If you’re running a small business, you’re probably now facing the prospect of completing and filing a self-assessment tax return.
But, if you’re like the millions of people who wait until the deadline is looming close before filing every year, it’s also unlikely that you’ve even started to think about your tax return yet, especially considering the January 31st deadline is still over two months away.
However, by taking time out now to tackle your tax return rather than waiting until the last moment, you may actually be able to save your business a lot of time, hassle and money in the long run. Here’s why.
You have more time to register
If this is the first year you’ve prepared a tax return, you’ll have to register with HMRC in order to file your returns online. This involves HMRC sending you an activation PIN code in the post, which takes at least seven days to arrive.
Don’t wait until December, when you may risk your PIN getting potentially mixed up with the huge extra volume of letters delivered around Christmas, and when it could take weeks to arrive, or even be completely lost.
Register with HMRC now, so you’ll have that activation code in plenty of time. You don’t want to be starting the whole process from scratch at the end of January when you realise that your code didn’t arrive!
You’ll avoid incurring any fines
This is perhaps the most obvious benefit of filing early, but it’s also one of the most important. By getting your tax return out of the way and submitted to HMRC long before the January 31st deadline passes, you won’t incur any fines from HMRC for filing late.
Those fines are as follows:
- A £100 instant fine for not submitting your return by the January 31 deadline
- £10 a day fines for up to 90 days if you don’t file by April 30th
- A £300 fine (or 5 per cent of the tax you owe – whichever is the greater number) if you still don’t file your tax return for 90 days after April 30th
- An additional £300 (or 5 per cent of the tax you owe, whichever is greater) if you still haven’t filed within a year
- Additional penalties if HMRC believes you are intentionally delaying your filing. This may include a fine of up to 100 per cent of the amount of tax you owe.
Get your self-assessment sorted and file your tax return now to avoid having to pay any of these penalties!
Your figures are more likely to be accurate
When you leave everything until the last moment and you’re rushing to meet a deadline, that’s when you’re more at risk of making mistakes. So the longer you wait to tackle your tax return, the more likely it is that you will forget to include something, such as interest on a particular bank account, or to enter incorrect figures.
Give yourself plenty of time and save yourself the worry of trying to pull all your figures together in a rush. And remember that you can also re-submit your tax return for no additional charge if you discover errors before the deadline; so even if you file now, you can still do a final double-check before January 31st and have time to make any final amends.
It’s easier to find the right accountant to work with
Unless your business is the very simplest and smallest of sole trades, and you have no other income such as income from a job or property, or unless you are 100 per cent confident of preparing your tax return correctly yourself, it’s a good idea to ask an accountant to help you prepare or check your tax return.
That’s because there are lots of potential pitfalls that you may not be aware of when it comes to self-assessment, and with tax in general.
However, accountants get very busy in the run-up to tax return season. Many of them may charge an extra premium to new clients who join them in January with a tax return to prepare that month, and some start charging higher fees as far back as late November.
Some may also be so busy in January that they won’t be able to work with you at all, if you wait until the last minute to approach them.
By starting your self-assessment now, you’ll have time to look around and find the right accountant who you feel comfortable with, who you can understand, and who understands you and your business.
And with more time to make your decision, you’re also more likely to find an accountant who you can build a sound long-term business relationship with.
Tax can be collected through your PAYE tax code
If you want HMRC to collect any tax you owe by changing your tax code, you’ll have to file your tax return online by December 30th.
You’ll only be able to do this if you owe less than £3,000 in tax, and if you have a tax code (which would be if you are employed and pay tax under PAYE, or if you receive a taxed private pension).
You’ll be clear for Christmas
Christmas is often the busiest time of the year for businesses, with orders to fulfil and dispatch. And that’s without even thinking about personal preparations such as buying and wrapping gifts, buying, writing and sending cards, buying food etc.
And then, of course, there’s the start of the New Year to come after that, which when you’ll probably like to start working towards your business resolutions, not to start worrying about your tax return.
Give yourself one less thing to think about during the festive season by filing your tax return now.
Further reading on accounts and tax