Why it could pay to get ready now to file your tax return in April

The chances are that because you’ve just gone through the process of completing and filing one, you’ve had quite enough of Self Assessment tax returns for the time being, thank you very much. That’s understandable.

But, there are many good reasons why it could be very shrewd to start preparing now, so that you’re in a great position to file your tax return. Not only would it mean that you’ve got your tax return off your plate nice and early,  it could also mean you pay less tax and receive higher pension payments.

Better manage your invoices and expenses

If completing your previous tax return seemed to take you a long time, it could possibly be because you need better systems for storing and retrieving invoices that you either gave to your customers and/or those you were given for purchases. It makes perfect sense to make improvements to your invoice systems now, when you’re not under pressure to complete a tax return ahead of the filing deadline.

Obviously, if you use digital systems (ie invoicing and bookkeeping software), the invoice-related information that you need to complete your next Self Assessment tax return can be accessed very easily and quickly, with one or two mouse clicks or touches of a mobile device screen.

You can and should, of course, take the same approach to managing your expenses, if your current system isn’t up to scratch. If you’re not currently using accounting software/app to record all sums of money entering and leaving your business, why not start doing so? It could cost as little as £10 a month, which can be charged to your business as a tax expense anyway.

Accounting software can be linked to your business bank account and credit card account, so, if you make all business purchases using a debit or credit card, expenses and purchases will automatically be recorded within your accounting software/app. This will make summarising your tax expenses much quicker and easier when you’re completing your Self assessment tax return.

Pay less tax, increase your pension

Also take the opportunity to fully research whether you’re claiming for all of the allowable expenses that your sole trader business can claim. If you aren’t, you’re playing too much tax. Also make sure that you’re claiming all of the other tax allowances to which you and your sole trader business are entitled.

There is nothing stopping you from starting to fill in your tax return now. And one of the big advantages of doing all of the tax return leg work as early as possible is you can get a reliable idea of your likely tax bill before the tax year ends. This enables you, for example, to increase contributions into your personal pension, with payments subject to pension tax relief. So, you lower your tax bill, while paying more into your pension and claiming pension tax relief.

• Tax relief is available on pension contributions up to your annual income or £60,000 a year, whichever is lower. If you’re a basic-rate taxpayer, for every £100 you pay into your pension, the government will effectively add an extra £25.
• If you pay enough tax at the higher rate of 40% in England, Wales or Northern Ireland – you can claim back a further £25 through your tax return for every £100 you pay into your pension.
• In Scotland, you can claim an extra £1.25 for every £100 paid if you pay enough tax at the Scottish Intermediate Rate of 21% and a further £26.25 if you pay enough tax at the Scottish Higher Rate of 41% (2024/25 tax year for all figures).

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.