“Can I do my own accounts?”. As bookkeepers, perhaps you’d expect Angel Bookkeeping to say, “No”. But, we’ll qualify that answer honestly:
It’s best not to.
Legally, yes – you can.
But, there are compelling reasons to outsource this critical task, which we’ve outlined below. Accounts are not for the faint-hearted, the busy, or those not up to speed with ever-changing UK tax legislation. Why? Because as this month’s blog will demonstrate, even with the best will in the world, it’s easy to get things wrong and end up in a messy spreadsheet-style muddle. Excel 1, You 0.
But to start, let’s celebrate the self-employed.
Is This You?
If you’ve started your own business or plan to, that’s great news.
You’re now your own boss, you can work the hours that suit you best, and hopefully, you’re highly skilled in your chosen profession. You’re earning actual money doing something you enjoy doing. However, at the risk of stating the blinding obvious, we all know this much is true:
Whatever you do and whoever buys your services or products – from personal training to plumbing – above a certain income threshold (£12,570), not all your income is yours to keep. To offer a simple explanation, having registered as self-employed, you must keep records of your income and expenditure and submit these details to HMRC on or by 31st January for the previous tax year.
Sounds straightforward? Not necessarily.
DIY Accounts – The Expensive Approach
If you think you’ll save money by doing your accounts yourself, you may want to think again.
In this case, time is money – hours of your precious time that you could spend on other aspects of your business. Plus, there’s the likelihood of accounting errors, you may forget to file your accounts on time, or lose out on critical tax reliefs because you didn’t know about them. And then there are fines (see below).
Overall, we believe doing your own accounts is detrimental to your working life, and piles on a degree of stress you do not need. Health is wealth, and to be fair, running your own small business can seem like an uphill mountain at the best of times.
So, stress less by outsourcing your accounts to a company with over 15 years’ experience in accountancy, such as Angel Bookkeeping.
Can I Do My Own Accounts?
1.Yes, but mistakes could lead to fines and penalties
It’s easy to get things wrong through no fault of your own. If you make a mistake with your accounts, you will show inaccurate total revenues or incorrect expenses. Obviously, this will affect your final calculated taxable income and liability. Your numbers will simply be wrong.
You could end up paying more tax than you need to, or less. And, HMRC can impose fines and penalties, with the amount reflecting what they see as the intent behind the error. For example, a lack of reasonable care could find you between 0% and 30% of the extra tax due. A deliberate error? Between 20% and 70%.
HMRC don’t offer a great deal of leeway here, so it’s best not to take the risk.
2.You could miss out on tax credits and tax reliefs
The government encourages entrepreneurship, and therefore offers incentives to people keen to start their own businesses.
So much so, in fact, certain tax reliefs and tax credits available could apply to your business- either now or as you become more established. Examples include Research and Development (R&D) reliefs, pre-trading expenses (expensed incurred before you submit your first tax return), Gift Aid, reclaiming VAT and Corporation Tax relief.
As a business owner, keeping track of what’s available is challenging. So, this is where an accountancy professional can add significant value and potentially reduce your tax liabilities.
3. You could lose focus on growing your business
SMEs fail for various reasons: being in the wrong market, bad partnerships, a lack of research, perhaps. But the critical factors are ineffective marketing and, not to put too fine a point on it, money running out. That is, not enough money coming in.
Once your small company has launched, the hard work begins. The next step is to promote its growth by finding clients, adding more services, and expanding its area of operations – all sorts of intense, hard work that needs focus. This will also entail a lot of planning, organising and getting yourself “out there”.
Do you have the time to do all these things and to prepare accurate, timely accounts? Keep all your financial records in order? Your attention needs to be on developing your business; otherwise, something has to give.
4. You’re not spending time on things you’re good at
Struggling with figures and numbers when you’re creative is a bit like fitting a square peg into a round hole: It takes a lot of effort and doesn’t really work. There is a reason you’re self-employed and undoubtedly have a passion for something you love. You could be a master chef, make beautiful jewellery or paint incredible art.
You will best serve your business by playing to your strengths and doing what you excel at. Managing your own accounts takes you away from what you love. Also, the thought of your “books” will likely lower your productivity and hang over you like a big, black cloud. If you’re doing something you really don’t want to do, ultimately, you could lose interest in the whole thing.
Avoid pressure and burnout by engaging people who genuinely enjoy something that you don’t.
5. With a DIY approach, you may not have the peace of mind you deserve
Although somewhat clichéd, a managed service to look after your “books” offers genuine peace of mind.
Bookkeepers offer the reassurance that the increasingly complex world of tax and accounting is something they are looking after for you to the absolute highest standards. They will meet all your deadlines and ensure you pay the tax you owe – to the nearest penny.
Thus, your time is much more your own. You have the energy to focus on the other vital things in your life, such as developing your business or spending quality time with the people you love.
So, can I do my own accounts?
It’s best not to. Engaging a bookkeeper could be one of your best-ever investments and a great asset. They’re an outstanding source of advice and advice, can save you money in tax savings, and ensure that you meet all your obligations to HMRC.
Well, that’s a relief.