With the new year just around the corner and tax season fast approaching, now’s a good time to get a head start on your self-assessment tax return.
What is self-assessment?
Self-assessment is a system HMRC uses to collect tax on income that wasn’t taxed at source. People who are self-employed, such as sole traders, have to file a self-assessment return, along with partners in partnerships and landlords who receive rental income. Directors of limited companies who pay themselves a dividend may also need to file a return. If you’re not sure whether you’re affected, you can check if you need to send a return on the Government website.
When is the self-assessment deadline?
The deadline for completing your return for the 2022/23 tax year is 31 January 2024. Any taxpayers who don’t file their return and pay any tax due by February 2024 will face penalties and interest.
It’s a good idea to submit your return now to avoid incurring any extra costs. To help you get started, we’ve outlined some of the benefits of filing your return early below.
Improved cashflow management
The earlier you submit your self-assessment return, the sooner you’ll know how much tax you owe. You don’t need to pay your tax bill at the same time as filing your return, so filing earlier will give you plenty of time to budget and manage your cashflow accordingly before 31 January. Giving yourself that extra bit of notice enables you to adjust your finances and make provisions where you need to.
Even if you end up with a bigger bill than you were expecting, it will be much easier to pay it when you’ve had a month or two to plan ahead. On the other hand, missing the filing and payment deadline will result in having to pay interest on your tax bill, as well as penalties. Cashflow problems are very common this time of year, so avoiding this extra cost is crucial.
More time for tax planning
Making a head start on your return will give you time to explore the wide range of reliefs and allowances available. Moreover, filing early can give you more time to seek expert tax advice. Accountants know the tax system inside and out and can advise you on how to become as tax efficient as possible while still staying compliant.
Working with a specialist may introduce you to methods of reducing your tax liabilities that you were previously unaware of. If you work as a sole trader or partner, you may be able to deduct some of your business costs as allowable expenses, which can include money spent on office supplies and travel, as well as the costs of running your business premises. Other sources of tax relief include claiming on tax-free charitable donations and claiming any pension contributions that you make throughout the year.
Access tax refunds sooner
If you file your return early and you’re owed a refund, there’s a good chance you’ll receive it ahead of the deadline. HMRC will let you know the amount you’ve overpaid by as soon as you complete your self-assessment form. After that, they’ll be able to process your refund, and you may not have to wait until 31 January to receive it. If you think you’ve overpaid, filing earlier can speed up the process.
Gain peace of mind
A looming tax deadline can make it hard to enjoy the holidays, but completing your forms now may alleviate some unnecessary stress in the coming weeks.
Are you ready to take the first step? Share your tax season tips on our LinkedIn page!
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