There are a lot of perks to being self-employed, from flexible hours and being your own boss, to the privilege of
working from home. There are some definitely some drawbacks to freelance life though, and one of these can be the annual filing of the self-assessment tax return.
Chances are that bookkeeping is not the highlight of your working week. Keeping your accounts in order is vital for the smooth running of a business though and leaving them to the last minute can be a recipe for disaster. So, this year, tackle your books on time, and experience the pure bliss that is filing your tax return early and take advantage of some of these benefits:
Receive refunds faster
If you owe HMRC tax your deadline for payment will be 31st January and possibly 31stJuly (if you come into the payments on account system). But, if HMRC owe you tax they will pay you shortly after they receive and process your tax return.
So, if you think you have overpaid tax and are due a refund, why not give your cash-flow a boost and submit your tax return early.
Improving your Cash flow
Plan to save
If you’re facing a tax bill instead of a refund, the natural thing to do is to delay submitting your return for as long as possible. But, by working out your tax liability early on you will know exactly how much you will have to pay and you can make a plan to start saving for the required amount.
Submitting your tax return early doesn’t mean you have to pay your tax early. You are only required to pay any tax liability by the normal due dates – 31st January and 31st July (for those who are on the payments on account system).
Reducing your payment on account for July
As a sole trader, if your total tax bill, exceeds £1,000, you will automatically enter the payments on account system. If your tax liability works out at less than you have paid on account, then if you submit your tax return before the 31st July, you may be able to reduce your payment on account for July. If your tax bill works out at being more than you have paid on account, then at least you can start budgeting for your final tax liability.
Claiming all allowable expenses
The risk of leaving a long gap between end of the tax year and preparation of your tax return is that you potentially miss the possibility of including all the expenses you may be entitled to deduct from your profits. If you haven’t kept up to date accounting records, trying to locate paperwork or even recall what expenditure you incurred months ago could be problematic. Forget to include all your allowable expenses and you’ll end up paying more tax. Getting your affairs in order early allows you the time to check those allowances you can claim and whether all your expenditure is tax deductible.
Prepare accurate figures to claim for tax credits
If you receive tax credits, you will need to renew your claim by the 31st July. Although you’re allowed to submit an estimate to the tax credit office, it’s always preferable to submit ‘actual’ figures to avoid the possibility of being over or under paid.
Time to find a great accountant (if you don’t have one already)
While you don’t legally require an accountant to help you file your self-assessment, it can often be a good idea to let an accountant check over your work, by letting a pro take a look you can make sure that you haven’t missed anything out. Accountants are notoriously busy in the run-up to the Self-Assessment deadline, so find one you like now, before everyone else books them up.
Avoid late penalties
For a business, every penny counts. Getting a head start on your tax returns means that you’ll never have to waste money on paying penalties that you could have easily avoided.
Save money (and stress)
Most accountants charge a premium for their services if you deliver your records to them in the latter part of the tax year. So, if you want the best out of your accountant and lower fees, aim to get your records together early in the tax year.
Keen to outsource the preparation of your tax return and accounts? I love helping sole traders with their accounts and tax. At Teesside Financial Accountants we offer a complete self-assessment service and our tax team is now ready and focused to prepare 2017/18 returns. You get the peace of mind that your return is being handled by experts and we’ll file it directly with HMRC, saving you time. You can look me up on Facebook, check out my website , drop me a line here or call Julia on 07724 282 176.
Remember, you may still have to fill in a self-assessment form even if no tax is owed.
The information contained above is provided for information purposes only and is not intended to amount to advice on which reliance should be placed. We therefore disclaim all liability and responsibility arising from any reliance placed on such information. Professional advice should be obtained before taking or refraining from taking any action as a result of the above contents.