Self Assessment - 4 reasons why you should do it now

Thousands of people heard an ominous thud last week, as their Self Assessment notice to file landed on their doormat.

It is an event that is likely to cause groans for many, as it seems like only yesterday that the last one was due. Many people simply put it in a drawer and forget about it until January.

But there are some very good reasons why you might be better off striking while the iron is hot, and doing your tax return now.

It shows you your position

This is a major benefit. If you do your Self Assessment now, you will have a very clear idea of how much you will owe the taxman in January. This will help you to make sure that you are setting aside enough money each month to pay your bill when it becomes due.

On the other hand, if you leave it until the last minute, you will be rushing to file your Self Assessment in time – only to potentially find that you are landed with an unexpectedly high bill. Forward planning means that you will be better able to pay your tax bill.

Missing the deadline is expensive

The government is clamping down on late filing. In its 2011 Budget, it announced that the penalties for Self Assessment taxpayers who miss the deadline would be increased, as the previous £100 fine was not enough to make people file promptly.

From the 2010-11 tax year, the £100 penalty will automatically be applied if you file late – even if you don’t have to pay any tax. In addition:

• If you are up to three months late, you will be fined £10 a day up to £900
• If you six months late you will incur a fine of 5 per cent of the tax due, or £300, whichever is more
• If you are 12 months late you will incur a second fine of 5 per cent of the tax due, or £300, whichever is more

You should also note that there are periodic penalties for late payment. Fines of 5 per cent of tax due will be imposed at 30 days, six months, and 12 months – in addition to the interest charged by HMRC.

It is good time management

There is nothing worse than being rushed. Inevitably, if you leave your Self Assessment to the last possible day, you will be doing it at the expense of other things – and this will mean that those other bits get pushed back. You can help to avoid this by taking doing your Self Assessment well in advance of the deadline.

It is psychologically beneficial

There is a lot to be said for the psychological benefits of doing your Self Assessment early. By filing now, you will be able to take a load off your mind. In addition, as mentioned earlier, you will be able to set yourself a financial target that you should be able to meet by the January payment deadline. Basic organisation like this can make a big difference to your mindset and to your productivity.