10 great reasons to get your tax return filed now
7th June 2023 11:11
by Rachel Lacey from interactive investor
There’s always something better to do than file your tax return, but getting it done sooner rather than later could have significant financial benefits.
You might have until 31 January next year to file your tax return, but if you can muster the energy, there are a number of strong arguments for getting it done now, or at least well ahead of the 2024 deadline.
While nobody relishes self-assessment, more taxpayers are recognising the benefits of filing their tax return early.
This year 77,500 people filed their 2022-23 tax return on 6 April, the first day of the new tax year (2023-24) – a number that has more than doubled since 2018, according to HMRC. However, it pales in comparison to the approximate 3.4 million who left theirs to the final week of January.
Filing your tax return on the first day of the new tax year may only be an option if you are self-employed. That’s because employed workers and retired people in receipt of pension income need to wait until their P60 is issued on 31 May. But now that date has passed, there’s nothing to stop anyone from getting ahead of the game.
Here's our top 10 reasons to get cracking on your tax return now:
1) Forewarned is forearmed
Once you’ve done the legwork and filed your tax return, you’ll find out how much you owe. If your business has had a particularly good year, or you’ve been hit with a few surprises and your tax bill is larger than anticipated, you’ll have time to put in place a plan to pay it.
This could be particularly important as the cost-of-living crisis continues with more families feeling the squeeze. In the year to March 2022, private debt collectors brought in a record £498 million in unpaid tax debts on behalf of HMRC, a figure that was 20% up on the previous tax year.
2) You can spread the cost
If you think you might struggle to pay your tax bill in one go, filing early will give you the opportunity to spread the cost in the run up to the deadline. The earlier you file, the more time you’ll have.
It’s possible to set up a direct debit to make weekly or monthly payments towards your next tax bill with HMRC’s Budget Payment Plan. The service allows you to decide how much you want to pay and when. You can either plan to clear your whole tax bill this way or make some payments to reduce the lump sum you need to pay before the 31 January deadline.
3) You might get more payment options
If you file your tax return by 30 December and your total tax bill is less than £3,000, you can avoid paying all your tax bill in one go and have it deducted from your salary or pension through PAYE instead. This will be facilitated by a change to your tax code.
4) You might find it easier to get a mortgage
Getting a mortgage can be more challenging when you’re self-employed. Potential lenders will want to see evidence of your income before they approve your loan and may need to see at least two years’ accounts. The sooner your tax return is filed, the sooner you’ll be able to demonstrate your earnings and get your application approved.
5) You’ve got time to do the job properly
Human nature means you’re more likely to rush and make mistakes if you leave it until the last minute, and HMRC will charge you a penalty fee unless you can show you have taken reasonable care in the completion of your tax return.
Filing your tax return early means you have plenty of time to gather the paper work you need from bank statements and invoices to receipts and pension statements. When you aren’t in a hurry you’ll also have more time to ensure you are taking advantage of all the reliefs and allowances you are entitled to. This could include making sure you’ve accounted for all your tax-deductible expenses, or claiming back higher or additional rate tax relief on pension contributions and charitable donations.
Put bluntly, that may well mean a smaller tax bill.
6) Time to correct any mistakes
If you realise that you have made a mistake on your self-assessment tax return, you’ll have the time to correct any mistakes before the deadline, if you have filed early. You can still correct mistakes within 12 months of filing your tax return, but any problems will be easier to rectify if you can spot them before you’ve paid your bill.
7) You’ll get tax rebates faster
If you think you might have paid too much tax in the previous year, it’s in your interest to get your tax return in as soon as possible. Tax rebates are separate to tax payments and the process should kick-off as soon as you file your return.
Rebates can be made within a matter of days but can stretch to eight weeks or more. Timing can depend on a number of factors – including the complexity of the situation – but you’ll get your money back quicker if you’re not at the back of the queue.
8) Help will be easier to access
If you need help completing your tax return, you might find it easier to talk to HMRC if you don’t leave it until the last minute. December and January are the busiest months for HMRC and you could find yourself stuck on hold for longer, if you want to speak to an adviser.
You may also find it easier to consult an accountant – and get a good deal – if you’re employing them outside peak periods.
9) You’re less like to get hit with a tax fine
Leave your tax return to the last minute and there’s a greater chance you’ll end up filing it late and getting hit with a penalty and, potentially, interest charges.
If you miss the 31 January deadline you’ll get an instant £100 fine and if you are more than 30 days late paying your tax, a 5% charge will be added.
10) You’ll enjoy a Happy Christmas and an even better new year
Your tax return will be a headache whenever you choose to do it. But getting it done early will mean you have one less thing to worry about over the festive period – especially if you’re concerned about the size of your bill and how you are going to pay it.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.