With the self-assessment deadline looming for the 5.4 million Brits who are yet to file their tax return, over 640,000 are set to file late according to research from accounting software, FreeAgent.
Surveying over 500 British small businesses, FreeAgent’s research shows that 35% of those who have to file a self assessment tax return will leave it until January, with a fifth (21%) waiting until the final few weeks of the month to submit to HMRC. While 42% typically file their return before the New Year, 46% admit they procrastinate when it comes to completing and submitting their tax returns – with 12% of respondents saying that they had filed after the deadline, despite facing a penalty for doing so.
Stress, and the time consuming nature of the Self Assessment process, appear to be major factors for why people leave their tax returns until the last minute. When asked how they feel about filing their taxes, almost a third (31%) of respondents said they felt stressed. And despite having all year to stay on top of their finances and tax affairs, a fifth (20%) said they spend more than nine hours gathering all the materials required and getting their paperwork in order to submit their return.
In contrast, just 13% said it took them less than five hours to complete the process. However, the survey also showed that, encouragingly, 62% said they felt calm and relaxed when thinking about their tax return, signalling a contrast in the physiological effect of taxes.
Although 27% of British small businesses still use pen and paper for calculating and preparing their taxes, 44% said they use online accounting software such as FreeAgent – showing how technology has become increasingly prevalent in the Self Assessment process. However, despite this, the majority (84%) of small businesses are still chained to their desks when submitting tax returns, with only 1% of those surveyed submitting their tax returns while travelling or on holiday, and 70% choosing to submit directly to the HMRC website.
Our research shows that many business owners find completing a tax return to be a stressful and intimidating process. With the January 31 Self Assessment deadline looming, it’s therefore important for anyone who has yet to complete their tax return to remain calm as there is still plenty of time left to get your tax affairs in order and submit it on time.
While it’s positive to see many businesses filing their taxes before the New Year, it’s also surprising to see how many are still following outdated methods for completing their tax returns – such as relying on pen and paper or being confined to their office in order to submit the forms to HMRC. Despite technology providing people with greater flexibility than ever before when it comes to their financial admin, just 1% of those we surveyed said they were actually using it in order to submit their tax returns outside of their traditional work environment.
With the government’s forthcoming Making Tax Digital (MTD) for Income Tax legislation aiming to digitalise the tax submission process for millions of UK small businesses over the coming years, technology is going to become a crucial tool for anyone reporting their tax to HMRC. By using a system like FreeAgent, you’ll not only be able to manage your finances all year round – reducing unnecessary stress and admin challenges during the run up to the annual Self Assessment deadline – but you’ll also have the freedom to submit your return directly to HMRC from anywhere, streamlining the process even further.
All small business owners should feel confident about their tax affairs. With the right tools and support, millions of people could find it much less daunting to manage and submit their tax returns.
– Roan Lavery, CEO, FreeAgent
FreeAgent’s survey also covered the issue of Making Tax Digital (MTD), which will see changes to the way tax is reported, requiring businesses to file more regularly throughout the year. Opinions were divided when asked about the impact of MTD, with 31% of small businesses saying it would positively improve their financial habits such as budgeting and saving, and 31% saying it would negatively impact them.
