Six key things to consider when choosing an accountant

Choosing an accountant is a key decision. Find the right one and they’ll make your life easier, while helping you to maximise your income and minimise your tax bills.

Some sole traders and small private landlords don’t use an accountant. They take a “DIY approach” to bookkeeping and completing their tax returns. Software makes this possible and it enables them to save money.

But for an easier life and peace of mind, many other sole traders and small private landlords do use accountants. Choosing an accountant is a key decision. Find the right accountant and they’ll make your life easier, while helping you to maximise your income and minimise your tax bills. Make a bad choice and you’ll earn less income and end up frustrated at the poor service you receive. So, before choosing an accountant, what key factors should you consider?  

1. Experience

You’re looking for a well-established accountant with years of experience of working for sole traders and landlords. If they’ve worked for sole traders in your sector, it can be hugely beneficial. They’ll be familiar with the unique challenges faced by sole traders in your sector, which should enable them to give you reliable practical advice. And although you’re likely to have to pay more for it, they or someone within their network should also be able to advise you on other important matters, such as growing your business or property portfolio, future investments, your pension, etc.  

Top tip! Seek recommendations from other landlords or sole traders in your sector. Ask them which accountants they use and whether they would recommend them. Also find out how much they pay and what services they get in return.

2. Qualifications

An accountant should of course have the necessary professional training and membership of relevant professional bodies. In the UK and Ireland, leading chartered accountancy bodies include the Association of Chartered Certified Accountants (ACCA), Chartered Accountants Ireland (CAI), the Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered Accountants of Scotland (ICAS).

Top tip! Qualifications and memberships will only tell you so much. The right accountant will also understand you, be committed to working hard for you and want to build up a strong professional relationship with you.

3. Services

You also need to find an accountant who can offer the services you require, now and into the future. While basic services such as bookkeeping and tax returns are essential, you might also gain from tax planning and business advisory services. If you run a business and it grows, consider whether the accountant can help to enable your growth and support you as your needs change over time.

When weighing up your options, get prospective accountants to explain what specific services they offer. Also find out about their culture and approach to customer service. You should be sure that they will respond quickly and satisfactorily to your requests for support, not leave you waiting ages for a reply.  

Top tip! Find out who your regular contact will be at prospective accountants and ask to meet them. This is the person with whom you’ll need to establish a good working relationship. Crucially, they need to be someone you can trust.

“When weighing up your options, get prospective accountants to explain what specific services they offer. Also find out about their culture and approach to customer service.” 

4. Reviews

Prospective accountants will probably tell you how wonderful they are and how much their existing clients love them. Their website might also contain glowing quotes from satisfied clients. But you need to do some of your own research. Look on social media and review platforms such as Trustpilot to see what clients are actually saying and what ratings they have given. You need to be able to trust your accountant, they need to demonstrate integrity and professionalism.

Top tip! Even the best accountants attract negative reviews – sometimes unfairly. As well as the glowing reviews, read the bad ones to see how the accountant has responded. It can reveal much about their customer service and explain bad reviews.

5. Value

Although, obviously, you’ll want to minimise your accountancy costs, going for the cheapest option can be unwise. Generally, you get what you pay for. You need to consider what value you will get, not necessarily what price you pay. An accountant who charges you slightly more might offer you greater quality. They could be much more reliable and give amore responsive, personalised service.  

Top tip! Accountants either charge a fixed monthly fee for specific services or a set fee for a specific task (eg complete a tax return), possibly an hourly fee for other work. Make sure you understand what you’ll pay and what you’ll get for your hard-earned cash. Transparency is essential, there should be no hidden costs. And be sure to claim back all accountancy fees as an allowable tax expense.

“Make sure you understand what you’ll pay and what you’ll get for your hard-earned cash. Transparency is essential, there should be no hidden costs.”

6. Software

As a sole trader or landlord, you realise the importance of keeping accurate, up-to-date financial figures, so you’re happy to use accounting software. But you just need accounting software that’s quick and easy to use, gives you basic functionality and gives you access via your smartphone if you’re out and about. You want something that enables you to manage and minimise your expenses, something that saves you time, effort and costs when completing your Self Assessment tax return.

Top tip! Ask prospective accountants what software they’ll expect you to use. Also ask them how quick and easy their preferred client accounting software is. If it comes with complex and unnecessary “bells and whistles”, ask for something simpler.

And finally…

Leave yourself enough time when searching for an accountant. Rushing your decision can lead to mistakes. Seek recommendations from other sole traders or landlords. Make time for a brief face-to-face meeting with accountants, to get a better idea of who will be working for you.

Have conversations with a few shortlisted accountants before making your decision. Be clear about how much you’ll pay and what services you’ll get. Speak to some of their other clients. Find out whether they think they’re getting good value for money. Choose an accountant that uses the right software for your practical needs, software that saves you time, effort, money and makes your life easier. Ultimately, you’re hiring an accountant for the same reasons.

• This blog was written for Coconut accounting software.

Do I need to file a tax return for my side hustle?

Side hustles have become very popular. According to some sources, more than a third of UK adults already have a side hustle and that could soon increase to half. A side hustle, of course, is a way to earn cash in addition to your main source of income, whether you’re employed or self-employed.

The explosion in side-hustler numbers hasn’t escaped HMRC’s attention. Last year, the UK tax authority warned that it had told popular platforms to reveal side-hustle income so that it could go after unpaid tax. HMRC had in its sights those making extra dough from eBay, Amazon, Etsy, Airbnb, Fiverr, Uber, Uber Eats and Deliveroo, as well as those using platforms Upwork and Fiverr to earn additional money by freelancing.

