Benefits of filing your 2019 tax return early
It’s the end of the financial year again so why not file your tax return early this year to save months of stress and last-minute panicking.
Despite HMRC’s best efforts, taxpayers often put off completing their tax return until the January. However, this really doesn’t leave very long to file and pay any tax owed before the 31
st January deadline….
Below are a few benefits of filing your tax return early:
You won’t have to pay tax earlier
Even if you file your tax return early with HMRC, you are only obliged to pay any tax liability by the normal due dates:
- 31st January 2020 (balance and the first payment on account- if applicable);
- 31st July 2020 (second payment on account- if applicable).
Refunds will be earlier
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 and not HMRC’s.
Cashflow
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 2019, 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
Having plenty of time to prepare your return reduces the risk of errors being made, because you aren’t 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 can’t 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 changed the penalty regime for late tax returns, and they are now significantly more 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. But the £100 penalty is now automatic.
And 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. And 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.
Tax Credits
If you are in receipts of tax credit or benefits, your claim needs to be renewed annually by 31st July, which involves letting the Tax Credit Office know of your income.
Whilst you may submit temporary estimates, it is preferable to submit the actual figures as soon as possible to avoid you being overpaid or underpaid until the Tax Credit Office has received your actual figures.
