7 reasons you SHOULD submit your taxes early
To file early, or leave everything to the last minute – that is the question (preying on most sole traders’ minds as we enter a new financial year). We are, of course, talking about submitting your tax return (otherwise known as your Self Assessment), which can technically be done any time between 6th April and the HMRC deadline of January 31st the following year.
So, should you submit your Self Assessment early?
While some go by the philosophy that there’s no point in doing a whole lot of admin before you absolutely have to, this can lead to a huge amount of unnecessary stress in the long run – and isn’t really logical. It helps to think about it like this: you get just under nine months to get your taxes in order for the previous financial year. By leaving everything until the last minute, you’re denying yourself the time and freedom to do things properly, and without stress. All that time is there for you to utilise – to save, plan and optimise your taxes in a way that means you’re not over, or under-paying.
It also gives you plenty of time to plan your tax payments, so you’re not left scrambling for funds as each deadline approaches.
But we get it – there’s a lot of confusion around this topic, and understandably so. That’s why we’re here to clarify some of the key benefits of getting your ducks in a row way before that looming deadline. First, let’s address one of the most common questions we get asked regarding this subject:
If you file your tax return early, do you have to pay early?
No! The belief that you have to pay your final bill early if you submit your Self Assessment early is one of the biggest deterrents to people getting organised in good time. Why would I outlay all that money now if I can do so later, right?
What’s crucial to recognise here, is that you can file your Self Assessment and learn what you owe, but still pay this sum at a later date (just before the deadline if that suits you). Of course, there’ll be people who would rather get everything paid up as soon as possible, and that’s fine too.
So, here’s why you should submit your tax return early
1. You’ll actually be able to enjoy the festive period (and your new years’ resolution can be something other than ‘Improve my financial discipline’)
When you leave your tax return to crunch-time things can and probably will get messy. This is something nobody wants, especially considering the deadline looms right after the festive period. Nothing kills New Year’s Eve party vibes like the person whining to anyone who’ll listen that ‘they’ve not even begun to get their taxes in order’.
Here’s the deal. If you leave things to the last minute, you’ll have very little time to get things done properly and without stress. This means you’ll be very rushed, and it’s an unfortunate fact of life that you’ll probably end up making mistakes because of this. The same goes whether you use an accountant or not (unless your accountant has mystical time-bending superpowers – let us know if they do).
It’s true that using intelligent technology like Finmo across the year does help massively speed up the Self Assessment process. But that’s not really the point. When it comes to filing your taxes accurately, you’ll need some breathing space to properly go through everything, preferably with the help of an accountant. That’s the only way you’ll be sure you’re not forgetting anything important. Mistakes can come in many forms, from accidentally getting your National Insurance or UTR number wrong, to forgetting to declare capital gains or missing a large on-off expense that could have saved you money.
Results from these mistakes could span from a whole lot of extra admin-headaches, to paying way too much tax, through to prosecution for making illegal expense claims. Yikes.
2. You’ll get to be one of those self-righteous people who actually understands their finances in and out, and so who can plan better
Leaving your Self Assessment to the last minute usually means you won’t know exactly what you actually owe until you have to pay it. Even if you’ve estimated what you owe, there’s a chance you’ve missed something which could result in a nasty surprise. Say, for example, there was a big expense you were able write off last year, but this year that expense didn’t end up happening (which you forgot about). That would make your tax bill higher, even though your income is the same.
On the other hand when you do your return and have it reviewed by an accountant, you may find you owe less than you think. Whichever way you look at it, there’s definitely an element of ‘the unknown’ until you actually do your Self Assessment. Getting this done early eliminates that, so you can organise your finances across the year.
3. You’ll approach payments on account with unheard of levels of zen (yes, you)
As a self-employed person, you’ll be required to make ‘payments on account’ each year. For those new to self-employment, this is where you pay half of your next predicted tax bill on or before 31st January, and the other half by 31st July of the same year. Each payment is exactly half of what your tax bill was the previous year. Filing your Self Assessment early means that you’ll know exactly how much you owe for your payments on account, with plenty of time to prepare. Plus, if you file in good time before 31st July and earned less than predicted in the last financial year, you may even be able to reduce your next payments on account by making a claim to HMRC. Nice.
4. You could get a tax refund earlier – cha-ching?!
If, for any reason, you’ve paid too much tax during the year, you’ll be due a tax refund. The sooner you file your tax return, the sooner you’ll get the money – simple.
5. Tax planning for the future will actually become a thing that you do
Filing your tax return gives you full visibility over your finances for that year. This means you’ll be aware of your income and expenses in minute detail – information that can come in useful for tax planning for the future. For example, your accountant might advise you that it’d be worth paying into a pension and making other business expense purchases to keep your income below the higher tax bracket.
6. You’ll be in a better place to get a mortgage or other loans
If you don’t know what your books look like, you can’t prove to loan providers what your self-employed income is, or at least not for the most recent financial year. In this sense, filing your Self Assessment early means you’re better equipped to apply for things like mortgages and business loans.
7. You’ll be able to say goodbye to the nightmare that is worrying about government fines
HMRC’s tax deadlines are there for a reason – and if you miss them, there’s every chance you’ll get fined. Leaving everything to the last minute makes it all the more likely you won’t hit those dates (cue: sleepless nights), but getting started early means you’ll approach them with full peace of mind. Phew.
Here’s how Finmo can help you get sorted, once and for all