Why employing a Personal Tax Accountant is better than Self Assessment
For individual business owners in the UK, the choice between employing a Personal Tax Accountant and undertaking the Self Assessment route is a pivotal decision. This choice carries significant implications for your financial decisions. To assist in this decision-making process, we present a comprehensive guide outlining the advantages and disadvantages of each option. Our goal is to provide you with the insights necessary to make an informed decision tailored to your specific business or personal needs. Whether you opt for the expertise of a tax professional or the hands-on approach of Self Assessment, this guide serves as your roadmap to financial success.
Understanding the Basics: When do I have to complete a Self Assessment tax return?
Common situations are:
you are self-employed (unless this income is within the annual £1,000 trading allowance)
you are a partner in a business
you are a company director and have income on which tax is due that is not taxed under Pay As You Earn (PAYE)
you have property income – for example, you are renting out a room, a garage or a whole property to someone else (unless this income qualifies for rent-a-room relief or is within the annual £1,000 property allowance)
you want to claim tax relief on employment expenses over £2,500 in a year
you have to pay a tax charge on your child benefit, known as the high income child benefit charge
you have untaxed savings income. HMRC might be able to collect any tax due on small amounts without you doing a full tax return, but you should always tell them about savings income of more than £1,000 a year (or £500 if you pay tax at the higher rate) and dividends of more than £1,000 a year
you have capital gains tax to pay which hasn’t already been paid in-year
For self-employed you need to be able to show how you have worked out your profit:
So, you need to keep things like:
invoices (bills) for work you have done
receipts for expenses paid
bank statements
statements from letting agents (or details of rental income for property if you do not use an agent)
information showing how you have taken account of any private use of things used in the business (for example, mileage logs for a vehicle used both in the business and privately).
When do I pay the tax due and what payment options are there?
Self Assessment payments due by 31 January after tax year end. Some make instalment payments for the following year, called payments on account. Additional payments on 31 July and 31 January if in the regime.
There are various ways to settle any payments due and these include cheque, bank transfer, debit card, but not personal credit card. See Pay your Self Assessment tax bill on GOV.UK.
Self Assessment - DIY Taxation
The Self Assessment route places the responsibility of tax management squarely on the shoulders of the business owner. This approach requires individuals to keep meticulous records, calculate their own tax liability, and submit annual tax returns to HM Revenue & Customs (HMRC).
Pros
✔️ Autonomy: Complete control over the taxation process.
✔️ Cost: Generally perceived as a cost-effective option.
Cons
❌ Complexity: Tax laws and regulations can be intricate and challenging to navigate.
❌ Time-Consuming: Requires a significant time investment for record-keeping and filing.
❌ Risk of Errors: Increased likelihood of errors that could lead to penalties.
Personal Tax Accountant - Entrusting Your Finances
Employing a Personal Tax Accountant involves hiring a professional who specialises in tax and financial advisory. This expert takes charge of your financial affairs, ensuring compliance with tax regulations and maximising your financial benefits.
Pros
✔️ Expertise: Access to the knowledge and experience of a tax and financial advisor.
✔️ Time Savings: Allows business owners to focus on their core activities.
✔️ Compliance: Minimises the risk of errors and ensures adherence to tax laws.
Cons
✔️ Cost: Involves a financial investment in professional services.
Comparative Analysis
Accuracy and Compliance
One of the primary concerns for business owners is the accuracy of their tax filings and adherence to HMRC regulations. While Self Assessment provides autonomy, it also opens the door to potential errors due to the complexity of tax laws. On the other hand, Personal Tax Accountants specialise in navigating these complexities, ensuring accurate and compliant tax submissions.
Businesses that opt for a Personal Tax Accountant benefit from expert knowledge, reducing the risk of costly mistakes and potential penalties. The cost of professional services is outweighed by the peace of mind that comes with knowing your financial affairs are in capable hands.
Time Efficiency
Time is a valuable resource for any business owner, especially for freelancers and small business operators juggling multiple responsibilities. Self Assessment demands a significant time commitment for record-keeping, calculations, and form submissions. This time investment can detract from core business activities.
A Personal Tax Accountant, however, streamlines the taxation process, allowing business owners to focus on their strengths and core operations. The time saved by outsourcing tax responsibilities can be invested back into growing the business or enhancing personal well-being.
Financial Expertise
The intricacies of tax laws and financial regulations can be daunting for those without specialised knowledge. Personal Tax Accountants bring a wealth of expertise to the table, offering strategic advice to optimise your financial situation.
Self Assessment relies on the business owner's understanding of tax laws, leaving room for oversights and missed opportunities. Personal Tax Accountants, acting as financial advisors, proactively identify tax-saving opportunities, ensuring you leverage all available benefits.
Risk Management
Self Assessment places the onus of risk management entirely on the individual business owner. The intricate nature of tax laws means that any oversight or mistake can lead to penalties, audits, and financial consequences. Personal Tax Accountants act as a protective shield, assuming responsibility for accurate filings and mitigating the risks associated with tax compliance.
By engaging a professional, business owners transfer the burden of risk to experts who are well-versed in navigating the complexities of taxation, reducing the likelihood of financial setbacks due to regulatory issues.
Adaptability to Regulatory Changes
Tax laws and regulations are subject to frequent changes, and staying updated can be a daunting task for individual business owners. Self Assessment requires continuous vigilance to remain compliant with the latest updates. Personal Tax Accountants, as part of their professional responsibility, stay abreast of regulatory changes, ensuring that your financial practices align with the current legal landscape.
