Why Pay Taxes Early
Why Pay Taxes Early
May 27, 2019
There are timelines and cut off dates set by HMRC that every business owner knows about. These need to be followed because there are penalties if you go beyond them and file your returns late. However, there are many reasons to pay your taxes ahead of time.
That’s both a good business practice that proves your company is trustworthy and well organized and there are benefits in terms lowering your actual tax bill because of the interest you might earn just by having your money on HMRC’s account.
Registering tax time
Before you can pay taxes in the first place, you need to register for it with HMRC. This is something that can take a few days to be completed. This is no problem when you do it on time, but you’ll notice that HMRC is usually overwhelmed during tax session and it may go even slower then.
When you complete the whole process ahead of time, you can rest assured that you won’t have to wait for the proper documents to arrive at the very last minute and to find yourself in a position to pay late fees.
Saving for a tax bill
Filling a tax return ahead of time means that you have more time to prepare for the actual tax bill. The cut of date for paying the bills is the same regardless of when you send the return. The return needs to be sent by the end of January, and you start paying in October.
This provides you with 9 months to prepare. Those who have a fixed business model which means that they spend and earn about the same each month could start preparing for the payments much earlier if their return is sent earlier as well.
Those files late payment penalties which only go up as you get later. The simplest way of avoiding this problem is to make sure not to be late. Filing ahead of time means you won’t need to worry about this anymore. Those penalties add up, and you should do your best to avoid them.
The penalty starts with £100 on the first day of being late. This goes up by £10 a day for the next 90 days. There’s a £300 if you’re late more than this for another 90 days. Those who haven’t filed for more than a year pay £300 more. There’ additional penalty that can go up to 100 percent of the debt if you’re late even more and HMRC can decide how much you pay.
A lot of the times you’ll need to contact HMRC to clarify something or to ask HMRC to give you advice and guidance on a particular issue your company is struggling with. HMRC could be contacted in a variety of ways from a phone call to a chat and forms that will result in HMRC getting back at you.
This may be a problem if you do it on short notice. Phones get jammed, and HMRC employees have too much work in particular times of the year, mostly when you’re close to the date set by the government. Don’t wait for that inconvenient time.
Finding the proper documents
There are a lot of documents you’ll need to gather for the purposes of reporting and paying taxes. This is especially true for those who have a lot of employees working under different types of contracts. The payroll is the most important of the finances of a small company, and you’ll need to focus on it and provide a variety of documents to both HMRC and each employee in particular.
It’s much easier to find and organize these documents if you have enough time. Setting up a system for keeping track of documents is important, but it’s useful to have some extra time by reporting your taxes in advance.
Goodwill from HMRC
There a lot of cases in which HMRC get a right to determine your fate about a particular issue. That can happen when you’re late, when you ask for extra time or when you’ve made an accidental mistake and want to avoid the fee. It’s up to HMRC to decide on these, and it’s partly done based on your past behaviour.
If you have always been on time or even better done your job ahead of time, you can get a lot of goodwill from HMRC in the years to come. You never know when you’re going to need it.
There are many reasons to file your tax return ahead of time as well as to pay your taxes ahead of time. Take the trouble of doing so, and you’ll benefit both in terms of your tax-related duties and tasks and in terms of your relationship with HMRC.