AS the self-assessment deadline nears, Britain’s five million freelancers will be wondering whether they need to pay an accountant as well as a taxman.
Many accountancy apps promise to do much of the hard work for you for half the price – but can they really replace a flesh and blood accountant?
A third of small UK small business owners lose cash by filling out the wrong paperwork, with businesses wasting almost three working weeks sorting out their tax returns.
This month’s 31 January deadline means it’s peak season for book-keeping panic, even more so with freelancers having to pay more tax this year.
But apps can now do the leg work for small businesses and freelancers – from preparing a version of your tax return to HMRC to snapping and recording your receipts using artificial intelligence AI.
They also send invoices with your own letterhead, help your track income and expenses and create instantly readable charts of your earnings if you want to see how well you’ve been doing.
But they come with varying price tags and extras can be incurred – even when the app is ‘free’ there is some cost to go premium.
Bokio is completely free for many of its features (see below) – ideal for a sole trader with a fairly basic set up – but if you want expert accountant input you pay £25 per month to chat to one.
Wave is another big player in the same space and offers free invoicing, accounting and receipts services but charges for bank-to-bank services (1 per cent fee per transaction.)
QuickBooks, one of the most established names in the market, and starts at £6 per month, though premium services cost extra.
How to know if you need to file an account for self-assessment
SELF-ASSESSMENT is a system HMRC uses to collect income tax.
Tax is usually deducted automatically from wages, pensions and savings, but people and businesses with other incomes must report it in a tax return.
We’ve made a list of who it applies to below:
- Earned more than £2,500 from renting out property
- You or your partner received high income child benefits and either of you had an annual income of more than £50,000
- Received more than £2,500 in other untaxed income, for example from tips or commission
- Are self-employed sole traders
- Are limited company directors
- Are shareholders
- Are employees claiming expenses in excess of £2,500
- Have an annual income over £100,000
There are a few things an app can never replace, says Richard Anning, a spokesperson for the Institute of Chartered Accountants in England and Wales.
He said: “Automation may streamline tasks like book-keeping, but you will always need skilled people to provide advice and make decisions, like, ‘Is there a problem with cash on the horizon? Is their tax return correct?
“Is their data secure?
“Experience also tells us that we trust computer systems more than we should, and with algorithms set to make more and more decisions, someone needs to be able to hold them to account.
“The chartered accountant here can be that “human in the loop”, helping to validate decisions and to build trust in IT systems.”
If you do miss the 31 January deadline, there are a limited number of excuses that HMRC will accept before fining you, such as relative died or you suffered a serious equipment failure.
Should you trust an app? We look at the biggest five on the market below.
Cost: £6 per month for the basic package after 30 day free trial. 50 per cent off promotion for the first 6 months regularly available.
What does it offer? You can track income and expenses, easily send invoices and, most handily, snap and record receipts.
Track deductible mileage and use multiple bank accounts, separating business and personal bank accounting (so you can sort your beer money too.)
Most usefully, it prepares you a complete HMRC self-assessment for you so you can file to tax office easily.
Nice touch that you can match receipts to expenses simply by moving photos from the “receipts” folder.
How easy is it to use? User-friendly interface and a free chat messaging support option. IOS and Android.
Cost: Free, though a premium package – with qualified accountant help – can be bought for £25 per month.
What does it offer? New kid on the block with an impressive list of features.
If you are used to keeping a drawer full of loose receipts, Bokio – using state of the art AI – you simply snap receipts with the camera and it pulls all the numbers off into a file.
Can be synced with your bank account too for easy monitoring of debts and expenses.
Brilliant invoicing feature that tracks all jobs and automatically creates invoices for each gig so you can send them out to clients.
Applies letterheads to all invoices/correspondence and handily tells you when your client has read the invoice. Instant graphs available to show how your company is performing.
How easy is it to use? Easy once you get going, but initial set up can be fiddly. IOS and Android.
Cost: Free trial, usual cost is £10 per month, though – if you are a mid-sized business – it gets expensive – things like payroll, extra invoicing are extra.
What does it offer? Easy to view your cash flow and transactions as business account transactions can be automatically monitored if you sync to your app.
Also offers performance insights and projections – i.e. how you might do next month based on previous data – and easy invoicing.
VAT calculation and payroll add-ons are available (£1 per additional employee up to 200.)
Online bill payments help keep track of spending and stay on top of bills due, with handy receipt management and storing.
How easy is it to use? Xero offers user support though online reviews suggest this is problematic.
Also has limit on number of invoices you can send – ‘free’ users can only send 5 per month. IOS and Android.
Cost: Free for accounting, invoicing and receipts, but some services are extra.
What does it offer? Unlimited invoicing and invoice tracking; accept payments on the spot by credit card or bank payment; personal accounting and reports/graph production.
There is also a feature to track loans you have owing.
How easy is it to use? Interface is easy to understand, though isn’t as sleek as competitors. Android and IOS.
Cost: Currently as low as £7 per month for basic package, (normally £24) though best features are on pricier packages available
What does it offer? Feels designed for larger businesses – you might not need departmental analysis and manage stock takes if you’re a sole trader.
Can generate business performance, speedy invoicing and reconcile business expenses with your own bank account.
Cloud-based and all accounts are stored on a private drive for easy access anywhere.
How easy is it to use? Has professional phone support and links seamlessly with Microsoft Office, though feels set up for desktop use rather than phone. Android and IOS.