Millions of people are understandably concerned about their financial affairs, given the uncertainty caused by the UK-wide Coronavirus lockdown. One of the key ways to mitigate this uncertainty is through sound planning and taking a proactive approach to the management of your finances. A good starting point is getting your tax return filed early. This will allow you to effectively budget for the rest of the year and prevent unnecessary stress later down the line. The official date by which tax returns need to be filed for the 2019-2020 tax year is 31st January 2021, but you can complete this process any time after the 6th April 2020. In this blog post, Salford accountancy firm, MCC, highlight the main reasons why getting your tax return in early is more important than ever.
You Don’t Have To Pay Straight Away
A common misconception that we come across is that once you have filed your return, you must pay all the tax you owe immediately. This is not the case. No matter how early you file your return, you’ll only have to pay your tax liability by the usual due date of 31st January 2021 for your balance and first payment on account (if applicable) and 31st July 2021 for the second payment on account (if applicable). That way, you can get ahead of schedule to focus on other important matters later down the line.
Planning for life post-lockdown is considerably easier if you have filed your tax return early. You’ll know exactly how much you owe well in advance of the payment deadline, meaning you can put aside some money to pay whilst knowing what’s left for you to spend and save yourself. If you leave filing to the last minute and haven’t put money aside, you might end up in the nightmare position of being unable to afford your tax bill and being hit with considerable fines as a result. Knowing how much money you’ll have in the longer term and assuring your financial security is an excellent way to remove some of the uncertainty current events may cause. You’ll also have time to seek professional advice from your accountant about planning for the future in the most effective way. In short, filing your return will allow you to better manage your cash flow and finances.
Completing your return in plenty of time will stop you rushing at the last minute. You’ll be able to gather together all of the relevant documents and paperwork you need, such as bank statements, in advance. If you have had a change in your circumstances, for example if your income has changed considerably, as it might have done at this difficult time, doing so is particularly important. With all the information you need to hand, you’ll be less likely to make mistakes and HMRC will not have to look into your tax affairs. You’ll therefore save yourself a lot of time and effort which could be better spent elsewhere.
Extra Money in the Bank
Money might be tight at the moment and you may be trying to save as much as possible. Filing your tax return early can help with this. The earlier you file, the earlier you can receive any tax refund you are owed. Once your refund has been processed, you’ll have the money transferred into your bank account where it will start earning interest. Whilst rates might be low at the moment, a little extra cash can go a long way and provide extra security in these uncertain times. Furthermore, if you wait until January to file, HMRC may take considerably longer to process your return as they’ll have so many to deal with, meaning you’ll be waiting much longer for your payment.
Avoid Late Payment Penalties
That brings us to the final reason why filing early is so important; it allows you to avoid the considerable late payment penalties that HMRC issues. Ignorance or a lack of organisation on your part will not be accepted as a genuine reason for a failure to pay. No matter how much tax you owe, if you fail to pay by the deadline you will automatically be fined £100. If you’ve still not paid after three months, you’ll be required to pay £10 a day, up to a maximum value of £900. Further failure to pay after six months will mean you’ll be charged 5% of the tax owed or £300, whichever is higher; this will repeat after twelve months. Don’t be one of the many thousands who end up fined because they have failed to get their tax affairs in order in time.
Tax Return Support
We understand that filling in the lengthy but necessary paperwork can be quite a daunting task; a simple mistake can cause quite a lot of needless hassle. At Salford accountancy firm, MCC, we have a team of dedicated tax specialists ready and waiting to help. Should you require our assistance, please call on 0161 707 1500 or complete our contact form.
To find out whether you need to complete a tax return, please visit the Government’s advice page.