How Soon Should I Submit My Self Assessment Tax Return?

This guide has been curated for the previous tax year ending 5th April 2021. 

You’re not alone when it comes to procrastination in filing your self-assessment tax returns. For the year 2019/20, almost 11 million UK nationals submitted their self-assessment forms around the deadline, and nearly 2 million UK citizens failed to meet the deadline.

But let us help you make sure that this year is different by planning for your self-assessment tax return early with the help of this quick guide!

What Is A Self-assessment Tax Return?

The HM Revenue & Customs self-assessment is a process set in place to assess your income generated, profits, and expenses throughout the tax year. Self-assessment can be done easily by filling out the self-assessment form, tax calculation, and submitting tax returns to HMRC. For most individuals, it seems like a lot of work; however, being vigilant with your self-assessment provides you with peace of mind and provides you with more time to plan out how to set aside funds to make tax payments when it’s due. 

Learn everything you need to know about self-assessment tax returns and how to complete HMRC’s forms accurately and efficiently

• Comprehensive Guide to Self-Assessment
• Guide to HMRC Self-Assessment Forms

Do You Need To Register For Self Assessment?

Before we move on towards the filing of your self-assessment, let us first ensure that you are eligible for it as well. You are required to register with self-assessment if,

• Your self-employment income was more than £1000.
• Your income from renting out the property was more than £2500.
• You earned an income of more than £10,000 before tax from investments or savings.
• You earned an untaxed income from various sources, such as tips and commissions, that was more than £2,500.
• You’re a trustee from a trust or a registered pension contributions scheme.
• You’re a company director.
• Your total taxable income is more than £100,000.
• On earning over £50,000 and making pension contributions, you must file a self-assessment to claim back extra tax relief.
• Claiming child benefit if the earnings of your partner or you are over £50,000.
• Your state Pension exceeded your allowance and was your only source of income.
• HM Revenue and Customs has notified you that not enough tax was filed in the previous year.
• You have income earned from abroad that you must pay tax on, or you live abroad but have an ongoing income in the UK.
• You need to Pay Capital Gains Tax on profits from selling shares or properties.

If any of the above mentioned conditions apply to you, you would be liable for registering for self-assessment payments.

• How is Pension Income Taxed?
• A Complete Understanding of Capital Gains Tax
• Claiming tax relief on employment expenses

How Do I Prepare My Tax Returns?

Preparing your self-assessment tax returns is a relatively straightforward process in most cases; although there are a few steps you need to take to get yourselves prepared.

Registration with HMRC

The first step is to get yourself registered with HMRC to access your Unique Taxpayer Reference or UTR. However, it is important not to wait for the last day to get registered with HMRC as it can take up to 10 working days for your UTR to be allotted once you applied and be sure to account for the additional 7 days it takes for you to get access to your activation code. Therefore, make sure you get registered with HMRC before the tax return deadline, and accordingly, considering any other unforeseen incident. 

Organise Your Documentation

The next step is to organise your documentation and particulars by effective bookkeeping. Do not wait until the last minute to organise your books, as most businesses fall victim to the last panic because of incomplete and disorganised records. In addition, ensuring that you keep your books regularly updated will allow you to file your tax return much earlier and enjoy the benefits that come along with it.

• Self-Assessment Deadline: Beat the Last-Minute Rush

Application of reliefs

Consult with your tax accountant to explore tax relief options you can claim that will help you reduce your tax liabilities. Understanding your income tax band and your tax liabilities plays a crucial role when it comes to self-assessment filings and claiming tax reliefs. There can be industry-specific tax reliefs offered by the government that you may claim based on your official business model, business structure, or industry. 

Understanding your business model and structure is key to identifying applicable tax reliefs and optimizing your tax liabilities.

• Business Models: An In-depth Understanding of the Types of Business Models
• Selecting the Right Business Structure for Your Startup
• UK Tax Codes – What Do They Mean?

Keep Track of Personal and Business Expenses

If you are a self-employed sole proprietor, make sure you keep your business expenses separate from your personal expenditures. It would allow you to claim business expenses as relief from taxation. 

On numerous occasions, we have noticed clients treating business expenses as personal expenses and adding to their tax liabilities. Suppose you are having a hard time differentiating between the two. In that case, we suggest that you look for the help of professional tax services and accountants who can help you figure out your actual liabilities or open a separate bank account just for your business transactions. 

If you still fail to make an early filing of your self-assessment tax return, consult this detailed guide on what to do to avoid last-minute panic and avoid penalties.

Simplifying expense tracking and choosing the right business bank account can help manage personal and business finances effectively.

• Best Business Bank Accounts for the Year 2023
• Simplified Expenses for the Self-Employed Individuals

How early can I file my self-assessment tax return?

The tax year of 2020/21 ends on the 5th of April 2021, meaning you can file for your self-assessment tax return starting from the 6th of April 2021. 

