While businesses are required by law to maintain financial books and records, individuals are not. However, not doing so is more likely to hurt you from an economic and tax perspective.
There are various reasons behind this, like incorrect credit card statements, due bills that may hurt your credit score, and overlooking some tax benefits. Therefore, it makes sense to keep track of your finances, and this is where a professional accountant comes into the picture.
On the other hand, hiring an accountant for personal finances might appear as an unnecessary expense. In the UK, failure to file a tax return attracts a penalty of at least £100, which professional accounting services can help avoid. Moreover, they will often save you more money than the cost of hiring them.
The best practice would be to find out more information about the accountant or accounting service provider to see how they can benefit you in managing your finances.
For example, if you’re in Newcastle-upon-Tyne, you can look up accounting for individuals in Newcastle-upon-Tyne and check for yourself the range of services offered. However, if you’re still in a dilemma, here’s a primer article to help you decide.
Why Should You Hire an Accountant?
HM Revenue and Customs (HMRC) has set the deadline for self-assessment on October 5th, 2021, with paper tax returns and online tax returns set for October 31st, 2021, and January 31st, 2022, respectively. This means tax season is here and according to IRS reports the error rate for paper tax returns is astonishingly high at 21%.
It is often caused by overlooked details because of the complexity of tax laws. A trained accountant or accounting firm should be able to spot and address these small overlooked details.
Additionally, if you are an individual who falls in a higher salary bracket, an accountant will prove beneficial since your taxes will be higher. The UK has an Alternative Minimum Tax method, which ensures that higher-income individuals are taxed fairly compared to middle and lower-income households.
That means there are more tax deductions and rebates available to higher-income groups. An accountant would help you find these tax deductions, especially if you have multiple sources of income.
Apart from these, a dedicated accountant or accounting firm will also help you through an audit, major financial decisions, and achieve financial goals realistically.
Who Should You Hire?
Now that you know how crucial it is to manage your finances and have a financial advisor, you must know about various financial experts based on your requirements. Here are some professionals whom you can hire.
A bookkeeper is a professional that offers concierge personal finance services. These may include maintaining your financial records like balancing your checkbook or looking over your credit card statements. Typically a bookkeeper may or may not have special training, and as such, they are more affordable.
An accountant is more qualified than a bookkeeper as they have a college degree in accounting and required training for financial accounting and bookkeeping. For this reason, they charge more than a bookkeeper.
Certified Public Accountant (CPA)
A CPA is a finance professional with a college degree, a master’s degree in accounting, and certification from Certified Public Accountant Professional or CPA Professional UK (CPAPRO) or similar professional bodies. Most CPAs offer both accounting expertise and bookkeeping but delegate the latter to an employee in their firm. These experts are considerably more expensive than an individual bookkeeper or accountant.
Lastly, accounting firms offer a range of accounting services for a reasonable hourly or monthly charge. These accounting firms have a team of experts equipped with the knowledge to deal with whatever accounting service you may need.
These services include bookkeeping, self-assessment tax returns, tax planning, CIS returns, asset management, and more. Therefore, individuals can decide what accounting service they need help with and get focused expertise in that department.
Moreover, accounting firms typically have a team of experts with years of experience and skills. There are dedicated accountants to deal with a particular accounting service who do the same task day in and day out. For example, they will have dedicated bookkeepers, tax planners, and asset managers, to name a few. Therefore, you get expert advice and assistance, no matter which service you avail.
The takeaway here is that while hiring an expert for managing your finances might seem like an additional expense, it’ll save you more money in the long run. However, make sure to keep your finances separate from the accounting of any business you might own. For best results, integrate the personal accounting cost into the household budget.