Benefits of Preparing the Self Assessment Tax Return now.
As of the 6th April you can now complete your 2021 Self Assessment Tax Return. Our fixed fee for Self Assessment Tax Returns is £300.00 + VAT. (Loyalty discounts apply to existing clients)
HMRC have been hit very hard by the Covid 19 crisis and we are already seeing the impacts and delays across all their services.
We strongly recommend preparation of your 2021 Tax Return now so that you have time to deal with any issues that might arise. Contacting us now will also provide us with more time to help you review the government Covid 19 support that may be available for your business (Deadlines for support applications are approaching). Doing this now will also assist you to prepare for the changes that you will be obliged to implement to comply with the HMRC MTD regulations.
More generally taxpayers often put off preparing their tax return until late in the year. However, this really does not leave very long to file and pay any tax owed before the January deadline. It is much better to get this task done and dusted now as it will allow more time to set money aside to pay the tax bill, to apply for a COVID deferment or 'time to pay' or to deal with any issues that might arise.
In this post, we highlight the main advantages of filing tax returns early:
Tax payments are not accelerated
Even if you file your tax return early with HMRC, you are only obliged to pay any tax liability by the normal due date:
31st July 2021 Second payment on account
31st January 2022 (balance and the first payment on account - if applicable);
...But refunds are accelerated
If you file your tax return before the filing deadline, you should receive any tax refund you are due fairly soon after you’ve submitted it. HMRC do not wait until 31st January to pay you. Therefore, if you suspect you have overpaid tax and are due a refund, you should really prepare your tax return as soon as possible so that you can get the cash earning interest in your bank account... not HMRC’s!
Cash flow management
Filing your tax return and calculating any tax liability arising, allows you the time to start saving for the bill and to manage your cash flow. If you pay your tax bill late, HMRC will charge you interest and possibly even late payment penalties.
The other benefit of filing early is that if your tax liability is under £3,000 and you submit your tax return by 30th December 2021, you can opt to have your tax liability collected through your tax code. This means it will simply be deducted from say your wages or pension each week/ month.
Time
If your affairs have changed this year and you have say, losses or a significant amount of additional income, then preparing your return early can pay dividends because it gives you the time to consider any tax planning opportunities which could lead to tax savings.
Calculating your tax liability now will also assist you in deciding if you should request a deferment of your tax payment:
https://www.gov.uk/difficulties-paying-hmrc
Furthermore, having plenty of time to prepare your return reduces the risk of errors being made, because you are not rushing to get it finished. It also allows time for bank statements to be collected and any other financial documents you may need to file the return.
Contacting HM Revenue & Customs
Trying to get hold of HMRC can be pretty difficult at times due to staff cuts, but it’s even more difficult around the tax return deadline. Avoid leaving your tax affairs until December or later; just in case you need to speak with the department and cannot get through.
If you are due a tax refund, you’re also likely to experience a longer turnaround time if you file your return during their peak times.
Penalties
HMRC have tightened the penalty regime for late tax returns, and they are now significantly stricter than they used to be. For example, the initial £100 penalty used to be reduced if you paid the tax on time or was capped to your tax liability. However the £100 penalty is now automatic and is very difficult to appeal.
If your tax return is more than three months late, £10 daily penalties start to accumulate up to a maximum of £900. A penalty of the higher of £300 or 5% of your tax due is then charged if your return is 6 months late and again if it becomes over 12 months late. All of these penalties are in addition to one another; rather than in place of. This can mean penalties for late tax returns can top over £1,600.
COVID 19
HMRC state that due to the Covid 19 crisis they will allow tax deferments and be more generous with 'Time to Pay' provisions. In most instances these opportunities will have to be applied for before tax falls due. It will better to have your tax liability calculated early so that you can meet any deadlines and know where you stand on any deferment or time to pay requests.
Using Gilchrist & Co and contacting us now will take away the stress of filing tax returns and leave you to concentrate on running your business. Not only should penalties and interest be avoided, but we may be able to save or defer you tax. We can also keep you informed of your tax position and abreast of any changes in the tax regime.
Call Martin on 07967 809 507 or email martin@gilchristandco.com to arrange collection of your books now.
