As a business owner, you may have found yourself with more time on your hands lately. It’s certainly not something anyone is celebrating as it is associated with many extra Coronavirus worries and challenges. One action that is a good use of time and will not only provide a sense of achievement but will also give you an accurate picture of your tax affairs is to complete your 2019/20 self-assessment tax return.
Deadline day on 31 January is still the busiest day for filing each year, with over 750,000 returns filed in the final 24 hours. January is an overwhelming time for HMRC call centres and it can take quite a while to get registered and sort out any queries and issues. So what are the key benefits to using this lockdown time wisely to submit your tax return early?
- File now, pay later
Just because you file your tax return early, doesn’t mean you have to pay your tax bill any earlier. The deadline for paying the balance or first payment on account is still 31 January and this year, the second payment on account deadline of 31 July 2020 has been automatically deferred by HMRC to 31 January 2021 due to COVID-19.
- Quicker refunds
If you’re due a tax refund, the quicker you submit your return, the quicker the refund will be processed and can be earning interest in your bank account. Refunds often take longer to process in the busy January period.
- Plan for tax owed
When your tax return is complete, you’re fully in the picture about your tax bill. The earlier you file your return, the longer you have to budget for what’s due. If your liability is lower than last year, for example, because your income is lower or you have extra deductions, you may be able to reduce your July payment on account rather than overpaying and getting a refund later.
- Change of circumstances
If your work or home situation changed during the 2019/20 tax year – divorce, employment, inheritance, etc. – gathering the necessary paperwork together and talking through the tax implications with CRM this summer gives you the breathing space to get it right.
- The great paperwork hunt
Do your receipts and invoices get left in car door pockets, handbags, wallets and office drawers? These important scraps of paper need to be gathered together and sorted for your tax return and this can take time.
- Use your tax code
If you submit early and owe less than £3000 in tax, you can opt to have the amount collected through your tax code – a useful option for pensioners and employees that can ease the pressure on cash flow.
- Avoid nasty fines
Late tax returns incur an automatic penalty of £100, no matter how much tax you owe. If your tax return is over three month’s late, £10 daily penalties accumulate up to a maximum of £900. For a six month overdue return, the penalties grow further and can reach £1600, so it’s well worth getting to grips with your tax return as early as possible.
Perhaps this is the year that you decide to go online to make the process easier – CRM has lots of experience in digital tax software and can advise you on the best course of action. If you’re ready to tick your tax return off your list of tasks this summer, contact the tax experts at CRM on 01865 379272.