The top 8 reasons why UK landlords should file their taxes early

28.05.2024 5 min read

Early tax filing can be a game-changer for landlords. At Hammock, we understand that there are many things to get right to manage rental income and expenses efficiently. One critical aspect that often gets overlooked until the last minute is tax filing. The official deadline for self-assessment tax returns in the UK is 31st January, but there are compelling reasons to consider filing your taxes well before this date. Let’s address them one by one:

1. Better cash flow management

Understanding your tax liability early in the year can give you a clear picture of your profit right at the end of the tax year, without waiting for months. This insight will allow you to plan and budget for the tax year ahead more clearly and without worrying about a surprise tax bill. (Also, ensuring you have sufficient funds set aside to cover your tax bill is a crucial practice often overlooked.)

💡 Early filing also means that any potential refunds will be processed sooner. Instead of waiting until after the January deadline, you could receive your refund earlier, providing a welcome boost to your cash flow.

2. Access to professional help

Accountants and tax advisors are often at their busiest as the January deadline approaches. By choosing to file your taxes early, you have better access to professional help. Your accountant will have more time to dedicate to your return, offer detailed advice and ensure that you take advantage of all available tax relief and deductions.

With less competition for your accountant’s time, you can benefit from a more relaxed review of your financial situation, and additional opportunities for follow-up questions or clarifications.

3. Reduce stress, avoid last-minute rush, and gain peace of mind

Tax filing can be stressful, especially if left until the eleventh hour. Many landlords find themselves scrambling to gather documents, receipts, and financial statements just days before (or after!) the deadline. This last-minute rush exposes them to the increased risk of mistakes, missed deductions, and incomplete submissions.

By filing your taxes early, you avoid the January rush and reduce stress, knowing that your tax obligations are taken care of well before the deadline. This peace of mind lets you focus completely on growing your property business. You can enter the new year with one less task on your to-do list, freeing up time for more strategic planning and property management.

4. Identify and correct errors

Even the most meticulous landlords can make mistakes. By filing early, you have the advantage of time to identify and correct any errors in your tax return. Whether it’s a missing receipt, an incorrect figure, or a misclassified expense, getting ready for an early filing provides the opportunity to rectify these issues without the stress of a looming deadline.

Moreover, if HMRC finds any discrepancies in your return, early filing allows for a smoother resolution process. You’ll have plenty of time to respond to queries and provide additional information if needed, reducing the risk of penalties or interest charges.

5. Avoid penalties and interest

Missing the 31st January deadline can result in substantial penalties and interest charges. Even a one-day delay can trigger a penalty, with additional charges accruing over time. By filing your taxes early, you get rid of the risk of missing the deadline and incurring these avoidable costs.

6. Improved bookkeeping

Early tax filing encourages better bookkeeping throughout the year. If you are planning to file your taxes ahead of time, you’re more likely to stay organized and maintain up-to-date financial records. This habit not only makes tax filing easier but also provides valuable ongoing insights into your business performance.

With accurate and timely records, you can make better informed and more timely decisions about property investments and expense management, ultimately improving your overall profitability.

7. Enhanced financial planning

Filing your taxes early gives you a head start on financial planning for the year to come. Understanding your tax liability and overall financial position allows you to make better strategic decisions about your rental properties. Whether it’s planning for renovations, expanding your portfolio, or optimising your mortgage strategy, early tax filing is a key element to the financial clarity needed for effective planning.

8. Make the most of Hammock, the accounting platform for landlords

Hammock landlords start filing their taxes in May, right after the end of the tax year. Thanks to Hammock you can have all the rental income and expenses for the tax year correctly reconciled, per property and per tenant. You can also attach all the receipts to the corresponding payments (no more paper stacks!). So when it comes time to file your taxes, you have everything you need at your fingertips. You get accuracy, reduce paperwork, and save time. Early filing becomes a hassle-free process.

💡 The Hammock fees are an allowable expense that you can deduct to calculate your taxable profit.

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Filing your taxes early offers numerous advantages for UK landlords. From reducing stress and avoiding penalties to improving cash flow management and accessing professional help more smoothly, the benefits are clear. Early tax filing not only ensures compliance with HMRC regulations but also enhances your overall business efficiency.

As your trusted accounting platform, Hammock is here to support you every step of the way. Use our platform and resources to simplify the management of your rental income and expenses, and enjoy the peace of mind that comes with an early tax submission. Start the new tax year on the right foot by filing your taxes early and gearing up for the next level of success.