As an Ltd company, you will, at some point in the year be required to submit your accounts to HMRC. You can wait until the deadline to do so, and many people do, but there are several reasons why filing your tax return early is a good idea!
Let’s delve into the reasons you might file your tax return early and why they can benefit your business.
Planning your company’s Cashflow
Filing your tax return early gives you a much better idea of the amount of money you will need to pay in taxes for the year. This in turn allows you to plan your company cash flow much better. Overall, this is a major benefit to your business. A few standout reasons why are:
Know how much you need to put aside for your tax bill
If you are used to working with a tight budget, knowing how much you need to put aside for your tax bill can help you immensely. It allows you to plan for other things that may come up during the year without the worry of an unexpectedly large bill.
Understand your profit and what to expect next year
By looking through your accounts and understanding how much profit you have made, you get a picture of what to expect next year. This is helpful in planning for things like investments or taking on new staff. Likewise, if you have made a loss there may be areas you can cut back in to ensure a profit next year
Find areas you need to improve or invest in
Filing your tax return early also allows you to find areas in your business that you need to invest in or improve. For example, you may identify allowable expenses that you have been missing out on, or you may notice that your staff costs are starting to eat into your profits. Addressing these issues early can save you a lot of money in the long run!
Not missing your tax deadlines
One of the most important benefits of filing your tax return early is so that you do not miss your tax deadlines. If you miss your tax deadlines, you may be subject to late filing penalties which can be very costly for your business.
Current legislation states that if you file your tax bill late you will be issued with an automatic £100 fine. After 3 months, you will be charged an additional £10 for each following day, up to a maximum of £900. After 6 months, you will be charged a further £300 or 5% of the tax due, whichever is greater.
As you can see, it is very important to make sure that you file your tax return on time to avoid these costly penalties.
More time to prepare and make changes
Filing your tax return early will always give you more time to prepare and make changes. This is especially important if you think you may owe money to HMRC.
By filing early your business can-
- Prepare the funds for your bill and make sure payments are made on time.
- Plan for purchases or investments
- Monitor staff costs
- Manage investments (eg. computer equipment that may need upgrading)
Get your tax refund earlier!
One of the best benefits of filing your tax return early is the possibility of a tax refund. This is especially appropriate if you have experienced losses due to the covid 19 pandemic and are expecting a rebate.
The sooner you file your return, the sooner HMRC will send you any money that you are owed.
How Stones Accountancy can help
Overall, there are many benefits to filing your tax return early. At Stones Accountancy, we can help you to prepare and file your return quickly and efficiently. We can also help you with auto-enrolment and payroll to keep all of your accounting in one place.
For more information on how we can help you, please get in touch with us today.