Hundreds of thousands of people file their tax returns at the last minute every year. But filing it early could save you money and stress.
You should already have everything you need to file your tax return.
If you file a self-assessment return and you’re employed, your employer should have sent you your P60 by now – the last piece of the puzzle – so there really is no reason to wait around.
Some 700,000 people submitted their tax returns on deadline day last tax year, with 26,562 of people filing in the final hour. Avoid the mad rush at the start of 2021 by filing yours now, for the following reasons.
1. It will help you plan ahead
With the coronavirus pandemic wreaking havoc on the economy this year, planning is crucial to avoiding, or at least alleviating, any future financial shocks.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, says:
‘None of us are having the 2020 we expected, and millions aren’t enjoying the income we were expecting either. It means there’s a risk we could suddenly find ourselves hitting the 31 January tax return deadline with a serious cash shortfall.’
The sooner you complete your self-assessment, the sooner you’ll get your tax bill. That means you know exactly how much you need to set aside each month to make sure you can afford it.
- Find out more: use our budgeting guides to help you manage your cash flow
2. You could get a quicker tax refund
If HMRC owes you a refund, it will be processed as soon as you file your return. And since HMRC isn’t as busy now as it will be nearer deadline day, it could be speedier to process your refund.
You can see if you might be owed a tax refund by checking how much you’ve paid in your personal tax account.
- Find out more: are you owed a pensions tax refund?
3. It could help you get a mortgage
Buying a home can be difficult if you’re self-employed, with a number of administrative hoops to jump through to prove you can afford mortgage repayments.
If you’re planning to buy a house in 2020, you’ll need to prove your earnings with an SA302 form. This form will show how much income you have declared. Most lenders will want to see your most recent three forms, so you’re likely to need one from the 2019/20 tax year.
Filing your tax return now will help you send your mortgage application sooner rather than later.
- Find out more: mortgages for self-employed buyers
4. You can opt into PAYE to pay your bill
If you file an online tax return and have earnings taxed under PAYE (from other employment), you can choose to pay your self-assessment tax month by month via PAYE too.
You must have a tax bill of less than £3,000 to be eligible, though.
The deadline for this isn’t actually until 30 December 2020, but that’s still a month earlier than the 31 January 2021 deadline for filing the return online.
- Find out more: tax return deadlines for 2020
5. You don’t need to worry about fines
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’s a £100 fine. Then after that, it’s £10 more for each day until you reach the £1,000 cap. Additional fines are piled on top of that if you’re more than six or 12 months late.
The only way to guarantee you won’t 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 absolutely certain that you won’t end up filing late.
- For help with your tax return, use the Which? Tax calculator for 2019-20.