Sooner or later

Is it better to file your Self Assessment tax return as soon as possible after the end of the tax year?

You are not obliged to file your tax return for 2015-16, online, before the 31 January 2017. However, if you leave the process of completing your return until close to this date, it will not give you much time to calculate and fund the amount of tax you may owe on the same date, 31 January 2017.

 When we prepare a Self Assessment tax return for clients there are four distinct phases:

  1. Gathering the information from clients to complete the return.
  2. Completing the return and considering any explanatory narrative.
  3. Agreeing the submission with our clients, and
  4. Filing the return.

It makes good sense to move through the first three phases as quickly as possible after the end of the tax year. For the 2015-16 year, it should be possible to collect and process the relevant data by midsummer, say 31 July 2016. Clients who facilitate this sort of timetable should then be in a position to know what their balance of tax owing (or tax overpaid) is several months before the 31 January 2017 filing and payment deadline.

It is possible to delay the actual filing of the return to any date up to and including 31 January 2017. There may be good reasons for doing this. For example:

Higher rate tax payers have an opportunity to carry back gift aid donations to the previous tax year. In order to do this, they must pay the donations and include the appropriate election before they file the tax return for the tax year they are carrying back to. I.e. in order to secure extra tax relief for 2015-16, the gift aid donations made after 5 April 2016 must be completed before the 2015-16 tax return is filed.

On the other hand, self-employed business owners whose profits have been falling during 2015-16 (compared to 2014-15) may find that the actual tax and NIC that is due is less than the payments on account being made 31 January 2016 and 31 July 2016. If this is highlighted by completing the return early in the tax year, an application can be made to reduce the second payment on account due 31 July 2016.

Readers should also note that HMRC have 12 months from the date they receive your return to raise enquiries regarding the return. Early filing starts the enquiry “clock” ticking sooner.

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