Freelancers - be Tax Savvy: File Early In 2020
You might think
it unusual that, almost immediately after the Budget and with the previous tax year only just behind
us[KG1] , we’re recommending that you submit your
tax return.
However, the
facts speak for themselves: filing just short of the deadline is a dangerous
game. HMRC is under pressure, you may not have the documents you need, and it
doesn’t exactly leave you much time to save for your tax bill.
Filing in April,
on the other hand, solves all of the above and steers you clear of any late-filing
penalties. But don’t just take our word for it. We’ve asked Mike Parkes from GoSimpleTax
to explain the benefits of filing early in full detail below, along with
details on how to claim your member discount.
Give yourself
time
Despite being an
annual occurrence, almost a million people missed 2020’s Self Assessment tax
return deadline. Over 700,000 submitted on deadline day. Part of the reason for
this isn’t because the taxpayer has forgotten, but that they’ve underestimated
the time it takes to register.
HMRC’s customer
service team is already run off their feet in January, and supplying you with a
UTR code and registering you for their online services isn’t a quick job.
Neither is sending you an activation code in the post that you need to log on.
Yet you’ll still have to pass through each stage of enrolment before you can
file.
What’s more, you
need to locate all of the information and paperwork necessary if you hope to not
only remain compliant, but potentially reduce your tax liability through
allowances. Expenses, invoices, receipts and bank statements are hard to track
if you’re submitting in January, almost two years after the tax year you’re
filing for.
Avoid the
rush
HMRC aren’t the
only ones exhausted in the lead-up to the Self Assessment deadline. The postal
service will be struggling under the weight of Christmas communications and
festivities – as will your accountants before they enter their busiest period.
This causes
stress for a number of business owners – stress that can easily be reduced by
being proactive and filing when last year’s accounts are still relatively fresh
in your mind.
Also, the
anxiety of leaving your tax bill to the very last second can impact your
productivity and drain your resources. Devoting yourself to your taxes in
January – a slow time for most individuals anyway – can harm your motivation and
finances.
Manage your
cash flow
Filing early
does have its financial perks. Of course, most will be faced with a tax bill;
however, some will be owed a tax rebate. If you’ve overpaid in your previous
year, HMRC will notify you and will return what you’re owed within a few weeks.
For the rest of
us, an early tax bill isn’t such a bad thing either. Your cash flow will be
better informed for the new tax year, and you can allocate resources with more confidence.
Remember, your tax
bill isn’t due until the 31st January the following year. Filing
early just gives you that visibility over what you owe. Effectively, all you’re
doing is giving yourself the heads-up to allow for better budgeting.
Avoid penalties
Finally, the
obvious benefit of filing early is not having to pay a fine. Getting your Self
Assessment tax return out of the way keeps you from facing any late-filing
penalties, of which there are many.
Firstly, you’ll
receive an instant £100 fine if you miss the 31st January deadline. For
the next three months, if you haven’t yet filed, you’ll be charged £10 a day
for up to 90 days. After that, you’ll face a £300 fine (or 5% of the tax you
owe – whichever is greater).
Still not filed
within a year? You’ll be issued another £300 fine or, again, 5% of the
tax you owe if greater. At this point, HMRC may believe you’re intentionally
delaying your filing. If they do, you’ll be penalised by an additional 100% of the
owed tax.
GoSimpleTax
software is designed to make filing as straightforward as possible and ensure
you avoid late-filing fines. Their solution is intuitive and easy to use,
allowing for taxpayers at any level of experience to file without the
assistance of an accountant. What’s more, their software will identify areas
where tax liability can be reduced if you qualify for certain allowances.
Interested? Take
your free
trial today – no credit card required!
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