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22 May 2022

Five reasons why you should file your 2021-22 tax return early

Being a self-assessment early bird can have financial benefits

While there's still eight months left until the 31 January self-assessment deadline, submitting your return well in advance could actually save you money.

Nearly 66,500 people filed their 2021-22 tax return on the first day of the new tax year (6 April), according to figures from HMRC. And it seems to be a growing trend, as this year saw an increase of 30,000 people filing early, compared to 2018.

Here, we outline five reasons why you might want to join the early birds this year, and submit your tax return months before the deadline.

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1. You'll have more time to plan

For some people, it's only once they've filled out their tax return that they'll know the final amount of tax they need to pay. If you file early, you'll have several months to make plans to pay off the bill, which doesn't need to be done until 31 January 2023. If you wait until the last minute, you may find you can't pay the full amount owed, and could face a fine.

If you're self-employed and pre-pay your tax by payments on account, any refunds you're owed by HMRC won’t be processed until it receives your tax return. By filing several months in advance, when the tax office is likely to be quieter, you might find you'll receive rebates quicker.

Finally, if this is your first time filing a tax return, the process can take longer than usual as you’ll first need to register with HMRC. 

It will post you a Unique Taxpayer Reference (UTR) number and a separate access code to use its online services; only then can you file your tax return. This process can take a couple of weeks - or even longer during peak times in January. To avoid running the risk of missing the deadline, getting this done early will save you stress and a potential fine.

2. You can seek help if needed

Self-assessment isn’t always straightforward, and you may have important questions you need HMRC to help you with. Unfortunately, if you wait until the end of January, you may find yourself in a long queue of other stressed customers who’ve also left it to the last minute. 

HMRC call waiting times appear to be getting longer, too. Research conducted by personal tax app Untied found that compared to the average 11- minute waiting period during 2021’s busy tax season, this year's peak time saw firms waiting for an average of nearly 12.5 minutes. The research also found there was an increased number of ‘cut-off’ calls as the January deadline approached.

Untied found the best time to call HMRC was later in the week, between the hours of 8am to 9am.

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3. You're less likely to make a mistake

Giving yourself more time means you’re less likely to have to rush your tax return, which can lead to careless mistakes. Double or triple-check all of the information, so you can correct any errors before submitting to HMRC. You'll also have plenty of time to source extra paperwork, if you need to. 

It's important to make sure your tax return is accurate, as HMRC can impose fines for mistakes.

The penalties are based on the amount of tax you owe, and depend on the kind of mistake HMRC deems you to have made: 

  • 0% charge: you've taken 'reasonable care' to fill out your tax return correctly
  • 0%-30% charge: you've been careless and made mistakes
  • 20%-70% charge: you've deliberately underestimated your tax
  • 30%-100% charge: you've deliberately underestimated your tax and tried to conceal it.

Before you start the self-assessment process, check you have everything you need to accurately calculate the tax owed. Essential details and documents can include things like your National Insurance number, UTR number, P60, P45, student loan statement, tenancy agreements, pension statements, invoices and receipts. 

Don’t worry if you’re still waiting on a few figures - you can still file your return with estimations and confirm the exact amounts at a later date. Just make it clear when you submit the form.

4. You can avoid costly late fines

HMRC imposes fines for tardiness. 

You’ll usually have to pay £100 if your tax return is even a day past the deadline (31 January). It’s then £10 for each additional day (capped at 90 days), plus the £100 initial fine - coming to a total of £1,000. 

If you still haven't filed your return after six months, you’ll either be fined £300 or 5% of the tax due (whichever is higher), on top of the penalties already mentioned. 

If you’re 12 months late you’ll be whacked with an additional £300 fine, or 5% of the tax due, plus the aforementioned penalties. In the most serious cases, you may be fined 100% of the tax due.

HMRC may let you off if you have what’s deemed a 'reasonable excuse', such as the death of a partner or other emergencies which might prevent you from filing on time, such as being admitted to hospital unexpectedly.

There are additional fines if you pay your tax bill late. If it's 30 days late, you'll receive a charge equal to 5% of the tax due; another charge if it's six months late, and an additional charge if the payment is 12 months late.

The late filing and tax payment penalties were delayed this year, to give taxpayers extra time - but there's no guarantee the same will happen for 2021-22 submissions.

5. Don’t miss out on changes to work from home rules

If you’re overly stressed about meeting the filing deadline, you could end up missing the opportunity to claim important tax breaks. 

For example, if you had to work from home during the pandemic, you may be able to claim tax relief worth up to £125 a year.

The rule, which was introduced almost 20 years ago, allows you to claim for additional household costs, such as gas and electricity bills, incurred as a result of having to work from home on a regular basis. 

In response to the pandemic, the government relaxed the regulations so the millions of people forced to work from home during lockdowns could also claim. 

However, from 2022-23 onwards, only workers whose employer forces them to work from home can apply; if you have the option of going to an office, but choose to work from home, you can't apply.

You can still claim tax relief for working from home for 2021-22, as well as 2020-21, if you haven't done so already.

File your tax return with the Which? Tax calculator 

If you're yet to file your self-assessment tax return, consider using the Which? tax calculator

This online tool is easy-to-use, jargon-free, and helps you tot up your tax bill while suggesting expenses and allowances you might have forgotten. 

When you're done, it can also submit your return directly to HMRC.