Do I need an accountant to
do my Self Assessment tax return, or can I take a crack at it myself?
Stay tuned to find out.
Hi there, Nicholas Campion here from 1st Formations.
The subject of today's discussion is do you need an accountant
to do your Self Assessment tax return or can you tackle it yourself?
And the short answer is - if your financial situation
is fairly straightforward, you can most probably do your Self Assessment
tax return yourself without the need of an accountant.
Assuming you are comfortable with using a computer,
you can quite easily work out what is expected of you by HMRC,
as the GOV.UK website provides some very detailed instructions.
The tax return itself is broken down into sections and pages.
Each page saves automatically,
you can jump in and out of pages if you want to take a break
to find information or do some calculations.
From time to time, you may get an error message,
but this is just a polite warning from HMRC telling you that the page
is incomplete in case you try to submit it before it has been completed.
HMRC will also give you some guidance on what they're looking for.
This is currently accessed by clicking the help feature below each question.
Now, admittedly some questions can take a few moments to grasp
what is being asked,
but as long as you do not leave the tax return to the last minute,
it's entirely possible
to do it yourself without an accountant - or at least give it a bash.
Once you've completed (but not submitted) the tax return,
you can take your time to review it before filing,
giving you added reassurance that what you've entered is correct.
HMRC will ask you to confirm that you are ready to submit, which is done
by entering your Government Gateway user ID and password again.
This means it's very hard to submit it accidentally.
If you do put your tax return aside to review at a later date, don’t
forget to go back and file it before the deadline of 31 January.
Set a personal reminder if you need to.
HMRC will consider it an unfiled return
otherwise and charge you penalties and interest.
Now, in terms of submitting your own return,
there are a number of benefits of doing so.
The most obvious one is the amount of money you will save on accountants’ fees.
The actual amount you save will vary depending on your location, type
of business, bookkeeping needs, and the number of transactions in the year.
But, realistically speaking,
you would be looking at saving in the region of £250 to £500 per year.
Another benefit of doing
your own tax return is the empowered feeling it brings.
This may help you feel more capable of handling your own finances
and give you the confidence to try new things that may help grow your business.
So those are some of the benefits of doing the return yourself.
And remember, we only recommend doing this if your financial situation
is fairly straightforward -
but just what does a straightforward tax return actually look like?
Well, an example of a simple return would be one where you
as a director receives a salary through the business.
This salary would have been processed through payroll software,
either by yourself or an accountant.
Other items
may include some dividends, bank interest, and perhaps a benefit in kind.
The tax return would simply be the details of your P60
(the end of year salary summary) showing the gross salary
that you received in the tax year, and any tax paid.
The dividends would be those
you received in the tax year 6 April to 5 April.
(not your company tax year).
The bank interest you received would be found on
an annual statement from your bank each tax year.
If it's unclear, simply call your bank.
And the benefit in kind value would have been calculated
by your company accountant or yourself if you do your own payroll.
However, if you have received additional income
for example, from property rental, the sale of assets,
or you were eligible for entrepreneurial relief
or any other reliefs – then things start to get more complicated,
and that's when it becomes advisable to use an accountant.
This will ensure you declare the relevant information correctly
and pay the right amount of tax. In terms of submitting your own return,
you’re not alone.
There are several accounting systems
on the market that can help you do your tax return,
for example, FreeAgent and QuickBooks.
Both are priced at the average rate a Self Assessment
accountant may charge annually.
Although FreeAgent is free if you have a NatWest,
RBS or a Mettle bank account.
Now, there's a quick point we need to make in relation
to Making Tax Digital for Income Tax.
HMRC has announced they want to see quarterly Self Assessment
tax return filings from the 6 April 2023 onwards,
as opposed to what it is currently, which is annually.
If you rely on an accountant to do your tax return,
their cost is likely to increase at this time.
To mitigate this additional cost, it would be advisable to consider
looking at how to do your return yourself.
Furthermore, we also advise that you embrace cloud accounting software
prior to this date.
This will allow you to get to grips with the software prior
to having to do quarterly tax returns.
So far, we’ve looked at
when and how you can do your own Self Assessment return.
As we've seen though, there are times when you really should be thinking
about obtaining the services of a Self Assessment accountant.
And there are, of course, plenty of benefits of doing so.
For example, an accountant can: give you advice
on financial challenges you may face in your business;
help you navigate through the ‘salary versus dividend’ minefield;
bring peace of mind knowing that you are doing things correctly; and,
check your bookkeeping, ensuring that all
sales and expenditure have been identified correctly.
Accountancy software is a great help,
but you can't rely solely on it to be accurate.
Like any software, the data out (in this case,
your tax return) is only as good as the data that goes in
(that is, the data that you enter).
If there are any errors in categorising your sales and expenses,
or if your bank connection duplicates or omits data (which does happen,
although thankfully it is rare), then your tax return will be incorrect.
Finally, here are
some quick tips on how to reduce any errors in your return:
Number one -
check your bookkeeping software's bank balance with your bank statements;
Number two -
keep your personal bank account separate from your business bank account; and,
number three - ensure all personal expenditure
or cash withdrawals from the business are categorised in the software;
as either dividends or if you're a sole trader, drawings.
And there you have it!
In today’s video we’ve discussed the question – do I need an accountant
to do my Self Assessment tax return?
We have found there are circumstances where you can do it
yourself and save quite a bit of money in accountancy fees.
There are, of course, other situations where using an accountant
could be very beneficial, if not entirely necessary.
You shouldn't be afraid to give this work
to an accountant if you aren't comfortable doing it yourself,
or if you have a complex return to deliver.
Always try to remember, the overarching
rule of the Self Assessment tax return is - to get it right.
If you have any questions, please leave them in the comments
section below, and in the meantime be sure to subscribe to our channel
to get more advice
on limited companies, reporting requirements, and tax obligations.
We’re always happy to hear from you, and we can't wait to help.
Until next time, cheerio.