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If you do a tax return, there’s a key date to be aware of in May. If you’re completely self-employed you can get cracking on your tax return on the first day of the tax year on 6 April. However, if you get any of your income from employment, you’ll need to wait for your P60 to arrive, showing the salary and benefits you got this year. Your employer has to give you this by the end of May, so this is the time to get stuck in.
Nobody would blame you for wanting to put off the boredom and anxiety of a tax return to the last possible second. In fact, more than 730,000 people left it to the last day in January this year — so you’re far from alone. Unfortunately, leaving it to the last minute just makes the whole thing more stressful and prone to mistakes — plus you miss out on the chance to do a few clever things that can cut your tax bill. So there’s plenty to be gained from starting now.
You have time to plan for your bill
It makes sense to put money aside for your tax bill as you go through the year, so you can pay your bill from this reserve.
However, sometimes things don’t go to plan, and you could end up with a shortfall. Regardless of when you file, you have until 31 January to pay, so you have months to put the extra cash aside.
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A penalty is charged if the tax is not paid by the due date. HMRC also charges interest on unpaid tax.
You can choose to manage it by direct debit
You can use the Budget Payment Plan service to set up weekly or monthly direct debit payments to spread the cost.
This may not work for anyone with a particularly lumpy income, but can be useful for anyone who could do with some help managing payments.
You can do some tax planning before you file
Most of what you do now will only affect your tax bill for the current tax year, but there’s something known as "carry back", where you can do something today to cut the tax bill you’re filing.
You can use this if you’re a higher or additional rate taxpayer who gives money to charity, and claims the extra gift aid through their tax return. You can make a donation now and include it in the tax return you’re filing. This is particularly useful if your income is going to fall below a tax threshold this year, because you can claim gift aid in a year when you were paying a higher rate of tax.
Another carry back rule applies if you’ve invested in an Enterprise Investment Scheme (EIS) in the current tax year, and you want to carry income tax relief of 30% to the previous year.
You may get a speedy tax refund
Payments don’t have to be in until January, but if HMRC owes you money, your refund will be processed now, so you should get it sooner rather than later.