Sole traders across the UK will notice letters from the taxman dropping through their letterboxes in the days ahead, reminding them that the tax year has ended and it’s now time to file their Self-Assessment Tax Return. Of course, the deadline for filing is 31st October for paper returns, or 31st January (2017!) when filing online. No sense doing today what you can put off until tomorrow, and tomorrow, and tomorrow…right?
Maybe. But maybe not.
According to the Financial Times 42% of sole traders filed last year’s self-assessment in January, while almost 10% filed on the very last day. Most self-employed business people are busy, and there are sure to be more pressing matters to deal with right now, so it’s not surprising that so many leave it until the last minute.
Still, there are a number of very good reasons why small business owners should consider filing their self-assessment early – here are five, for starters.
Admit it – if you’ve ever rushed to complete your self-assessment in January, you will have felt it weigh on you over Christmas...and New Year…and beyond. While financial reporting never feels like the best use of your time, even on a slow day, isn’t it possible that you’d actually be more productive, more efficient, more full-steam-ahead (and yes, more festive!) if your tax return wasn’t looming over your head like a big, ugly Grinch?
Many internet banking services will only display transaction history for the past 12 or 18 months. If you wait until January before completing your self-assessment some of the bank records you might need to double check could be up to 21 months out of date, meaning you may struggle to find the right information online.
In order to avoid having to trawl through your paper bank statements, or visit your bank branch to request historical records if you don’t have bank statements, it makes sense to file your self-assessment early, when all the relevant transaction history will be available at the click of a button.
This probably goes without saying, but we’ll say it anyway: the longer you leave it before filing your Self-Assessment Tax Return the more likely you are to mislay, overlook or accidentally discard important receipts and invoices. Not only will this add to the already stressful experience of filing your tax return, but it could also mean you are unable to deduct allowable expenses if you can’t find the corresponding receipts.
By filing your tax return earlier, you will have less receipts to sort through, less time to lose them and less chance of missing something important.
Others may not have kept such a firm handle on their business’s ‘funds in’ and ‘funds out’, and some people inevitably get a bit of a shock when they calculate how much tax they owe.
By filing your self-assessment early you will have more time to get to grips with your income tax burden…and more time to save if you haven’t been putting enough aside to cover your taxes.
Some small business accountants (including our team of London accountants at Accounts & Legal) offer sole traders a discount when they file their Self-Assessment Tax Return early, in an effort to spread out some of workload that inevitably mounts up in December and January.
So self-employed business people that are too busy to complete and file their own self-assessment can make a tidy saving by filing during the summer or autumn, before the deadlines for paper and online filing.