The benefits of an early tax return
Posted on 4th May 2021 at 12:14
The early bird can catch the worm. Although the 2020/21 tax year has ended and the deadline for your online self-assessment tax (SAT) return is 31 January 2022 (31 October 2021 for paper returns) there are some very good reasons to make your submission as soon as you can.
Avoid the tax return rush
We all know the annual deadline for our tax return but we still put off collecting the information. Around Christmas every year thousands of people realise they have waited too long – some even submit their tax return on Christmas day.
Many people rush to send all the information to their accountant. By this time some of the information you need could be 20 months old. While your accountant will do everything possible to make sure your SAT submission is on time, if information is missing or incomplete it can cause a lot of stress and delay. Figures from January this year showed that almost half of callers who needed to speak to HMRC had to wait for more than 10 minutes so it could take up a lot of your time as well.
The deadline day itself will see a logjam on the HMRC website as thousands of submissions are made. If there are any problems your tax return could be late and you could suffer penalties. There’s a £100 fine if you’re just one day late and this year almost 1.8million people missed the deadline. Due to the coronavirus pandemic the rules and fines were eased for January 2021, but this is unlikely to be repeated in 2022.
If you are planning to make the submission yourself and you don’t already have a Government Gateway account you will need to register and this can take several weeks, so don’t leave it until December.
Plan your tax payments
One thing many people forget is that the payment for tax owed in the previous tax year must also be made on or before 31 January. If you haven’t already completed your tax return you won’t know whether you need to make a payment or how much it should be. You certainly won’t be able to plan to make sure you have enough to pay what’s due. If your payment is late you will have to pay interest as well as a fine.
On the positive side, if you have already made payments on account for the 2020/21 tax year, you might be entitled to a refund, but it will be delayed if you leave your submission to the last minute.
Make sure you have the information you need
You will need your tax forms:
your P60 shows tax you have paid if you receive a salary from your limited company
you will receive a P45 from your employer if you stopped working for them during the tax year to show your pay as you earn (PAYE) contributions
a P11D will show you work-related ‘benefits in kind’ such as a company car or interest-free loan.
You will need copies of your invoices and bank statements. Since some of your records will be approaching two years old if you leave it until the last minute, you might have to contact your bank to access some statements as many will only automatically provide online statements for the last six or 12 months.
Ideally, you will have kept track of your work-related expenses throughout the year, which will help to reduce your tax liability. If you don’t already use accounting software like Xero it is something we recommend. It will simplify managing your expenses and will save you a lot of time and stress. If you have a box or bag full of receipts don’t leave it until the end of the year to try an organise them. Ideally contact a bookkeeper straightaway to do it for you.
So, to reduce your stress, enjoy a happy Christmas, and perhaps receive a welcome tax refund early in the new year, submit your SAT return as soon as you can.
Please get in touch if that box of receipts is too much for you to handle. We can sort it out for you using some excellent software that will help you to keep it under control this year.
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