Do I 'really' need an accountant?

Fleeting_Glimpse

Hi

I'm a self employed plumber and have been for 10 Years.

I pay my accountant £500 a year to deal with my tax affairs, fill out my self assessment form and write up my year end accounts.

To me that is a lot of money each year to find and I only earn 15K to 20K so how would I go about doing this myself....I have no idea.


Thanks


Leigh

sneekymum

No you don't need an accountant.

Have a look at the tax return.

Try filling it in in pencil. I'd recommend going through the form first - refer to the notes only as needed (to avoid overload). You have ten years of proper examples of how to do this - and how to write up you end of year accounts also.

Try dedicating a whole morning to getting the hang of it. When it starts to take up more time than it would cost in earnings to get your accountant to do it, then its time to give up. But you won't know till you try.

You can always ask questions here.

WHA

It depends how complete and accurate your book-keeping is and whether you actually understand the principles of accounts preparation. If you look at the "profit and loss account" prepared by your accountant and havn't a clue what it all means, then you shouldn'e try to do it yourself. However, if you can understand it, where the figures come from and what year end adjustments are needed (accruals, prepayments, debtors, credtitors and depreciation), then you should be able to manage fine. Of course, your underlying accounting books and records must be complete, accurate and properly balanced or you wouldn't have anything to start from.

Lawbag_2

£500 - money for old rope.

considering your earnings, this is way over the top, and to be fair your accountant could find a cheaper method to do your accounts. But then its not in his financial interest to do so.

brantwood150

Lawbag wrote:

£500 - money for old rope.

considering your earnings, this is way over the top, and to be fair your accountant could find a cheaper method to do your accounts. But then its not in his financial interest to do so.

Do you say that from personal experience?

I've got to say that I don't think that £500 is particularly expensive for preparing accounts, preparing tax computations, completing and submitting a SA tax return, and dealing with the NIC liabilities. If the fee includes dealing with enquiries then I think you're getting even better value.

I don't know how well your accounting records are kept (so no disrespect intended) but when I was a trainee and dealt with small businesses the quality of record keeping generally fell into the "bag full of invoices and bank statements" category.

The time taken to prepare accounts from this kind of "record keeping" (or even from rudimentary accounting records when they were kept) was huge. The size of income from the business does not necessarily have a direct relationship with the amount of work involved and hence the fee.

I still prepare self-employed accounts, and deal with the SA tax work for members of my family and it takes forever to do. I don't even get paid for it, but if I did, £500 each seems like a reasonable fee.

If you understand accounting principles and the vagaries of the personal tax system, then prepare your own by all means. If you don't then consider the £500 as an insurance policy - if he cocks it up, you have someone to sue. If you !!!! it up yourself, you don't.

It is often a knee-jerk reaction to say that accountants charge too much without the accusers knowing what actually goes into the process.

I'm sure that I could have a go at fixing my boiler or putting in a new radiator if I wanted to but I prefer to pay what is often a lot of money to a plumber instead. Plumbers have abilities that I don't and charge me for the privilege accordingly. Accountants do the same.

[/me steps off soap box]

Richie(UK)

Hi,

Like brantwood, I don't think that a fee of £500 is particularly large. It all depends on the amount of work involved and the level of experience of the people undertaking the work (the better they are, the more they cost). The price is only too high if it is something that you can, and are willing to, do yourself. Otherwise it is money well spent, IMHO.

If you feel that you are capable of undertaking the work yourself, and that you won't unduly worry about it, then by all means do so (there is no legal requirement for you to make use of an accountant).

One piece of advice - many tax professionals (and nearly all MPs!) struggle to do the manual tax calculation in a tax return. Give serious thought to submitting the return before 30 September so that the Revenue will calculate the tax for you. (Of course, you won't have an accountant to tell you whether the calculated figure is correct )

sneekymum

Yes - that's a good one - let the IR do the sums....and then check to see if you agree. It also stops you from putting the whole thing off until you're close to penalty time.

I can see how the OP would balk at £500 when on an income of 15-20K. I got a quote a couple of years ago and it was £225. I felt that I'd have to have it all tidy to present to him though -.... like cleaning your house before the cleaner arrives....

My technique is to keep records that could be transferred directly into the boxes on the tax return - though I update these cumulatively every month (on the 5th). It then takes about ten minutes to do the return itself.

Richie(UK)

sneekymum wrote:

... I can see how the OP would balk at £500 when on an income of 15-20K. I got a quote a couple of years ago and it was £225. I felt that I'd have to have it all tidy to present to him though -.... like cleaning your house before the cleaner arrives....

The thing is sneekymum, it isn't the OP's level of income that determines the amount charged (unless you can find an accountant that offers some form of means-tested fees) - its a combination of the amount of work involved and the cost of the people doing the work.

