When Spending A Few Hundred Could Save You Thousands

A large proportion of the British population has to complete their own Self Assessment Tax return every year (usually at the beginning of the calendar year). For those who own property, have savings income or who earn more than £100k per year all have to complete their own tax return.

In order to avoid the bother of completing their own tax return, many people actually hire their own accountant to do it for them. But when money is so tight, is this really a worthwhile way to be spending your well earned money? Some will pay over £150 just to avoid the hassle!

The expertise is in knowing what you can claim for and what will get you in trouble: The main reason millions of us, hire an accountant at this time is that, they pay for themselves. They understand what expenses we can claim for and the allowances we are eligible to receive. The Head of Personal Tax at PWC, Mr John Whiting told The Independent that there value add was ensuring you get your allowances and as many tax deductions as you can.

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".

Grinding, complex and takes time: If you haven't completed a self assessment tax return before then it can be a daunting task especially if you have even slightly complicated financial affairs (i.e. multiple income streams). Having ordered records helps but if you are like me, then finding stuff takes time. It took me half an hour to find my NI number last week! Using an accountant, though costly, will save you all this kerfuffle, well most of it anyway. Also, if you use the same accountant year in year out they start to get a better and better understanding of your financial affairs, so the process often simplifies and improves.

The Guardian reported in 2007 that it is possible to complete your tax return yourself. "If you've got an appetite for the fine detail - such as establishing what expenses you can offset against your income - and are willing to put in the legwork, you can easily do it all yourself."

Definitely a job for the detailed and well organised. If your idea of an organised file is, knowing whereabouts in the shed, the shopping bag full receipts is. If you think a spreadsheet is something you take on a picnic, then this maybe the time to call in the experts.

Saving money: It may seem counter intuitive to argue that paying an accountant can actually end up saving you money. However, that is exactly why many people employ a professional to look after their business affairs. The Guardian 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."

I know this may seem rather difficult to grasp but let's look at an example. Say, you have different sources of money 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 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.