Filing your tax return (also known as “Self Assessment”) can be a daunting task. But with the availability of free resources and tools and the cost-of-living crisis, you might wonder if you should handle it yourself. In this blog post, we will explore the pros and cons of doing your own tax return, helping you make an informed decision.
Pros of Doing Your Own Tax Return:
Cost Savings: Hiring a professional to prepare your tax return can be expensive, especially if you have a relatively straightforward tax situation. Doing it yourself can save you money.
Control and Familiarity: By handling your tax return personally, you maintain complete control over the process. You can ensure that all the necessary information is included and have a better understanding of your financial situation. The HMRC website does guide you through the process of completing your tax return with scoping questions and tips.
Learning Opportunity: Preparing your own tax return provides a valuable learning experience. It allows you to gain insights into the tax system and potentially identify areas for tax planning in the future. Nowadays, there are plenty of easily digestible tax tips via Instagram and podcasts. We enjoy listening to The HeelanHub Podcast (Spotify Link).
Cons of Doing Your Own Tax Return:
Complexity and Time-Consuming: The UK tax system can be intricate, especially for individuals with more complex financial affairs. Filing your tax return accurately requires a good understanding of tax legislation, which can be time-consuming and overwhelming. For example, an individual could probably manage rental income on their tax return but running your own business is a tipping point for seeking professional advice.
Risk of Errors: Mistakes on your tax return can lead to penalties and potential investigations by HM Revenue and Customs (HMRC). Also, you could get your tax wrong several years in a row without you or HMRC realising it. But if they do pick up on it in the 6th year, you could then end up with 6 years of extra tax, which can add up even if your tax affairs are relatively simple. Without professional guidance, you may inadvertently overlook important details or misinterpret tax rules.
You don’t know what you don’t know: Tax laws are subject to frequent changes. A tax professional stays updated with these changes and can identify potential tax-saving opportunities or allowances that you might miss when doing it yourself.
Conclusion
If your tax situation is relatively simple and you are willing to invest time in understanding the tax system then doing your own tax return can be a cost-effective option. However, for individuals with complex financial affairs or limited tax knowledge, consulting a qualified accountant is advisable to ensure accuracy, minimise risks, and potentially optimise your tax position.
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