Getting your tax return organised, completed and filed is certainly not something that many people look forward to. But since it needs to be done, why not just get it finished and out of the way?
The deadline for filing your self-assessment tax return is January 31 but there is no need to wait until then and there are penalties for both filing the return late and paying tax late. The key dates and deadlines are set out on the HMRC website.
There are not very many sources of income and expenditure that go on most tax returns. The most common data that we see, and the sources of documentation are:
Of the sources of data you receive from third parties, you may have to wait until July for your P11d but the rest are available much earlier.
If you need to prepare accounts for your business or for a property – it’s up to you when you do it, but much easier and more helpful if the accounting is done throughout the year. There’s no reason why these accounts can’t be finished by the end of May.
Certainly you can organise and file everything yourself and, despite what you see occasionally in the media, HMRC are very helpful and you should call them if you need to. It is, after all, in their interests that tax returns are filed and tax is paid on time.
But, if this is not a process that you are comfortable with or your income and tax affairs are a little complicated, then you would be wise to get help from an accountant.
If you opt for outside help then the more work you can do the lower the fees should be. So if you can collect all of the data and organise it using a template agreed with the accountant then the process should be cheaper.
But the closer you get to the January deadline, the more expensive you can expect it to be – another good reason to get your tax return filed as soon as you can.
The later you leave it, the more likely you are to see unexpected surprises and the less time you will have to organise the payment of tax.
Tax payers who have income that is not taxed as you earn it, such as self-employment, dividend or property income will find themselves in the “payment on account” regime in which estimates of tax payable need to be paid on January 31 and July 31 and any balance paid by January 31 following the end of the tax year.
It can be painful when you first go in to the payment on account regime, because you may have to pay up to 150% of a year’s tax liability in the first January. Thereafter, the half-yearly tax payments should become more even.
However, once you have submitted your tax return you have certainty over the amount of tax you need to pay and by when. It’s useful to submit your tax return before the July 31 payment is due because this payment could be lower than the estimated amount would have been.
Finally, if you need time to pay your tax liability, HMRC can not agree anything with you until your tax return is filed and the sooner you can start this dialogue the better.
Your tax return is not going to go away. However, a well-organised approach to getting it done and filed will make the whole process much easier and give you clarity over how much tax to pay and when.
Michael
Sales | Margins | Profit | Cashflow
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