Do I need an accountant to do my tax return?

This article is for freelancers, sole traders, and people with side hustles.

Most newly self-employed people start out with a lot of questions about how to handle their tax payments. Whether or not it’s necessary to use an accountant is often one of them. Should you enlist the help of a professional, or save money by going it alone? How much does an accountant cost anyway? And what other options are available?

Whether you work as a freelancer, are in the gig economy, or have a side hustle – we cover all you need to know about using an accountant (or not) for your tax return.

What’s a tax return? A tax return is a set of forms that needs to be completed annually by anyone who earns over £1,000 in self-employed income in a year. It tells HMRC how much you’ve earned across the financial year (for most people that’s 6th April – 5th April). And it shows how much Income Tax and National Insurance you owe. 

Do you need an accountant to file your tax return?

Whether or not you need an accountant to help with your tax return depends on how confident you are with tax. There’s no legal requirement to use an accountant. But there are benefits to getting professional help. 

If you’re unfamiliar with the world of tax, for example, using an accountant can give you peace of mind that you’re not making any mistakes on your tax return. They’ll handle all the complicated bits, like making sure you claim the right business expenses. And they’ll make sure you stay on track with everything with friendly reminders, so you don’t miss any deadlines (which can lead to fines). 

Using an accountant also saves you time, as they’ll do the bulk of the work on your tax return so you don’t have to. 

Cost of using an accountant

Accountants usually charge a one-off fee for sole trader tax returns. (You’re a sole trader if you are registered as one with HMRC.) This can be between £200-450, but it might be higher if your accounts are more complicated. 

Can I do my tax return myself?

As a sole trader, you can do your tax return yourself if you want to. The process includes working out:

• How much you’ve earned in total across the year
• How much you’ve spent in allowable business expenses (like your phone, car running costs, and home office costs)
• How much you’ve spent on other things you can get tax relief on (like most pension payments and charity donations)
• How much you’ve already paid in tax (for example, if you get a PAYE salary from an employer as well as self-employed income)

You then use this information to fill out your tax return forms. You can file your Self Assessment online or by post. HMRC has its own free software that can be used by those who want to file online. It’s important to remember that the tax return deadline is different for online filing (31st January) and filing by post (31st October). 

While you will save money handling your tax this way, going it alone can be a bit daunting if you’re a first-time filer or your accounts are quite complicated.  For example, if you have a lot of business costs (most people have more than they realise), get lots of smaller payments (like with gig economy work), or work a regular job and are self-employed. 

That’s not to say you can’t go it alone. It really all depends on how confident you feel and whether or not you’ve got the time to do things thoroughly. There is lots of free support out there to help you with your taxes, including useful articles you can read on the Finmo website.

If you can’t afford an accountant, there are some great apps around that can help you manage your finances for free. Which brings us to our next point:

What is tax software and how does it help?

Tax software (which includes apps) is technology designed to help you track your work and personal finances over the course of the year. 

A while back, tax software would be pretty cumbersome and only really suitable for larger enterprises. But these days a lot of tax software is designed specifically for sole traders, freelancers and people with small businesses, with user-friendly apps that can be accessed on the go.

This kind of tax software usually works by connecting with your bank account, so you can sort your finances directly from your transactions (on an app or website portal). 

Finmo is an example of tax software that lets you do this. Our app hooks up with your bank so you can easily tag each bank transaction as a business expense, tax relief, or income. 

Finmo also has a feature that lets you automate income and expense tracking. It means you can instruct the app to tag certain transactions for you as and when they happen. For example, if you regularly buy work supplies from a certain chain store, you can make it so that Finmo automatically tags all transactions at that store as ‘Business’. As well as tagging all future transactions that take place at that store, it’ll tag all past transactions you’ve made there too.  This means your finances get categorised in bulk, so you don’t have to go through them manually (which is way more time consuming).

Our software also calculates a live tax estimate for you, so you always know roughly what you owe.

Using a combination of tax software and an accountant

Another option is to use both tax software and an accountant. 

At Finmo, for example, our plans let you use our tax software through the year, and also connect with an accountant, who’ll review and file your tax return for you.

(This approach means that we can offer accountancy support at a more affordable rate because a lot of the accountant’s work is taken care of by our software.) 

The benefits of using a platform like Finmo include:

• Keeping track of your finances across the year 
• Always roughly knowing what tax you owe, and how much to save
• Much easier and more accurate income and expense tracking across the year
• Snap and match receipts and invoices to your bank transactions so everything is connected in one place and you never miss an expense
• A simpler, easier tax return process than HMRC’s current system (the Finmo Self Assessment portal walks you through the process, with handy prompts, questions and explanations to help you pull all the information you need together)
• More affordable accountancy support (accountants review and file your tax return for you, just like an accountant in any other setting would)
• You can take your time with your Self Assessment by saving your progress to come back to it later 

When do I need to do my Self Assessment? 

The annual deadline for Self Assessments is 31st October if you’re doing it by post, and 31st January if you’re doing it online. 

If you haven’t done your 2021/2022 tax return yet, you’ve got until 31st January 2023 to do it online (the postal deadline has passed).

You can read more about important tax dates for sole traders here.