A self-assessment tax return can be filed as soon as your tax year ends; this is why we strongly suggest that you keep regular track of your income and expenses as the earlier you file for your returns, the more beneficial it would be for you.

Let us look at some of the benefits and reasons for you to file your return early.

Should I file my tax return early?

You can never go wrong with filing your tax returns earlier as it comes with added benefits and helps you relieve a lot of pressure that would allow you to focus on more daunting tasks. Let us look at some of these benefits:

• Simple Assessments – The effect on Self-Assessment Tax Returns

Receiving Your Tax Refund

Every year, a few lucky people are owed a refund on their self-assessment return by  HMRC. This refund can provide your cash flow with the positive push it requires. If you submit your tax return early, you will be able to get that refund earlier as well, boosting your cash flow.

Planning Ahead

Knowing the amount of tax you owe will enable you to plan farther ahead as you will be aware of your liabilities and how much you can spend to expand or grow your business. In addition, knowing the tax bill almost nine months in advance will allow you to put away the money you owe as tax liability, giving you the financial freedom to make better, more informed decisions.

Avoiding Mistakes

HMRC has rigorous policies when it comes to incorrect filing of your self-assessment tax returns. An incorrectly filed tax return can end up costing you quite a lot as there are penalties leading up to 30% of the tax due in fines. If you are filing your tax return earlier, you would have had a long time assessing the return and ensuring there are no discrepancies.

Claim It All

Not only will you rectify any errors in your tax returns, but you will also enable yourself to make sure that you claim tax relief on everything that applies to you and lower your tax liability drastically. Additionally, you would also have more time to seek professional advice in case of confusion that you cannot resolve by yourself.

It Takes Time To File

It’s not always rainbows and butterflies when filing your tax returns, especially near the filing deadline as in the past there have been multiple instances where thousands of taxpayers failed to submit their tax returns due to technical issues and heavy online traffic on HMRC’s website. HMRC fined millions of pounds to late filers as they have to pay fines on penalties and interests on further delays. 

This is why it is always good to give yourself the luxury of time and file earlier to avoid any complications.

Avoid Penalties

Let us look at the penalties you would be able to avoid by filing your tax return earlier,

• A £100 instant fine at the time of missing the January 31st deadline
• £10-per-day penalty if the return hasn’t been filed by 30th April of the following year ( only goes up to 90 days)
• A £300 fine (or 5% of the tax you owe – whichever is greater) if it still hasn’t been filed for another 90 days.
• Another £300 fine (or 5% of the tax you owe – whichever is greater) if you fail to file it in the next year as well.
• Additional penalties include up to 100% of the total tax owed if the HMRC assumes you intentionally avoid paying tax.

Potentially, you can avoid £1,600 + an additional 100% of your total tax owed by filling out your tax return at an earlier date.

So there you have it; we believe it has been evident how filing your tax return earlier can benefit you and save you thousands of pounds. Now that you are aware of the consequences it’s time to look at how you can file your tax returns.

How to File Tax Returns?

There are a few ways you can submit your return depending on your preference and tax liabilities. However, it is important to get professional advice before proceeding with the filing to avoid any errors leading to heavy penalties.

• Filing Online
• Paper tax return 
• Third-Party Agent

Online Filing

For being able to file your tax return online, you need to fulfil the following criteria,

• You need to be self-employed.
• You are not self-employed but have some other sources of untaxed income, such as running a rental business or renting out and earning a property income.

To file your tax returns online, you would need to identify yourself at the government gateway here. 

The benefits of filing your online tax returns are that you do not need to file it entirely in one go and can save your entry to complete later.

By Paper Form

If you want to submit your returns via postal mail, you need to download and fill the SA100 form.

The form requires you to fill in some necessary information and can get a little hectic for some people as it can get quite detailed, but it is an amazing way of making sure you have everything you need to file your tax returns. 

Third-Party Agent

HMRC allows you to employ the help of third-party accountants to file your self-assessment tax returns. So, all you need to do is find professional tax services in the UK and appoint someone to fill in and submit your tax return.

Hiring a third-party tax professional is a great way of saving yourself time and money to help you focus on things you should rather be focusing on than spending countless hours figuring out your self-assessment returns.

Frequently Asked Questions

Conclusion

Filing your self-assessment tax return can help you avoid thousands in penalties and help you get a better understanding of your taxable income streams. Additionally, it provides you with a clearer picture of your financial liabilities such as when to pay capital gains tax, student loan repayments, income tax, and more, in the coming period and helps you plan accordingly, impacting your cash flows as little as possible.

If you find it to be a difficult process or just do not have the time to do it yourselves, we suggest that you seek the help of professionally qualified personal tax accountants who can take care of your self-assessment returns for you while you place all your focus on bringing forth the best of your business.

Aditional Resources

• HMRC’s Payment on Account and Self-Assessment second Payment Deadline
• Late Payment Interests and coronavirus may affect 21/22 Tax Returns
• How to Do a VAT Return? Do I Need An Accountant for Vat Returns?