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The benefits of filing tax returns early for Limited Companies and the Self-Employed

Melanie Richardson

18/05/2019

Year-end has come and gone, and we are into a new financial year. The last thing you probably want to think about is your tax return. However rather than wait till the last minute this year, why not get ahead of the game and enjoy the benefits that early tax return filing can provide? This article will discuss the advantages and disadvantages to filing your Corporation Tax Return & Self-Assessment early.

Benefits for companies:

Tax payments aren’t accelerated

You don’t have to actually pay the tax due until the deadlines, just because you file your return early does not mean that you have to pay early. You just have the information at hand to plan forwards and budget.

Cash Flow Management

Nothing is ever guaranteed in business or life...apart from death and taxes. You will have to pay taxes on your profits that is a certainty. It’s advantageous to have all of the information as early as possible so that you can budget appropriately and ensure that you have the necessary funds ready to pay your tax bill when the time comes.

Avoid late penalties

If you wait till the last minute to prepare and file your corporation tax return you run the risk of coming unstuck when you need specific information that might not be readily available. Penalties are not severe instantly but can mount up and HMRC do not look favourably on this.

Time after your deadline	Penalty
1 day	£100
3 months	Another £100
6 months	HM Revenue and Customs (HMRC) will estimate your Corporation Tax bill and add a penalty of 10% the unpaid tax
12 months	Another 10% of any unpaid tax

Peace of mind

Businesses can be stressful places at times and you rarely know what is coming up in the future. This is an opportunity to gain more clarity over the financial future of your business and at least understand and factor future outgoing payments into your plans.

Benefits for self-employed or sole traders:

Tax payments aren’t accelerated

You don’t have to actually pay the tax due until the deadlines, just because you file your return early does not mean that you have to pay early.

Give yourself time

It can take time to gather everything you need to file Self Assessments, P45s, P60s, expenses, invoices and statements. If you do this in January, you need statements going back nearly two years and some banks may charge you for the privilege. It’s best practice to download and store CSV versions of your statements each month however if you don’t do this, getting on top of it early will give you the time to get everything in order early.

Time to save for your bill

This is the big one. If you know how much you will owe in January you can save, plan and put money aside so that you are not left in a difficult situation after Christmas. Don’t ruin your Christmas by being unprepared, make sure you have all the information that you need to be able to budget, plan and comfortably afford your tax bill in January.

HMRC are less busy

HMRC are busy…with more and more people choosing self-employment January has become a difficult time to get in touch with them. If you have questions or there have been mistakes it’s better to be able to call them early and sort out the issue. If you’re stuck in January not being able to find the answers you risk being in a late filing situation and possibly incurring fines.

Avoid late penalties

It seems obvious but if you file early you will avoid late penalties. It’s not only the financial burden but the stress caused by these penalties that is worth avoiding.

The current penalties are:

A £100 instant fine if you miss the January 31st deadline
£10-per-day fines (for up to 90 days) if you haven’t filed by 30th April
A £300 fine (or 5% of the tax you owe – whichever is greater) if you still haven’t filed after another 90 days
Another £300 fine (or 5% of the tax you owe – whichever is greater) if you still haven’t filed within a year
Additional penalties – including up to 100% of owed tax – if HMRC believes you are intentionally delaying your filing.

Peace of mind

It goes without saying that being self-employed is not the easy route. It’s stressful and at times difficult and uncertain. Peace of mind is invaluable when you work for yourself. A few days’ work early in the financial year can save untold problems down the line. If you have any questions or are struggling, we’re always here to help and can discuss the best options for you to completing your Self-Assessment early.

If you need help with getting your tax return in early get in touch with our Business Services Partner Robert who can discuss the best route with you:

Email: robertw@swindellsaccounting.co.uk

Tel: 01825 763366

Robert east sussex accountants

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