- October 22nd
- Oakley Court
By Florence Robson
hether you are a sole trader, a high-earner, an investor, or have just rented your spare room to a friend for a few months, chances are you will need to complete a self-assessment tax return. When it comes to tax returns, however, many of us have a tendency to leave them until the very last minute. In 2020 alone, more than 700,000 people submitted their self-assessment tax returns on deadline day, while almost 27,000 people completed their returns in the final hour before midnight.
Contrary to popular belief, however, you can file your tax return any time between 6th April (when the tax year ends) and 31st January, giving you almost nine months to get organised. From financial planning to buying a house, there are plenty of reasons to put your tax return to the top of your to-do list.
Build in time to budget
Once you know you have to file a self-assessment tax return, what’s to stop you leaving it until the last minute? Well, for starters, you might owe more – or less – than you think.
“I filed my tax return early because I didn’t want any nasty surprises – with my wedding coming up, 2022 is shaping up to be a costly year for me”, says author Alexandra Sheppard. “I'm glad I did because I completely forgot about payment on account, meaning my tax bill is 50% higher than I expected! Now I have the time to budget accordingly.”
Payments on account are advance payments towards your next tax bill and usually amount to an additional 50% on top of what you already owe. For example, if your tax bill is £1000, you will also have to pay an extra £500 towards the following year’s bill. “One of the benefits of doing your self-assessment early is knowing how much you have to pay and giving yourself extra months to save up, as well as having the time to make mistakes without incurring financial penalties”, says accountant Kara Curtayne.”
On the positive side, you might also be owed a tax rebate or refund if your payments on account have been too high, you have unclaimed expenses or you’re an investor who has made losses. Who doesn’t like surprise money?
Secure a new home
Are you self-employed and looking to move house? A fresh tax return might come in handy to help you seal the deal.
“I decided to file my tax return early because I wanted to be in the best possible financial position to rent a new flat”, says brand consultant Ellen Atlanta. “I knew my income had increased significantly on the previous tax year, and wanted to put my best foot forward with my new landlords. The London property market is so incredibly competitive that every detail in your application counts, and I needed to stand out (it worked, I got the flat!).”
Copywriter Natalie Littlewood was also motivated to get her tax return done quickly so that she could apply for a mortgage. “It was my first tax return since going freelance full time so I was waiting for the tax year to end so I could file my return and prove my income for the mortgage application.”
Proof of income is the key here, says Alysia Wanczyk, Brand and Product Marketing Lead at TaxScouts. “The earlier you file the better. If you’re looking to get a new home, the earlier you get that documentation that shows your income for the last year, the easier it will be.”
Treat your taxes as self-care
While getting on top of your taxes is a smart decision for your bank account, it can be just as beneficial for your mental wellbeing.
Ettie Bailey-King, founder of Fighting Talk communications, decided to complete her self-assessment as a way of showing some love to her future self after a dreary winter. “Filing my taxes shortly after the tax year ended felt like a really practical bit of self-care”, she says. “Investing time in getting my taxes right is the first thing I’ve done in a while to remind myself that there’s a future beyond the next few days or weeks.”
Nutritionist and yoga teacher Sarah Hawkins also chose to take advantage of a quieter time in her professional and personal life to sort her taxes. “Autumn tends to be manic for both me and my accountant! Doing my tax return early saved time, energy and a lot of stress.”
According to Prerna Khemlani, founder of This Girl Invests, getting organised is the best way to rid yourself of the mental burden of preparing your tax return. “Keep receipts, do the bookkeeping as frequently as you can, classify expenses as you go through each month. Not leaving it all to the last minute will help you avoid frantically looking for receipts and trying to remember what the money was spent on (we've all been there!).”
Whether you handle your tax return yourself or ask a qualified accountant for advice, the most important thing is to start the process as soon as possible.
“The system has been set up to disincentivize people from thinking about their tax by perpetuating fear around it”, says Wanczyk. “As women, we’re told that taxes are complicated and stressful, and that we are always going to find them hard. Instead, why not empower yourself to actually take charge of them?”
If you need to file a self-assessment tax return, get it sorted as soon as possible to lessen the burden on your wallet – and your mind.
By Florence Robson
More people than ever are opting for the flexibility and freedom that going freelance offers - 6% of the national workforce to be precise, or just over two million people, according to a recent survey. Here’s how to successfully go it solo.