Spending A Little On The Right Tax Advice Could Save You A Lot!
Millions of people in the UK have to submit a Self Assessment tax return annually. Anyone who is self-employed, who has significant property or savings income or who earns over 100,000 per year has to complete their own tax return.
Whilst many people fill out their own tax return, many others decide to hire an accountant or tax advisor to help them with their tax affairs. But, is it really worth paying a professional in excess of 150-200 to help you with your tax?
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 a full understanding of the process 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. Talking to 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".
Time consuming and hassle: Completing a tax return can take up your time and an awful lot of hassle. This is particularly true if you have various sources of income including self-employed earnings, property income and investment or savings income. As a result, many people elect to use an accountant because they will not only do all the necessary calculations but also submit the tax return on their behalf.
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 completing your own self assessment. 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."
It is true though that handling numbers, invoices and receipts isn't everyone's cup of tea - I know it would be my idea of hell! Therefore, there is the other half of the population who do prefer obtaining expert help.
Reduce costs: It might not seem right to argue paying for an accountant can reduce your costs overall, yet this is the main reason many people do hire an accountant to keep business affairs in order. "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." Is The Guardian's view on the matter.
Let's use the example of having multiple income sources, to simplify matters and reduce tax paid; an accountant could establish a limited company for all these streams to come from. From this company, you are then paid in dividends. Getting this sort of advice and help from an accountant could cost around 1,000, but being paid in dividends reduces the amount in tax having to be paid, leaving more money to be reinvested to your business. So paying 1k to an accountant might in the long run be the wiser expenditure.
The most basic services from an accountant will only cost around 150-200. Not only will you be free from the chore 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.
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