There is a common misconception that filing your Self-Assessment tax return before the deadline means that you need to pay your tax bill early. This is not true. By filing early you are providing yourself with more time for preparation and more likely to avoid the HMRC fines and penalties if your tax return is incorrect, incomplete, or your supporting documents are not available should you be put through an investigation.
Filing early not only removes the stress around the 31st January deadline, but starting your filing process at the start of the tax year means that you will know your tax bill in advance and allow you to prepare more accurately, remember which expenses you can claim for and budget for the year ahead.
Tax returns prepared in plenty of time help you to plan and budget throughout the year; knowing your tax bill beforehand helps you to determine how much you would need to save for extra purchases, resource or space and provides an extra layer of stability should external forces such as the current pandemic affect your business.
The earlier you start to begin the process, the more likely you will have those elusive receipts to hand and it will be easier to pull them together. Penalties can be received for expenses claimed for which evidence cannot be provided.
Around 1 million people are fined up to £1,000 each year by HMRC for failing to return their self-assessment tax returns. Missing your Self-Assessment tax return deadline means you will be issued with an initial £100 penalty. If your tax return becomes more than three months late, £10 daily penalties will be issued. After six months, you will receive a £300 fine or 5% of the total tax due (whichever is greater). The same happens again after 12 months.
So, the early you file, the better, leaving just your tax bill to be paid once the 31st January deadline is upon us.
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