Why complete your self-assessment form and make payment early?
When is self-assessment day? 31st January? You’d be right. But there’s another self-assessment date that slips most by.
From September for about six weeks, we get some of our valued existing and new customers calling us up about 31st October. What is the significance of that date?
It’s the deadline for submission of self-assessment paper returns. A declining number of us are doing paper returns across the country but the option is still available – click here to read HMRC’s guidance.
In the age of Xero and fully digital accounting practices like Panthera, we’d strongly recommend you stick with digital filing.
However, people who file paper returns so early enjoy a few distinct advantages over their digital counterparts. And people who pay their tax months before they have to enjoy even more benefits. But what are they?
Know what you owe
Business has its ups and downs. What makes running a business a little bit easier is knowledge.
Completing your self-assessment in September or October will let you know just how much personal tax you’ll have to pay.
If your business is cyclical meaning that the winter months are leaner and you have the money available to pay HMRC now, pay it and you won’t find yourself caught short on January 31st.
Bank records, invoices, and receipts
For those of you not using Xero yet, downloading your bank records is one way to start working with Panthera to compile your self-assessment form.
Things are changing now but some of the High Street banks’ online platforms do not allow you to look at bank transactions more than 18 months old.
If that’s you, your only hope is to phone the bank and pay for the privilege of receiving paper statements. You’ll then have to input each item on your statements one by one into an Excel spreadsheet.
You also get the chance, without the pressure of the 31st January deadline looming over you, to find and store all the receipts and invoices you’ll need for your books. Every missing record could be an allowable expense you can’t claim back which means you’ll pay more tax than you need to.
If you're paying on account, this will reduce your July payment
If the way you pay yourself is via salary and dividends from your own company, you can win yourself a tax advantage by filing and paying early.
If you owe less than £3,000 in tax, you can ask HMRC to work out if your underpaid tax from dividends or other sources can be taken from your salary or pension in smaller equal instalments.
HMRC's advisors are easier to contact
Getting through to HMRC’s helpline in January is a testing affair. It’s better to save yourself the headache.
Definitely no penalties, except if…
…you don’t pay your tax by the 31st January.
If you decide to submit your self-assessment early but don’t make payment until after deadline day, you will be on the receiving end of HMRC’s penalties which, at time of writing, are:
- £100 instant fine,
- An additional £10 a day fine if you haven’t paid by 30th April,
- If you haven’t paid 90 days after 30th April, you’ll pay the greater of £300 or 5% of the tax you owe,
- The greater of £300 or 5% of the tax you owe if you haven’t paid within a year, and
- Up to 100% of the tax you owe if HMRC thinks you’ve been deliberately holding off payment.
Come and talk to Panthera
Like the idea of filing and paying early? There are genuinely distinct advantages to it.
If this is the year you’re going to file and pay early, please call the team on 01235 768 561 or email email@example.com.
We’ll work through every stage with you and we’ll even help you with any tax planning opportunities for the next financial year.
Last but not least, what if I want to make a change to my self-assessment form after I’ve filed it early?
That’s fine. You can resubmit it any time you like before 31st January without paying any additional charges.
And there’s always one…
Don’t file it too early. Accountants Baker Tilly told the Daily Telegraph about a client who “filed his return for the year 2013‑14 in mid-2014, well ahead of the January 31, 2015, deadline. Tax was due.
“HMRC factored the underpaid tax into his code, and his PAYE income was thus adjusted. So far, so good.
“This very organised individual, however, then completed and submitted his self-assessment return for the year 2014‑15 in May this year – some eight months ahead of the deadline.
“Again, tax was due.
“The taxpayer’s efficiency in filing his return was matched by the efficiency of HMRC in contacting his employer: a new code was issued and as a result his pay was further reduced.”
This diligent and organised tax payer was paying two years’ worth of tax at the same time.
It all turned out fine in the end but if you’re going to be that quick in filing, please contact us beforehand to avoid situations like this.