five micro-business owners were anxious about completing their Self Assessment – with one in twenty admitting they were “terrified”. With the number of self-employed workers in the UK growing faster than ever, more and more people are facing their first ever filing – in fact the number of people required to file has increased by over 1 million in just the last four years.

Filing early will mean you can avoid the mid-January dread felt by many freelancers and contractors, and enjoy a well-earned worry-free rest over the festive period. HMRC even used this angle in its most recent advertising push, promising taxpayers they would “find inner peace” by filing on time.

5. You’ll avoid penalties

This is the most obvious benefit, but filing early will give you time to address any problems and avoid HMRC’s late filing penalties. For the uninitiated, those penalties are:

  • A £100 instant fine if you miss the January 31st deadline
  • £10-per-day fines (for up to 90 days) if you haven’t filed by 30th April
  • A £300 (or 5% of the tax you owe – whichever is greater) fine if you still haven’t filed after another 90 days
  • Another £300 (or 5% of the tax you owe – whichever is greater) if you still haven’t filed within a year
  • Additional penalties – including up to 100% of owed tax – if HMRC believes you are intentionally delaying your filing

6. You might win something (err… possibly)

In 2012 David Cameron’s Behavioural Insight Team – a group tasked with finding “intelligent ways to encourage, support and enable people to make better choices for themselves” floated the idea of offering a £100,000 prize to anyone who filed their Self Assessment before the end of November. The idea came after the success of a similar scheme which offered a £25,000 prize for people moving their Council Tax payments to Direct Debit, which was estimated to have saved local authorities around £350,000.

Three years later the proposal has yet to be implemented – but you never know!

Summary

Cooper Bradshaw are keen advocates of filing as early as all the full information is available. This gives our clients more time to plan if they have tax to pay, and if they are due a refund, it arrives sooner rather than later. If your business has been loss making, it is also advantageous to know that fact as soon as possible rather than nine months after the year end! For assistance with your self assessment, please get in touch.

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