Self-assessment: it’s something that most business owners (and many others) have to do every single year. But somehow it’s one of those things that so many dread and end up leaving to the last minute when there is absolutely no need to do so.
Have you nearly been late submitting your tax before? If you have done it once you probably haven’t done it again in a hurry! Figures show the number of people filing their tax returns on the first day they can has tripled in the last five years as we all try to get more organised.
The next return is for 6 April 2020 to 5 April 2021 and accounts for your income, even if you were hit by the economic effects of Covid. If you haven’t done it yet, there is no reason not to submit your tax return as soon as possible – it’s up to you when you pay any tax due as long as it is before 31 January 2022. So why should you be thinking about this now? There are good reasons to submit early, your chances of making mistakes are lower and you can organise and get your paperwork together at your own pace, there is more time to plan your tax bill and what you owe to HMRC, receive possible tax rebates earlier, and of course, you would avoid any penalties.
Submitting your tax return late can mean the following:
- If you are late, even for one day, there is a penalty of £100.
- Late by up to three months: £10 extra for each day late and capped at 90 days.
- Late by up to six months: an extra £300 or 5% of the total tax due (whichever is the highest)
- Late by up to twelve months: an extra £300 of 5% of the total tax due (whichever is the highest)
Plus, if you have mistakes and what you submitted to HMRC is wrong, penalties are based on the amount of tax you owe with HMRC considering the following:
- 0% if you took ‘reasonable care’ to fill your taxes correctly
- 0%-30% if you made mistakes
- 20%-70% if you deliberately underestimated your tax
- 30%-100% charge if you deliberately underestimated and tried to conceal it.
According to HMRC, last year there were around 700,000 taxpayers racing to hit this year’s 31 January deadline having left their tax return submission to the last day – with 26,500 people submitting their return in the final hour between 11pm and midnight. There is just no need to be that last minute.
Through years, we were reminded of a few of the favourite genuine excuses which HMRC received last year, which included: “I’m too short to reach the post box”, “I had a curse put on me”, “I couldn’t type, because my boiler broke and it was too cold”, “My dog ate the post again”, “I’ve been cruising around the world in my yacht, and only picking up post when I’m on dry land.”
Why does everyone wait until January to do their tax return? The truth is you just don’t need to. After so many months of difficulties for business, and losses for many, it is more important than ever to ensure your tax affairs are looked after in enough time. There are lots of reasons why it is a good idea to get your tax return in early, and avoiding fines is probably the least of all of them. If you need an accountant to help you, we would be delighted to discuss. Contact your local AIMS Accountant today.