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Christmas and New Years is used by many small business owners as a well-earned break. Turn off email notifications, crack open a sherry, and spend quality time with loved ones for a week.
Many business owners struggle to turn off entirely though. Throughout the parties, huge dinners and Queen’s Speech that tiny voice at the back of their head keeps asking questions. How are you going to grow sales next year? Do we need to take on any more staff? And, most annoyingly, when are we going to have time to do that stupid Self Assessment?
The annual personal tax return is the nightmare after Christmas for many freelancers and contractors and, especially if you’ve never filed before, can be a daunting prospect.
The best way to tackle your Self Assessment – although not the method employed by the majority of business owners – is to file early. Need more convincing?
It takes ages to register
You can’t just turn up and file a Self Assessment – HMRC has to be expecting a return from you. This means you have to register ahead of time, and that process takes time.
How long? Well, that depends on the time of year. Out of peak times it can take a fortnight or so, but if you wait until the January rush (when HMRC’s customer service customarily grinds to a halt) it could take far longer.
There are two stages to registration. First you need a Unique Taxpayer Reference (UTR), which is sent to you in the post. You use your UTR to register for HMRC Online Services. HMRC will then send you a PIN number to access Online Services, where you can file your Self Assessment. This arduous process should become simpler when HMRC rolls out online tax accounts, but for now you’re reliant on Royal Mail and HMRC to get registered quickly.
HMRC’s call centres are always overwhelmed in January
The taxman doesn’t have the best reputation for customer service, but unfortunately that reputation is hard-earned and, with further departmental budget cuts, looks to be getting worse. According to HMRC’s own data the numbers of calls they answered dropped from 85% in January 2014 to 74% in January 2015.
Most troublingly for those with low tolerances for hold music the average wait time jumped from just over four minutes in 2014 to over 12 minutes a year later. The situation is so dire almost half a million people who called HMRC’s tax line in January 2015 simply gave up before speaking to an agent.
So if you think you might need help with your Self Assessment, don’t leave it until January or you’ll have some lengthy hold times in your immediate future.
It might not be all bad news
HMRC taketh away, but HMRC also giveth. Some lucky business owners, especially those who mix self-employment with salaried employment, will be owed a tax refund.
If you’ve overpaid tax during the last year HMRC will let you know when you file your Self Assessment and give it back straight away. Well, not straight away – this is HMRC we’re talking about – it can take a few weeks to process your refund.
But knowing you have cash coming into your bank account rather than going out will help your cashflow hugely. You could buy some new equipment, pay off some company debt, pay it into a pension, or just save it for a rainy day. The world is your oyster, and all because you filed your Self Assessment early – good for you!
It can take time to get everything you need to file
To file your Self Assessment you need all kinds of paperwork – P45s, expenses, invoices, and bank statements. If you file in January you’ll need records going back almost two years, and many banks don’t let you get at that information easily.
Depending on your bank and the type of account you have you may need to order historic statements either in digital or paper format. If you bank with a particularly archaic financial institution, you may also have to pay for them.
The more organised Self Assessment filers will download and store monthly statements in handy CSV format, but mistakes can and will happen on January 31st – so file that return early and overcome and bank statement-related snafus.
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