QUESTION: I am trying to get my financial affairs in order and wondered should I file my self-assessment return now and not at the end of January?
ANSWER: It is inherently sensible to file your tax return as early as possible. Your Accountant will be glad to see your return information in early so that you both can discuss the return and its associated liability.
A lot of taxpayers put off filing a tax return to the very last minute annually and of the approximate 13 million UK self-assessment returns to be filed almost 15 per cent are filed late which, in the absence of a genuine reason (illness etc), is simply inexcusable.
As soon as you have all the information you need (such as a Form P60, P45, P11D and all your income and expenses), you can file your self-assessment. If you have investments, then your financial advisor will be able to provide a broker pack for the last tax year. You should therefore have all the required information at this stage.
As soon as your return is drafted you will have a good idea of your tax liability. You may even be due a tax refund and the sooner that you file your tax return, the sooner any refund you may be due can be processed.
There are many reasons why you may be due a tax refund, including excessive payments on account based on the previous year's income, one off pension contributions, and for employees and directors where HMRC have made errors with their tax codes.
Building subcontractors who have had tax deducted at source through the CIS are often in a tax refund position.
Many businesses are currently trying to forecast their cash needs in the short/medium term and one of the biggest expenses the self-employed will have before the end of the tax year will be their income tax bill.
Knowing exactly how much your tax bill will be in January 2024 will help you to plan effectively for how you will be able to pay it. You may require time to pay from HMRC and if that is the case you should engage with HMRC and ask for a phased payment arrangement before the date the liability falls due.
Remember just because you file your return early does not mean that you must pay the liability immediately. That only becomes due for payment in January 2024.
Another benefit of filing your tax return early is that if you have earnings taxed under PAYE (from other employment), you can choose to pay your self-assessment tax month by month via PAYE. You must have a tax bill of less than £3,000 to be eligible and file your return before the end of December.
Finally, the threat of getting fined is part of the reason that leaving a tax return to the last minute is so stressful. If you pay one day late, it is a £100 fine. Then after three months have elapsed, it is £10 more for each day until you reach the £1,000 cap. Additional fines are levied on top of that if you are more than six or 12 months late.
The only way to guarantee you will not have to pay these fines is to file on time. You might encounter unexpected complications if you leave it to the last minute, potentially delaying you past the deadline.
By filing your self-assessment early, you can be certain that you will not end up filing late.
Finally by filing now you can discuss the current year tax liability which is due for filing on January 31 2025. You have seven months from now to reduce your liability by pension planning or investment in tax efficient products such as EIS and VCT funds.
:: Paddy Harty (p.harty@fpmaab.com) is private client tax partner at FPM Accountants Ltd (www.fpmaab.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies
