Last week we passed the filing deadline (31 January 2019) for the 2017-18 self assessment tax returns. A surprising number of taxpayers are still content to deal with this annual chore at the last minute. This article sets out a few compelling reasons for preparing your tax return as soon as you can after the end of each tax year.
- Until you prepare your return and calculate your liability for a tax year, you can have no certainty about the level of any tax payments that you may have to fund in the January and July of the year following the tax year end. So for 2018-19, payments possibly due January and July 2020. By crunching the numbers as soon as you can you will maximise the time you have available to save for any taxes due.
- If your return is prepared before the end of July 2019, there may be a possibility to reduce the second payment on account for 2018-19 (due 31 July 2019) if your liability for 2018-19 is lower than that of 2017-18.
- By preparing your return early in the tax year there are a number of tax planning opportunities that you will have time to consider before you formally file your return. For example, you could make charitable contributions in the year following the year of the return and carry them back to the previous year.
- You will be your tax advisor's best friend as early-birds will increase the time available for consideration of tax planning options.
Tax saving opportunities
You will note that we use the expression "prepare" rather than "file" in our notes above. The deadline for filing a return is the 31 January following the relevant tax year end. By preparing the return as soon as possible after the tax year end date, we can ascertain what tax liabilities are expected and what opportunities there are to save tax by adopting any tax planning options.