By Emily Coltman FCA, Chief Accountant to FreeAgent
The summer months are upon us, which means you may be more inclined to think about whether you can take a break in the sun rather than getting your annual tax return sorted.
But while the deadline for online Self Assessment filing is still six months away, the summer might actually represent a perfect time to get your accounts in order and your tax return filed with HMRC.
You’ll avoid incurring any fines
This is probably the most obvious benefit of completing your Self Assessment 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 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% 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% 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% of the amount of tax you owe
Remember that these are just the penalties for filing late. You also need to pay the tax you owe - and HMRC will issue additional penalties for late payment. Get your Self Assessment sorted and file your tax return now to avoid having to pay any of these penalties!
Registering with HMRC will be easier (and quicker)
If this is the first year you’ve prepared a tax return, you will need to register with HMRC to file your returns online, if you haven’t already done so. However, registering to file online involves HMRC sending you an activation PIN code in the post, which takes at least 7 days to arrive.
If you do this now, then you should be all set to file your tax return in the next week or so. Wait until December, on the other hand, and you’ll risk having the letter with your PIN in it getting caught up with the Christmas post - which means it could take weeks to arrive, or even get completely lost.
Avoid the stress of extended waiting by registering with HMRC now.
Your figures will be fresh in your mind
Your tax return is for the tax year ending 6th April 2015, which at this point is only just a few months ago. That means the information you need to include in it should still be relatively fresh in your mind, and you won’t have to worry about rushing to try and pull all of your figures together.
However, the longer you leave it to file your tax return, the more likely it is that you will forget to include something - such as interest on a particular bank account - or enter incorrect figures; especially if you're frantically trying to pull everything together before the January 31st deadline arrives.
Remember that you can also re-submit your tax return for no additional charge if you discover errors in the future - so if you file now, you can still do a final double-check well before the deadline, and still have time to make any final amends.
You may have more time to dedicate to your tax return
If you run the kind of business that experiences a seasonal slowdown at this time of year - for example, if a lot of your clients go on holiday and so there’s less demand for your services - you may have more free time than usual to dedicate elsewhere in your business. And if you already tend to use this time of year for strategic planning and for refreshing some of your business practices, why not include completing your tax return as one of these tasks?
By waiting until December or January to file your Self Assessment return, you could risk having to juggle it with a lot of other commitments during a busier period in your business. And if you’re rushing to finish a tax return in between all of the other important work you’re doing, you may be more likely to make mistakes.
If you have free time right now, use it wisely. You don’t want to regret passing up those distraction-free hours down the line.
You’ll have more time to find an accountant
There are lots of potential pitfalls that you may not be aware of when it comes to Self Assessment. So 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% confident of preparing your tax return correctly yourself - it is a good idea to ask an accountant to help you prepare or check your tax return.
However, accountants are very busy in the run-up to tax return season and many of them charge an extra premium to new clients who join them in the months prior to the Self Assessment deadline. Also it’s a good idea to find an accountant that you feel comfortable with and who understands your business - and you’re unlikely to be able to do that when you’re rushing around to find someone at the last moment.
Start looking now and you stand a much better chance of finding the right accountant, not only to help you prepare this year’s tax return, but also to establish a sound long-term business relationship with.