If somebody has a salary of £1M and their return consists solely of a P60 entry and a couple of P11D entries then it isn't going to cost much. On the other hand, if somebody with income of £10k presents you with the classic 'bag job' (a scruffy carrier bag packed full of unsorted, crumpled and torn, coffee-stained, cigarette-smelling invoices) and expects you to prepare a set of accounts and a tax return then its going to cost a lot more.

By all means shop-around for a cheaper quote - but keep in mind that, as with many things, cheaper isn't always better. Don't expect Rolls Royce service when you pay Kia prices.

Poppy9

This has been discussed before. Have a look at these threads to see if they help you.

SA & Accountants

Part time working & Self Employed

Book Keepers



A previous poster mentioned accruals, prepayments, debtors, credtitors and depreciation. Don't let these words scare you (as they did my OH);)

Accruals are entries for invoices/goods that you haven't yet paid by the end of your trading year but have received. These are called CREDITORS. DEBTORS are invoices which you have not yet issued for work completed by the end of your tradiing year.

PREPAYMENTS & RECEIPTS IN ADVANCE are exactly what they say they are - paying in advance for something that you will receive in your new trading year i.e. paying insurance up front for 12 months. Receipts in advance are the receiving of money for which you have provided no goods or services yet i.e. in your case maybe deposits for work.

You have to be disciplined in doing your accounts because the last thing you want is an end of year panic. If not yourself perhaps your OH will do them for you (for a small fee of course).

As you will see above I included a thread on employing a book keeper. Cheaper than an accountant and you may then be able to tackle your Self Assessment form yourself. Basically you pay your money and take your choice. Could you earn more in the hours it will take you to prepare your accounts?

Good luck.

brantwood150

Poppy9 wrote:

A previous poster mentioned accruals, prepayments, debtors, credtitors and depreciation. Don't let these words scare you (as they did my OH);)

Accruals are entries for invoices/goods that you haven't yet paid by the end of your trading year but have received. These are called CREDITORS.

That isn't entirely correct. Accruals are not the same as creditors. What you have described above is a creditor. As you set out above, creditors are simply payments due to people that have invoiced you but that you have not paid at the period end.

Accruals are generally adjustments to include some, or part of invoices issued after your period end for services etc that are delivered for a period that occurs before your period end.

e.g. you order parts for a job which you complete before period end, but you don't get invoiced until after the period end. Therefore you need to make an accrual for the costs shown on the invoice.

Alternatively, you may receive an invoice after period end which relates to services covering a period which spans your period end, e.g. your utility costs. You need to apportion these so that you include the element of the service that has been consumed during the accounting period. This is normally done by splitting the cost on a time basis.

That is an accrual

Poppy9 wrote:

DEBTORS are invoices which you have not yet issued for work completed by the end of your tradiing year.

Again, not right. Debtors are people that you have invoiced but not been paid for yet. What you are talking about is accrued income.

Maybe you should let the words scare you :eek:

Poppy9

brantwood150 wrote:

That isn't entirely correct. Accruals are not the same as creditors. What you have described above is a creditor. As you set out above, creditors are simply payments due to people that have invoiced you but that you have not paid at the period end.

Accruals are generally adjustments to include some, or part of invoices issued after your period end for services etc that are delivered for a period that occurs before your period end.

e.g. you order parts for a job which you complete before period end, but you don't get invoiced until after the period end. Therefore you need to make an accrual for the costs shown on the invoice.

Alternatively, you may receive an invoice after period end which relates to services covering a period which spans your period end, e.g. your utility costs. You need to apportion these so that you include the element of the service that has been consumed during the accounting period. This is normally done by splitting the cost on a time basis.

That is an accrual



Again, not right. Debtors are people that you have invoiced but not been paid for yet. What you are talking about is accrued income.

Maybe you should let the words scare you :eek:

And you wonder why people don't like accountants:o

I tried to put into plain English the end of year procedure in a form a lay person will understand. You are just nit picking:mad: . For a lay person its easier for them to understand that Accruals are accounting for payments/income from a future trading year in the accounting trading period which has just ended. They are familiar with the term Creditors/Debtors there is no need to confuse them. A small business book keeper just needs to keep to basics and not get too technical.

As an accountant with over 20 years experience I know that some people suffer number blindness and panic and others can grasp the concept if you keep it simple. Completing a Self Assessment form is not rocket science but it terrifies some people and they will never understand the concept. IMO the OP has been given some sound advice. None of us know his level of competence in book keeping/accounting. My brother is a bag keeper who likes to deal in cash, my sister an excellent book keeper via bank transactions etc . My bro is happy to pay the accountant whatever he wants for sorting out his smelly, grubby bag (as I'm not touching it :rotfl: )

The OP has to make the decision which is best for him.