Many self-employed professionals and small business owners take the same approach to their taxes as they did to their assignments at university: ‘if it’s not due day tomorrow, it’s not do day today.’ Let’s be frank: nobody enjoys paying taxes and filing your returns often detracts time away from other important activities when you are already busy. Nevertheless, by ignoring your tax payments and returns, or leaving everything until the last minute, you can create unnecessary stress for yourself, increase the financial strain of your tax liability, and even suffer penalties if you miss deadlines.
Preparing your taxes early is, therefore, one of the smartest ways to stay in control of your business finances and avoid headaches.
Key Deadlines You Need to Know
First, it’s important to understand when the different taxes are due. The deadlines vary depending on the tax you’re dealing with, for example:
Personal Tax Self-Assessment (SA)
Personal taxes are due twice a year, at the end of January and July. The main payment deadline is 31st January, and if you make payments on account (advance payments towards your next tax bill) the second payment is due on 31st July.
Corporation Tax (CT)
If you are a small business owner, the deadline for your CT return and any payment is nine months and one day after the end of your company’s financial year. This is normally the year beginning the day after you registered your company with Companies House, not the HMRC financial year.
Value Added Tax (VAT)
If you are VAT registered, your payment deadline will depend on whether you submit your returns quarterly or monthly. Quarterly returns are the most common, and this means that you must file your VAT return and payment within one month and seven days after the end of the period (which is always a month-end), e.g., if your quarter ends on 28th February, payment is needed by 7th April.
Why File Your Tax Returns Early?
Many people fall into the trap of procrastinating until tax deadlines are imminent, and, understandable as this is, there are several compelling reasons to get your filings and payments completed early. For example:
You Know What You Need to Pay
By completing your tax returns in good time, you will have more time to calculate how much you owe and spread your liability so that it doesn’t impact your cash flow. An unexpectedly large personal tax or corporation tax bill, for example, can easily put you or the business under unnecessary financial strain. Knowing the amount in advance gives you greater flexibility and helps you avoid nasty surprises.
It’s Easier to Manage Your Budget
Being clear about your tax bill helps you to plan how and when to pay so that it doesn’t interfere with your business activities. If you owe more than you had anticipated, you’ll have more time to transfer money around or budget accordingly, and if you owe less than you thought, you could have money to spare for other purposes. Either way, putting off your tax submission often means having to scramble to find funds just before the deadline, or bailing out the business from your personal savings, which is a stress you can do without.
You Will Avoid Penalties And Interest
Missing a filing deadline or tax deadline can incur penalties, interest charges, and menacing letters from HMRC. Getting your paperwork in order in advance lets you double-check your returns for mistakes, maintain compliance, and avoid fees.
Find Out More
If you would like advice about your tax and reporting liabilities as a business owner or self-employed professional, please get in touch with the team at Vanilla Accounting today by calling 0115 945 2222, or click here to send us a message.
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