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Do you need an accountant to do your tax return?

Filling in a self-assessment form can be a real headache. But how do you find a professional to do it for you?

Self-assessment can be a daunting prospect if you choose to do it yourself? Accountants can prepare and complete the forms for around £250, while budget online services start as low as £50. But the advice is do your homework and make sure you know what you are paying for.

When compiling your tax return you can use a self-assessment software provider to upload, calculate and store all relevant information, which goes a long way to helping you complete your own assessment.

Self Assessment - Hire an accountant or doing it yourself?

Regardless of whether this is your first year in business or you have been running your own company for many years, the reality is very few people enjoy doing their own self assessment tax returns at the end of the year.

A question many business owners often find themselves asking is whether they should do their own tax return or hire an accountant to do it for them. If you really aren’t sure what is right for you and your company, the information below will help outline the pros and cons of each option.

Doing your own tax return

Disadvantages:

·   Unless you are a qualified accountant or have a lot of experience dealing with accounts, chances are that you are going to have limited knowledge when it comes to completing your self assessment. Trying to guess your way through it is likely to lead to mistakes, delays and a whole lot of unnecessary stress.

·   If you aren’t entirely sure what you are doing when completing your tax return, you may make innocent mistakes that can lead to a lot of stress. Whilst it is easy to make genuine errors that you don’t notice, if HMRC spots anything that doesn’t look right, your chances of being investigated are increased.

Benefits:

·   You will have complete control over your self assessment, how long it takes to complete and when it is done by. Business owners who like to have total control all the time sometimes prefer this option because it means that they’re not relying on someone else to do something for them.

·   One of the main benefits of doing your own tax return is that you will become completely aware of all your personal finances. You will know exactly what you have coming into and leaving the business and are therefore unlikely to face any surprises at the end of the tax year.

·   The online guides from the HMRC are very comprehensive and give step by step instruction which makes doing the return yourself a lot more accessible than ever before.

Hiring an accountant

Disadvantages:

·   Cost – This usually stops people from hiring an accountant to do their tax return for them. A good accountant will cost money which can be difficult when you know you are facing a tax bill shortly.

·   As with purchasing any service you do of course run the risk of hiring an accountant who isn’t particularly reliable. As mentioned earlier it’s very important to do your research before choosing an accountant and if possible, speak to someone who has used them before so you know exactly what you will be getting. Referrals are very useful to have.

Benefits:

·   If you have a busy worklife running your own business, managing staff and juggling a personal life the chances are you aren’t going to have time to even think about doing your tax return. Relinquishing this aspect of work makes it easier by passing this job on to a trusted accountant that will do the self-assessment for you

·   Accountants specialize when it comes to identifying ways to save money. They are far more likely to know the items you can claim for and they are also going to be experts in reducing your taxes. Although you might not initially like the thought of paying an accountant to do your self assessment for you, in the long run you may find that by doing so, you have can yourself a lot of money. 

·   Tax laws are a ‘moving target’ and change all the time which can make it difficult to keep up to date especially if you are not in the finance industry. This means that in order to have complete peace of mind, as well as trying to complete your tax return, you will have to make sure that you are up to date on all the latest laws before you even start your self assessment.

Important records you need to keep

You’ll need to keep records of:

·   All sales and income

·   All business expenses 

·   VAT records if you’re registered for VAT

·   PAYE recordsif you employ people

· Records about your personal income 

Why you need to keep records

You don’t need to send your records in when you submit your tax return but you need to keep them so you can:

·   Work out your profit or loss for your tax return

·   Show them to HM Revenue and Customs (HMRC) if asked

You must make sure your records are accurate.

Keeping proof

Types of proof include:

·   All receipts for goods and stock

·   Bank statements, chequebook stubs

·   Sales invoices, till rolls and bank slips

If you’re using traditional accounting

As well as the standard records, you’ll also need to keep further records so that your tax return includes:

·   What you’re owed but haven’t received yet

·   What you’ve committed to spend but haven’t paid out yet, for example you’ve received an invoice but haven’t paid it yet

·   The value of stock and work in progress at the end of your accounting period

·   Your year end bank balances

·   How much you’ve invested in the business in the year

·   How much money you’ve taken out for your own use