The January rush to file tax returns!
How many people are guilty of leaving the filing of their tax return to the last minute? As a profession we always see a mad rush during December and January as many taxpayers frantically try to gather the information for us to prepare their personal tax returns ahead of the deadline at the end of January.
Last year, more than 10.2 million people filed their tax return by the 31 January deadline. Around 630,000 of those were filed on the deadline day, with the busiest hour for filing returns being between 4.00pm and 5.00pm when 52,475 tax returns were filed. There were 20,947 people who filed returns between 11.00pm and midnight!
Don’t leave it until the last minute
While filing your tax return can be easy to put off until you are under pressure to get it completed, there are several reasons why getting your tax return filed earlier in the year is a good idea.
You can file the return at any time after 6 April following the end of the tax year, giving you around nine and a half months to complete the return.
Here are six reasons why filing your tax return earlier in the year might be a good idea:
- Cash flow management – while filing your tax return does not mean your tax payment is due any earlier (all tax liabilities must be paid by 31 January), it does let you calculate the payment that you need to make, so you can budget and manage cash flow more effectively. In addition, if your liability for the year is less than £3,000 and you have sufficient PAYE income, you may be able to have the liability collected by way of an adjustment to your PAYE code rather than having to pay the amount as a lump sum. Your tax return needs to be filed before 30 December for this option to be available.
- Tax refunds – while tax payments aren’t accelerated by filing your tax return early, any tax repayment due to you will be accessible once your tax return has been filed. Normally these are issued within a few weeks of the return being submitted to HMRC.
- Reduced errors – giving yourself plenty of time to prepare your tax return reduces the risk of errors being made because you aren’t rushing to get it finished. It also gives you more time to get hold of copies of any bank statements and other financial documents if necessary and doing it earlier means the events of the past tax year will be fresher in your memory.
- Contacting HMRC – while you may not need to speak to HMRC direct when preparing your tax return, if you do need to speak to them, their telephone lines are at their busiest in December and January. In January 2022 the average wait to speak to an adviser on the phone was 12.5 minutes.
- Applying for mortgages – if you are looking to apply for a mortgage as a self-employed person you will be required to provide evidence to support your income. The sooner you complete and file your tax return, the sooner you will have another year’s worth of accounts to add to the evidence.
- Avoiding late filing penalties – Automatic late filing penalties are issued where your tax return is not filed by the deadline of 31 January. The initial penalty is £100 and this increases where the return continues to be outstanding after three months.
Of course, there may be a good reason why you aren’t able to file your tax return on time, and HMRC will consider appeals against late filing penalties where you have a reasonable excuse for missing the deadline.
This can include things like an unexpected stay in hospital, the death of a close relative, or a fire, flood or theft which prevented you from completing the return.
At this time of year, I always like to re-visit some of the more obscure excuses which taxpayers have submitted to HMRC for not filing their tax return on time. I hasten to add none of these were accepted as a reasonable excuse. I hope these make you smile (and inspire to get your tax return filed on time)!
- My pet goldfish died
- My wife won’t give me my mail
- I’ve been cruising around the world on my yacht, and only picking up post when I’m on dry land
- My husband told me the deadline was 31 March, and I believed him
- After seeing a volcanic eruption on the news, I couldn’t concentrate on anything else
- I’ve been too busy submitting my client’s tax returns (London accountant)
If you need help filing your tax return or have any questions about the process, you can contact a member of the Westcotts team or speak to your usual adviser in one of our offices.