The adaptability of Personal Tax Accountants to evolving regulations provides a sense of security and reassurance, sparing business owners the stress of keeping pace with the ever-changing tax environment.
Audit Preparedness
The prospect of a tax audit can be anxiety-inducing for any business owner. Self Assessment increases the likelihood of errors, making the business more susceptible to audits by HMRC. Personal Tax Accountants, with their meticulous approach to financial management, prepare businesses for potential audits by maintaining accurate records, ensuring compliance, and addressing any issues proactively.
Being audit-ready is a significant advantage that comes with hiring a tax and financial advisor. It not only reduces the stress associated with potential audits but also demonstrates a commitment to transparency and compliance.
The Benefits of Using a Personal Tax Accountant
Maximising Tax Benefits
A Personal Tax Accountant goes beyond simple compliance; they actively seek opportunities to minimise your tax liability. Through a deep understanding of the tax code, these professionals identify deductions, credits, and allowances that may be overlooked during a self-assessment.
By engaging with a tax and financial advisor, business owners can unlock potential tax benefits, ultimately saving more money than the cost of professional services.
Avoiding Common Pitfalls
Self Assessment may seem straightforward, but the devil is in the details. Missing deadlines, miscalculations, and oversights can lead to penalties and unnecessary financial strain. Personal Tax Accountants are well-versed in HMRC regulations, ensuring all requirements are met and deadlines are adhered to.
Entrusting your financial affairs to an expert minimises the risk of oversights, providing a safety net against costly mistakes.
Strategic Tax Planning and Advice
Personal Tax Accountants go beyond the mere preparation and submission of annual tax returns. They serve as strategic partners, offering valuable insights into tax planning. These professionals analyse your financial situation, identify potential tax-saving opportunities, and devise long-term strategies to optimise your tax position.
Through proactive planning, Personal Tax Accountants help you structure your finances in a way that minimises tax liabilities, maximises deductions, and ensures compliance with the latest tax regulations. This strategic approach can lead to significant savings over time, far outweighing the initial investment in professional services.
Access to a Network of Resources
Personal Tax Accountants often have extensive professional networks that can be beneficial for your business. Whether it's connecting you with legal advisors, assisting in financial planning, or providing referrals to other specialised professionals, their network can serve as a valuable resource.
This access to a broader spectrum of expertise ensures that your financial matters are handled comprehensively. It also positions your business to adapt to changes or challenges by having a network of professionals who can offer guidance in various aspects beyond taxation.
Peace of Mind and Reduced Stress
The peace of mind that comes with entrusting your financial affairs to a qualified professional is immeasurable. Personal Tax Accountants relieve business owners from the stress and anxiety associated with self-assessment. Knowing that your taxes are in the hands of an expert fosters a sense of confidence in the accuracy and compliance of your financial records.
This psychological benefit extends beyond the financial realm, positively impacting your overall well-being. Reduced stress allows business owners to focus on their core activities, leading to increased productivity and a healthier work-life balance.
Conclusion
Within the intricate landscape of UK taxation for individual business proprietors, the decision between a Personal Tax Accountant and engaging in Self Assessment holds paramount importance. While Self Assessment might seem economical, the risks associated with errors, time consumption, and missed opportunities are substantial.
Opting for a Personal Tax Accountant signifies an investment in financial well-being and to protect your business. The advantages of precision, time optimisation, financial acumen, and strategic planning far surpass the expenses related to professional services. Dragon Argent, backed by a team of tax specialists, is prepared to lead founders and small business owners through the intricacies of taxation, enabling them to focus on their core competencies – fostering the growth of their enterprises.
In the pursuit of financial stability and strategic expansion, selecting a Personal Tax Accountant transcends mere decision-making; it constitutes a shrewd investment in the future prosperity of your business. Get in touch with us to learn more!
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Frequently Asked Questions
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While some free accounting software can be helpful in the early days, remember that features and capabilities are often restricted. Consider investing in a more comprehensive solution as your business evolves to avoid future roadblocks.
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Most accounting software lives in the cloud now. Access it from any device, anywhere, with just a web browser or app. Access your finances from any device, anywhere, simply through your web browser or mobile app. Your data is securely stored by your provider, giving you peace of mind and 24/7 access. All this for a flat monthly fee, making managing your finances a breeze.
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Get ready for a digital tax future! MTD for Income Tax is a government initiative to modernize tax reporting for self-employed individuals and businesses. Starting in April 2026, you'll use compatible software to record your income and expenses, and send digital summaries to HMRC every quarter. This streamlines the process for both you and HMRC. It involves keeping digital records and submitting income and expense updates to HMRC electronically instead of using paper forms. This starts in April 2026.
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Your tax return for any tax year must contain details of all that year’s taxable income and gains. Here are some typical things you might need:
✔️ Details of self-employment income and expenses to work out your trading profit or loss for the year
✔️ Details of property income and expenses to work out your rental profit or loss for the year
✔️ Employment and pensions income information, including forms P60, P11D and P45 from any jobs you have had
✔️ Interest certificates from banks or building societies
✔️ Details of pension contributions made to relief at source schemes
✔️ Details of any chargeable capital gains made in the year
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GOV.UK: Register for and file your Self Assessment tax return
HMRC’s tax return and supplementary pages notes, as well as helpsheets on more technical areas such as losses: Self Assessment forms and help sheets
HMRC: YouTube videos and webinars
HMRC’s customer forum has a range of frequently asked questions within its ‘Knowledgebase’, as well as a facility to post generic questions for HMRC to answer: HMRC Community Forums
HMRC can also be contacted via Twitter using @HMRCcustomers for general queries.
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