Are tax returns really that scary??

sortofwinning

Hi, I have seen on the Inland Revenue site that there are two types of return, one of which is for small businesses or individuals. So this is the one I'd be filling in. It doesn't look all that complicated but I've heard so much about filling in tax returns that I'm very wary of registering as self employed.

I bought a book to try and learn but in the book it mentions "drawings" but there's no mention of drawings on the form that I saw, so I don't know how you put your payments to yourself on the form.

I would only be doing a little bit on the side - a bit of writing for Textbroker and maybe some personal tutoring.

Is the best idea for me to go to an accountant as a one off, and ask to be shown how to keep records properly and how to fill in the tax return? I don't want to waste money going to see an accountant if it's going to be horribly complicated because that would just put me off straight away. But if I thought a one off visit to an accountant would help me to learn it all quickly and easily, then I'd be happy to pay.

I once read a post in here (possibly from someone called Catwoman) who said her tax return takes her half an hour. If I thought it could be that easy, I'd definitely go ahead.

Thanks for any help.

[Deleted User]

I would recommend the initial visit to the accountant. You can decide at that point whether you can 'go it alone' - although your knowledge of drawings suggests that you may need further help.

Anyone can fillin a tax return, even get a result at the end. Is it correct however? Can you cope with a HMRC challenge? Bear in mind that the accountancy fee is the expense that could save you the most money - amazing how it is usually the first to go!

If you remain confident then, by all means, file away!

Pennywise

Drawings don't go on the tax return because they're irrelevant for tax. As sole trader, you pay tax on the profit made by the business, so whether you draw it out or keep it in the business makes no difference to the tax you pay.

chrismac1

As an accountant some of my clients do their own tax returns, mostly I do them. Of those I do, in my view around 25% of clients would be capable of doing their own without getting into a mess. 7 clients previously did their own but moved to me due to HMRC enquiries, debt management or other issues such as hassle from Companies House.

Having said that, within the 25% are people who have actually messed up returns! So just off the top of my head 2 of them, each earning over £100k with high profile and demanding jobs, got the flat rate VAT totally wrong. In both cases the reason is that the wording on the VAT return tells you to do exactly the wrong thing if you happen to be in flat rate VAT.

A key problem is that what HMRC regard as "plain English" does not make the cut as "plain English" with the majority of the UK population. So for the DIY tax return enthusiast it is all too easy to interpret a given box in the wrong way. Some of the boxes are really badly worded, and even as an accountant I would put the wrong figure in if I did not know what the wording meant, as opposed to what HMRC had written.

In a nutshell, unless you are really confident or have very simple affairs - ideally both - it's advisable to at least use someone experienced for at least your first year. If you'd have got all the boxes right if you'd gone DIY then clearly it makes sense to DIY in year 2.

agrinnall

If your earnings are primarily PAYE and interest on savings then it's certainly possible to complete a return in 30 minutes, although you might have to spend a bit longer collating information before you start. But as your situation will be more complicated than that I'd agree that at least consulting an accountant before doing the first one would be money well spent.

[Deleted User]

chrismac1 wrote: »

As an accountant some of my clients do their own tax returns, mostly I do them. Of those I do, in my view around 25% of clients would be capable of doing their own without getting into a mess. 7 clients previously did their own but moved to me due to HMRC enquiries, debt management or other issues such as hassle from Companies House.

Having said that, within the 25% are people who have actually messed up returns! So just off the top of my head 2 of them, each earning over £100k with high profile and demanding jobs, got the flat rate VAT totally wrong. In both cases the reason is that the wording on the VAT return tells you to do exactly the wrong thing if you happen to be in flat rate VAT.

A key problem is that what HMRC regard as "plain English" does not make the cut as "plain English" with the majority of the UK population. So for the DIY tax return enthusiast it is all too easy to interpret a given box in the wrong way. Some of the boxes are really badly worded, and even as an accountant I would put the wrong figure in if I did not know what the wording meant, as opposed to what HMRC had written.

In a nutshell, unless you are really confident or have very simple affairs - ideally both - it's advisable to at least use someone experienced for at least your first year. If you'd have got all the boxes right if you'd gone DIY then clearly it makes sense to DIY in year 2.

You are obviously familiar with HMRC logic. I am not sure if you were around when Self Assessment first reared its head in 1996/97 but I was involved in the consultations with the Inland Revenue as it was. They were very strict on their loss claims in those days which had to be claimed under sections of the income tax acts e.g. S 380 for sideways loss relief. The huge returns had numbers - box 380 for example. They insisted that S383 loss relief be claimed in box 380, S385 in box 382 etc etc - refused to accept that this would cause confusion - they were wrong!

tiger_eyes

sortofwinning wrote: »

I once read a post in here (possibly from someone called Catwoman) who said her tax return takes her half an hour. If I thought it could be that easy, I'd definitely go ahead.

That was probably me. We had a discussion about this recently and the regulars made some persuasive arguments, so I guess I can't know if my tax return actually is simple enough to do in half an hour without an accountant unless I see what an accountant would do with it.

sortofwinning

Thanks very much for all your replies. Don't know what I'll end up doing now, it still sounds scary! But I think a trip to the accountant is definitely in order.

DigForVictory

May sound completely wildeyed, but have you thought of phoning HMRC & asking for advice? As they usually will tell you what to put in what box, &/or send you leaflets &/or weblinks.
Calling them mid week at a schooltime should see you put through to someone reasonably fast. May be worth a try before you definitely have to pay an accountant.

Peace of mind suggests accountant 1st. Fiscal prudence give HMRC a bell. Best of luck!

dano17439

As long as you are organised, take your time, and have a bit of common sense you should be able to complete it no problems. The great bit is that you can check it before you submit it, so if you think it looks a little weird, you can go back and change it

sortofwinning

No I didn't even think about phoning HMRC because I thought their leaflets and so on would also be complicated but I will give that a shot.

Thanks Dano, you've given me some confidence!