The 7 Dangers of a DIY Tax return
This article explores some of the risks of DIY Tax returns and demonstrates how instructing professional property and landlord tax advisors such as RITA4Rent helps you avoid these risks from occurring.
- Financial Cost
Perhaps one of the most common reasons for doing a tax return yourself is not wanting to pay the costs of instructing a professional tax advisor. However, a tax advisor is not simply there to fill the forms in. What your tax advisor should do is review your circumstances and information in full to ensure that you are as tax efficient as possible. You may not be claiming deductions for all the expenses you are entitled to or you may not be claiming all the allowances available. The result of this could be that you actually pay more in tax than you would have done to your tax advisor.
A big risk of not getting professional tax advice is that you may end up completing your tax return incorrectly. Not only could this mean you pay an incorrect amount of tax but you could also be investigated by HMRC and even charged penalties for the errors as well as any tax that you have underpaid. When you instruct a tax advisor the chances of any errors appearing on the tax return are dramatically reduced. If you were to face a HMRC investigation (even if you are just picked at random) a professional tax advisor will be able to help you deal with HMRC and the fees you would owe for this extra work may be covered by fee insurance.
When it comes to tax law there is a lot of “technical jargon.” It can almost be like learning a foreign language. On your own you would have to look up the definition of many of these terms and this is not always straight-forward. There is a definite risk of misunderstanding tax definitions. With a professional tax advisor, you can use them a bit like a translator of a foreign language. They will be able to translate complex technical terms in to plain English so that you understand the meaning of it.
- Up to Date Information
Tax law, unfortunately, quite literally does not stay still. It will have changes at least once a year, which is why the finance bill is passed every year and sometimes changes will be introduced at other points of the year. This means what you did to come to your tax liability in one year may not be the same thing you need to do the next year. The example below demonstrates this. Professional Tax Advisors are members of certain professional bodies. One of the requirements of continued membership is that the member stays up to date with relevant changes through Continued Professional Development. When you are just doing it yourself once a year it is easy to miss things.
- Forgetting Deadlines
You may find that, with no one to remind you, you forget the deadline for a submission or a payment. Some deadlines are quite well publicised by HMRC, such as the 31st January for the submission of a personal tax return and the balancing payment. However, there are other deadlines which are less well published by HMRC. For example, in some cases, you may be able to get a tax liability you owe taken out of your tax code from your employment. This requires, however, your tax return to be submitted by 30th December. A professional tax advisor would provide you with reminders of all your tax submission and payment deadlines as well as drawing your attention to the less commonly known deadlines.
- Not Considering Your Best Overall Position
It is common to try and get yourself in the best tax position. You may be tempted to do everything you are allowed to do to decrease your personal tax liability. The only problem is that this tends to only be looking at your short term position. A professional tax advisor can look at your overall long term position. An example may be, when you are trying to reduce your level of income by claiming certain allowances. You may also be applying for a mortgage which requires a certain level of income. In this case it may be more beneficial to not claim all the allowances available to you.
- Dealing with HMRC
Dealing with HMRC can be stressful at the best of times. HMRC are a powerful organisation. To put it in to perspective, HMRC, in some cases, are more powerful than the police. Using their phone service, for example, can be difficult to even get through to someone, particularly in busier times. When you use a professional tax advisor, they will ask you to fill in a form 64-8. This gives the agent (that is the tax advisor) permission to speak to HMRC, regarding your tax affairs, on your behalf. This means that you won’t have to deal with HMRC directly. Also, agents get the benefit of having some priority help lines to deal with your tax affairs quicker.
As demonstrated above there are lots of benefits to instructing a professional tax advisor and some potential risks of not doing so. We would therefore always recommend that you seek professional advice.
As professional tax advisors that specialise in landlord and property tax tax, RITA4Rent would be delighted to assist you, and should you have any questions regarding this, please do not hesitate to contact us on 0800 1 22 33 57 or via email by clicking here.