Tax Software vs. Accountant: Which Is Right for You?

As soon as New Year’s celebrations wind down, UK taxpayers begin their annual hassle to track invoices/bills and P60 forms to start the arduous task of filing tax returns for the annual January 31 deadline. 

For some taxpayers, it is convenient to receive a nice little refund with the help of an accountant. However, for others, the season evokes a great amount of anxiety and confusion. 

For millions of Britons, tax season demands a big decision. Ultimately, paying a professional to prepare your taxes is wiser, or you may pay the excess.

According to a YouGov annual report, approximately 58% of self-employed UK small businesses hire an accountant to help with their tax returns.

Nonetheless, look at both and see what works best for you.

What is Tax Software?

Tax software takes a do-it-yourself approach and is somewhat insufficient in managing tax obligations. It has an unfriendly interface and features that barely help file tax returns.

However, software like Xero and QuickBooks allow you to put financial information, calculate taxes, and submit them online. 

That being the case, tax Software has gained popularity recently. Here are some pros and cons of using tax software.

Pros

• Accessibility: You can file your taxes anywhere and anytime. Most tax software has step-by-step guides to help you complete basic tasks. 
• Agility: For straightforward tax situations, software can help you complete the process faster, maybe in a few hours. 
• Automaticity: Tax software can apply relevant tax rules. However, a user must input data correctly to avail of appropriate tax benefits, ultimately making an Accountant more suitable in this situation.
  
  

Cons

• Limited Guidance: While tax software is helpful for basic tax filing, a non-expert can not handle complex tax scenarios.
• Potential for Errors: Without the expertise of a professional, it’s easier to make errors or miss deductions, which can lead to higher taxes or penalties.
• Limited Customisation: Accounting software has fixed templates and processes, which may only partially adapt to a business’s exceptional financial needs or complexities. For example, an R&D Tax Credit can not be claimed without additional forms with calculated values, which is only suited for professionals.

What Does an Accountant Do?

Accountants specialise in tax planning, financial analysis, and regulatory compliance. They offer personalised insights and accurate reporting, ensure accurate records, and help optimise Xero/QuickBooks setups. 

An accountant’s expertise is vital for complex financial scenarios like multiple currencies/entities or international operations. 

They provide continuous monitoring, exceptional handling, and customised support, ensuring that your business complies with regulations and your financials remain accurate and up-to-date.

Pros 

• Personalised Expertise: An accountant can give you valuable insight into the best solution if you have multiple income streams or encounter complex financial scenarios. 
• Improved business processes: Accountants can help you get loan approvals by liaising with professionals like mortgage advisors and financial institutions.  
• Save time: An accountant will help you save money and time, but you’ll also be able to concentrate on important work for your company. 
• Data Protection: All accounting procedures are GDPR-compliant and use cloud-based software such as Xero and QuickBooks. Data security is an important element of working with a skilled accounting firm. 
• Claiming Everything Right: A well-qualified accountant can help you avoid the problems that businesses deal with. Accounting professionals are taught to recognise tax credits, tax allowances, and deductions that you aren’t aware of.

Cons

• Limited Availability: An accountant may only be available during business hours due to limited working hours. 
• Slower processing: An accountant requires more time for back-and-forth communication, whereas Tax software can provide instant calculations if the input is correct.  

Cost Comparison Tax Software Vs. Accountant 

How Much an Accountant Charged for Tax Return?

In 2023-24, accountant fees charged to individuals for personal tax returns in the UK varied significantly due to multiple factors, such as the complexity of the return filing process and service type required; as well as the expertise of an accountant. Here’s an idea:

• Individual Tax Return: Annual costs range from £75 to over £500 for filing an individual tax return.
• Tax Return and Accounts Services for Self-Employed: Annual fees typically range from £250 to £1000+ VAT per annum.
• Accountant Services for Limited Companies: Accountants typically charge between £60 and £250+ VAT monthly for accounting services for limited companies, including accounts management, tax returns filing, and payroll processing services.

Note: The variance in price is due to the way Accounting Firms charge their customers. Some charge as a percentage of Annual Turnover, and some emphasize the Nature and Volume of transactions or other metrics to quote price. 

Tax Software Pricing

Here is a quick overview of the popular tax software options in the UK and their pricing for 2024:

1. QuickBooks

• Self-employed: £10/month
• Simple Start: £15/month
• Essentials: £32/month
• Plus: £44/month
• Advanced: £98/month 

2. Xero

• Ignite: £16/month
• Grow: £33/month
• Comprehensive: £47/month
• Ultimate: £59/month 

Which One is Right for You?

• Use Tax Software if:
  • You have a straightforward tax return without technical advantage.
  • You’re comfortable handling HMRC notices and queries.
  • You have ample time to put in information without any professional oversight.
• Hire an Accountant if:
  • Your tax situation is complex and requires an easy and quick solution.
  • You want personalised advice on technical taxation issues.
  • You’re concerned about potential audits, and making costly mistakes and want to avoid them.

The choice between tax software and hiring an accountant depends on your tax situation, comfort level with financial details, and willingness to avoid any confrontation with HMRC. 

Tax software may be the most accessible option for those with straightforward tax returns without technical advantages. On the other hand, individuals with complex taxes or who want more personalised service will benefit from hiring a professional accountant.

Can you Use Both Accountant and Tax Software?

Just relying on tax software can leave you unattended with financial complexities. A combination of both an accountant and tax software will give you an edge with the following:

• Receipts Handling: An accountant can help you with receipt handling that most businesses overlook and cannot claim due to the unavailability of expense evidence. 
• Handle Reports: Software like QuickBooks doesn’t have a friendly interface for reports. 
• Review Tax: Though you have successfully managed your taxes, a professional must review your documents. 
• HMRC Submission: The tax software combined with the professional competence of the Accountant can result in a well-drafted Tax return, ensuring all complex and voluminous transactions are reconciled and accounted for. This would save you a lot of time researching several HMRC Rules and Regulations and understanding their application. 

Ready to make the right choice for your tax needs? 

Take control of your finances today and ensure a smooth tax season. Reach us for a free consultation quote and explore the latest tax software solutions.

Get a quote now and choose the best option for your financial journey!