Would you be better off hiring an Accountant?
When are the tax savings that an expert can make for you worth the cost of paying for their expertise? Sam Dunn helps you decide
Blurring figures? Check. Glazed eyes? Check. Hot prickling sensation on the back of your neck in the early hours? Check. Hmm, you must be self-employed and crunching your own numbers.
So what’s the cure? Many people choose to throw money at the problem and hire an accountant – and, in fact, 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.
But how much should an accountant cost? Basic book-keeping and sorting simple tax affairs shouldn’t set you back more than £200 or £300 a year, says Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants. However, if your affairs are more complicated, it can end up costing you four or five times that sum.
So should you go for it? First, if you’re hopeless with percentages, tax and money, it’s a no-brainer. Second, much depends on the amount of money flowing through your business, and how much accounting work you expect – or want – to do yourself.
If you’re a freelance designer, say, and earn £50,000 a year by working from home two days a week and then commuting to an office for the rest of the week for a different company, you might well feel you can manage by yourself by using a simple spreadsheet that keeps track of your work, invoices and payments. That in turn will make it fairly straightforward for you to fill in your tax return online yourself – and if you do it early enough, the taxman will calculate what you must pay for you.
However, if your business is any more complicated than this, it’s probably worth calling on the professionals. If you have several different sources of income, for instance, it might be worth investigating setting up a limited company and getting paid in dividends for tax purposes. You can of course do all this yourself, but it can involve an awful lot of legal administration.
Similarly, if you need to register for VAT you’ll face having to make some quite complicated decisions – for example, you can choose to pay an “average” VAT flat rate. If you need staff, you’re in the realms of PAYE for your minions, as well as National Insurance.
This is really where you should be calling in an expert and delegating that donkey work. Says Roy-Chowdhury: “An accountant will be able to look at your working practices and be able to advise you on all these issues.”
You can easily spend upwards of £1,000 for this kind of advice and work. But the rewards can be worthwhile: you could set up that aforementioned limited company and pay yourself mostly in dividends, which will mean you have a lower tax bill. This in turn can help you to grow your turnover, employ more staff and develop your company – with all its attendant rewards.
Much of your decision on whether to hire an accountant will also hinge on your personal attitude towards administration – and interest in how the UK’s tax and legal system works. 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.
Others, however, might see this as a drudge involving receipts and wayward documents – and prefer to leave it in the hands of a paid specialist.
So be honest with yourself about this. First, just how complicated are your affairs? Are you doing the best for yourself in terms of knowing your way around the system? Do you hate admin or do you revel in it? Should you fire yourself and hire an accountant? … Only you know the answer to that question.
Article Source: The Guardian