Getting Ahead of the Tax Man

Beat the tax man

A great many contractors leave their tax return to the last minute, and it’s easy to see why. When you’re running your own business, you have a lot to think about. In July, a task with a deadline in January will inevitably give way to more immediate concerns.

But what if sorting it ahead of time came with a range of built-in advantages, beyond the warm, slightly smug feeling that it’s out of the way and you don’t need to worry about it anymore?

If you’ve earned less than last year

At the end of January, you may have made a payment on account based on 50% of last year’s tax bill and you’ll make another such payment at the end of July. If you’ve earned less than last year and you expect this year’s tax bill to be smaller, you’re forced to over-pay until you can claim your refund in six months’ time.

However, if your return is completed before the second payment on account becomes due you can make the payment based on your actual liability. This will reduce the amount you have to pay in July, and depending on the figures it might even eliminate the need to make the second payment on account altogether.

If you’ve earned more than last year

If you’ve made more money than last year and you’re expecting a higher tax bill, your payments on account will not cover your liability and you’ll have to make a balancing payment in January, along with your first payment on account for next year. This could leave you having to find quite a lot of money all at once, and you don’t really know how much until your return is complete.

The earlier you get your data to us, the sooner you’ll know exactly how much you’ll need to pay, and the more time you’ll have to prepare.

Help your accountant to help you

We want you to submit your data as soon as possible after the end of the tax year, because that gives us the best chance to do our job and look after your interests. As the deadline approaches, your accountant’s workload increases and so do the demands on their time and attention. Beat the rush and give us the best chance to spot any issues and resolve them in good time.

Never need an excuse

Every January, HMRC publish a list of ridiculous excuses they’ve received for late filing of tax returns. This is generally a result of people trying to avoid late-filing penalties by claiming they have a “reasonable excuse”. The list is widely publicised, proving that accountants like a good laugh as much as anyone, and this year’s included:

My tax return was on my yacht, which caught fire

A wasp in my car caused me to have an accident and my tax return, which was inside, was destroyed

My dog ate my tax return… and all of the reminders

A colleague borrowed my tax return to photocopy it and lost it

Whether we believe these excuses or not, there clearly wouldn’t have been such a problem if these people had filed in July instead of waiting until the last minute. And while it may be small consolation as you clean the soggy paper out of your carpet or watch the charred remains of your yacht sink into the water, at least you won’t have to pay a penalty and no-one will laugh.

If you have questions about your self-assessment tax return or if we can help in any way please call us on 01296 468483 or email us at accountancy@orangegenie.com.

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