Spending A Little On The Right Tax Advice Could Save You A Lot!
Self Assessment tax returns are the bane of millions of UK citizens, if you work for yourself, earn 100,000 pa+ or have large savings or property income, then you know all about the self assessment as these groups must fill in the tax return.
The majority of people soldier on and fill in their own tax return, however a large number decide to employ either a tax advisor or accountant to sort their tax affairs for them. The question to be asked though is; is it worth the 150-200 in costs to take the inconvenience out of your hands.
Expertise in knowing what to claim for: One of the main reasons that millions of people employ an accountant to handle their tax affairs is that they have specialist expertise and knowhow and can help people ensure that they claim all the correct tax expenses and tax allowances. John Whiting, head of personal tax at accountants Price Waterhouse, told The Independent: “You might be able to spot things yourself, but getting your allowances and getting as many tax deductions as you can for your tax expenses, that’s our value-added.”
In agreement with PWC, self-employed landscaper John Gilman feels that professionals are worth every penny. In an interview with the Daily Telegraph back in 2007, he said, “It is such a grey area knowing what I can and can’t claim for when it comes to tax returns. I have considered going online, but it seems like the same hassle as filling out the paper forms. And many of my friends have had problems with their claims, so I decided against doing the tax return myself”.
It’s a chore that drains time: As already stated, a tax return can be frustrating and can eat up time easily. This is doubly true if you have numerous income sources, some of which could be from investment, savings, property as well as being self employed. With all these crossed wires, settling on using an accountant is understandable, especially as they know how to calculate tax returns in their sleep.
It is by no means impossible to complete your own tax return, and in a 2007 report, The Guardian newspaper came down on the side of doing it yourself. The report emphasised that if you have a keen eye for detail and numbers “and are willing to put in the legwork, you can easily do it all yourself.”
However, keeping hundreds of receipts and invoices may be your worst nightmare and you may prefer to pay a specialist to handle this for you.
Keep your hard earned in your pocket: Ironically, hiring an accountant could actually save you a bit of money, as crazy as it sounds! The Guardian further reports that “a good accountant will almost certainly recoup the cost of the work they do for you in the efficiencies they make in your financial affairs”. It may surprise you to know that the main reason people do hire an accountant is to reduce their overall costs.
I know this may seem at odds with what you would normally think but let’s look at an example. Say, you have multiple streams of income from various different avenues. Your accountant could set up a limited company, in turn consolidating all your income streams into one source. This not only simplifies things for you, but it can significantly reduce the amount of tax you pay. While seeking advice of this sort can cost over 1,000, because you will be paid in dividends more money is left which can be reinvested to your business. Like most investments, the long term benefits often outweigh the short term and this is a prime example of such a case.
The most basic services from an accountant will only cost around 150-200. Not only will you be free from the nightmare of balancing the books, but by utilising the accountants’ expert knowledge, you can tweak your business so you can reduce your overall tax liability.
Howard writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.