Submitting your personal tax return can be a stressful process and even more so if you leave it until the last minute. This is why we strongly recommend that you file your personal tax return by 31st July instead.
File your tax return to save yourself stress
It’s easy to delay filing your tax return: you’re probably busy working towards more immediate deadlines. These might be work-related or one of the other filing deadlines. If something doesn’t actually need doing for a few months, why prioritise doing it now? We’d say that, while this is an understandable question to ask, the later you file, the greater the potential for you (and your accountant) to feel stressed and overwhelmed. This is even more true if there are unforeseen issues with the return as there will be immense pressure to resolve them quickly at a time when your accountant’s time is limited.
Avoid the late filing penalties
Leaving your tax return until the last minute increases the chances that you could accidentally miss the deadline, which will be costly for you as late filing penalties can soon add up. Penalties are issued even if there is no tax outstanding or the tax due has already been paid. As soon as the deadline is missed, a £100 penalty is issued with additional penalties if the tax return still isn’t filed after 3, 6, and 12 months.
Better manage next year’s cashflow
It’s not until you’ve completed your tax return that you definitively know what tax is due. This can leave you in the situation where any predicted or estimated calculations made during the year might be less than what you actually need to pay and, in which case, you’d have to find a way to pay for this. An unexpected expense like this could be problematic for your cash flow for that year.
If you’re in the position where your tax liability has increased to over £1,000 in the year and you haven’t anticipated this, there will be another cost to factor into your finances. You will be required to make Payments On Account (POA), which require you to prepay your tax liability based on what HMRC anticipates your next tax bill to be.
The Payments On Account (POA) are due 31.01 and 31.07, at 50% each, based on the previous years liability. This means you need to have sufficient funds put to one side, on two occasions during the year. For example, if your 2022 tax bill was £2,000, your first POA is due on the 31.01.2023 (along with the balance of £2,000 for the 2022 tax return) and POA 2 is due on the 31.07.2023 both payments would be for £1,000, totalling £2,000.
This would therefore mean you would have to pay £3,000 by 31.01.2023 and £1,000 by 31.07.2023.
Let’s now assume that you do your 2023 tax return early, before 31.07.2023.
By this stage you would have already paid your POA 1 of £1,000.
This year your tax liability for 05.04.23 is lower at £1500. As you have already paid £1,000 on account, this leaves a balance of £500 outstanding. Therefore, instead of paying £1,000 on the 31.07.2023, you would only have to pay £500.
Therefore, doing the above return early has saved cashflow of £500!
If you’re able to start thinking about your personal tax return now, you’re giving yourself plenty of time to get everything in place by 31st July.
We’re happy to help you with this so get in touch or read more about the self-assessment process.
