6 reasons to file your Self-Assessment early
As the self-assessment deadline approaches, many taxpayers find themselves scrambling to gather documents and complete their tax returns. However, there are compelling reasons to file your self-assessment tax return early. In this blog post, we'll explore six reasons and provide answers to common questions about self-assessment.
1. Avoid last minute stress
Filing your self-assessment tax return early can significantly reduce stress. By avoiding the last-minute rush, you have plenty of time to gather all necessary documents, double-check your entries, and ensure accuracy.
2. Plan your finances better
Knowing your tax liability early allows you to plan your finances more effectively. You can budget for any tax payments due and avoid the financial strain of unexpected tax bills. If you know your Self Assessment tax liability in advance of 31 January, you have the opportunity to spread the tax across a number of instalments.
3. Faster tax refunds
If you're due a tax refund, filing early means you'll receive your money sooner. HMRC processes refunds on a first-come, first-served basis, so the earlier you file, the quicker you'll get your refund.
4. Avoid penalties
Late filing incurs penalties and interest. File early to avoid extra costs.
5. Access to HMRC support
HMRC's support services are less busy earlier in the tax season. If you need assistance, you're more likely to get timely help if you file early.
6. Cheaper accountancy fees
Many accountants offer a financial incentive to file your tax return early in the year because it helps reduce their workload in December and January.
Common questions about Self Assessment
What is Self Assessment?
Self Assessment is a system used by HM Revenue and Customs (HMRC) to collect Income Tax, Capital Gains Tax and Corporation Tax.
Under the Self Assessment regime, the taxpayer is responsible for determining their own tax liability. For individuals, this means their liability to Income Tax and Capital Gains Tax. An individual taxpayer must deliver a tax return providing details of income, gains, claims and reliefs for the tax year. These figures are used to calculate the individual’s tax liability. However, HMRC have the ability to make enquiries into the tax return under the ‘process now – check later’ principle.
Do I need to do a Self Assessment tax return?
You need to complete a Self Assessment tax return if, in the last tax year, you were self-employed, earned more than £1,000 from self-employment, had income from savings, investments, or property, or had other untaxed income.
You can find a more comprehensive list of scenarios that will require you to file a Self Assessment tax return here.
How to register for Self Assessment
There are different registration processes for self-employed individuals, partnerships, and other scenarios.
- First-time sole traders can sign into their business tax account and select 'Add a tax to your account.' If you don't have a sign-in, create one. If online registration isn't possible, use form CW1F.
- Partners in business partnerships must complete form SA401 and register the partnership (if nominated). Limited liability partnerships and non-individual partners have specific registration processes.
- For other registrations, provide your details online: name, address, date of birth, phone number, and National Insurance number (if applicable).
HMRC have an online tool to help guide you on the correct process.
If you didn't file a tax return last year, you'll need to re-register.
When is the Self Assessment tax deadline?
How to pay Self Assessment tax
The deadline for online Self-Assessment tax returns and tax payments is midnight on 31 January following the end of the tax year. For paper returns, the deadline is 31 October following the end of the tax year. You have the option to pay any outstanding tax in instalments before the deadline.
There are several ways to pay Self Assessment tax bills, including:
- Direct Debit, BACS or CHAPS
- Online or telephone banking
- Debit or corporate credit card online
- At your bank or building society
- By cheque through the post
The deadline for making Self Assessment tax payments is typically:
- 31 January for any tax you owe for the previous tax year and your first payment on account
- 31 July for your second payment on account
Some methods of payment are quicker than others so make sure you leave enough time for your payment to clear before the Self Assessment tax deadline.
Conclusion
Filing your Self Assessment tax return early has numerous benefits, from reducing stress to avoiding penalties. By understanding the Self Assessment process and planning ahead, you can ensure a smooth and hassle-free tax season.
If you have any more questions or need further assistance, feel free to ask us.
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