Selling personal possessions versus side hustle income

If you’re occasionally selling personal possessions via an online marketplace, perhaps old vinyl records or football programmes on eBay, clothes on Vinted or other unwanted things from your loft or garage at car boot sales, no tax is payable. You’re just selling off your personal possessions.

However, if you’re regularly buying things to sell on for a profit or you’re buying materials to make things (eg greetings cards) to sell for a profit, you’re trading and tax may be payable. The same is true if you’re selling your professional services regularly, where income can also be taxable over certain thresholds.

When is side hustle income subject to tax?

If you are trading, thanks to your “Trading Allowance” you can earn up to £1,000 a year of side-hustle gross income (ie your total sales) tax-free, because HMRC views this as “casual or miscellaneous” income. You don’t have to register or fill in a tax return, you can relax.

But once your side-hustle trading gross income goes over the £1,000 Trading Allowance threshold, Income Tax can be payable, depending upon how much taxable income you earn from other sources. If you earn taxable income from more than one side hustle, the £1,000 threshold applies to your total taxable side-hustle income.

Registering to pay tax on your side hustle income

Most people earning taxable side-hustle income pay tax via Self Assessment, after registering as a “sole trader” (rather than setting up a limited company). Visit government website GOV.UK to register as a sole trader. It’s quick, free and easy.

If you haven’t done this before, you must register before 5 October following the end of the tax year in which you earned taxable side-hustle income. The UK tax year runs from 6 April until the following 5 April. If you don’t register in time, you can be fined.

Once registered, each year you must complete and file a Self Assessment tax return, as well as supplementary tax return pages SA103 to report your side-hustle income, plus any tax expenses and allowances you wish to claim. Depending on your other sources of taxable income, there can be other supplementary pages to complete. You must file your Self Assessment tax return before the online-filing deadline of midnight on 31 January, otherwise there’s an immediate £100 fine.

How much tax will I pay on my side-hustle income?

Sole traders pay tax on their net profits, which is their sales minus their costs. HMRC allows you to deduct some costs (“allowable expenses”) from your gross sales/income, which reduces your tax bill. Other other tax allowances and reliefs may also be claimable.

The Income Tax band into which all of your total taxable income falls (not just your trading income) determines how much tax you pay. As well as your £1,000 Trading Allowance, you don’t pay Income Tax on your first £12,570 of gross taxable income, because this is your tax-free Personal Allowance.

• You’ll pay the basic rate of Income Tax of 20% if your total taxable income is between £12,571 and £50,270 a year.

• You’ll pay the higher rate of Income Tax of 40% if your total taxable income is between £50,271 and £125,140 a year.

• You’ll pay the additional rate of Income Tax of 45%, if your total taxable income is more than £125,140 a year (2024/25 tax year).

• Income Tax bands and rates are slightly different in Scotland.

What about airbnb or other property rental income?

If you earn less than £1,000 gross rental income via airbnb, you don’t have to report it to HMRC. Thanks to the Property Allowance, it’s tax-free income. As soon as you earn more than £1,000, it’s reportable taxable income.

• Contact HMRC if your annual rental income is between £1,000 and £2,500.

• You must complete and file a Self Assessment tax return and supplementary pages SA105 if your annual rental income is more than £2,500 after allowable expenses or £10,000 before allowable expenses.

What if I don’t pay tax on my side-hustle income?

Reportedly, digital platforms will only pass on data to HMRC automatically if a seller is selling 30 or more items a year or they have total earnings over €2,000 (about £1,700). But even if your taxable sales are just over £1,000, registering for Self Assessment and paying any tax due is recommended.

If you know that tax is payable on your side-hustle income and you try to conceal it from HMRC, you’re guilty of tax evasion, a type of fraud and a criminal offence, of course. The financial penalties for tax evasion can be severe and in the worst cases it can lead to a prison sentence. Trying to hustle HMRC is not advised.

• This article was written for GoSimpleTax in 2024.

How a thriving community-owned and run enterprise in Liverpool is bettering the lives of people in Anfield

Liverpool FC is one of the world’s richest football clubs, yet the streets around the club’s spiritual home of Anfield are among the UK’s most economically deprived and unemployment remains high.

According to Liverpool City Council, 6 per cent of people in Anfield aged 16-64 claim benefits for being unemployed, while the citywide figure is 3.5 per cent and it is 2 per cent for the UK. The average household income in Anfield is £22,444 (national average £38,858), while 36.6 per cent of its children live in poverty (national average 16.8 per cent).

In the shadow of Liverpool FC’s world-famous Kop stands Homebaked, a community land trust (a community-led housing and enterprise scheme) and hugely popular co-operative bakery and café. The aim is to improve Anfield and help to rebuild the local community – “brick by brick, loaf by loaf”.

Community arts project

The origins of Homebaked date back to 2010, when artist Jeanne van Heeswijk, supported by Liverpool’s Biennial (the UK’s largest festival of contemporary visual art), sought involvement from Anfield people in a project that would improve their neighbourhood. This centred on the old Mitchell’s Bakery building, which had been designated for demolition.

“Homebaked Community Land Trust was formed in 2012,” explains treasurer, Sally-Anne Watkiss. “The aim was to refurbish the bakery building to provide workspace for social enterprise and affordable housing.

“The Homebaked Bakery Co-operative was incorporated in June 2012, with local residents wanting to re-open the bakery under community ownership, to create a successful enterprise with financial and social value. Homebaked is run by a board of volunteers, which includes myself, in partnership with local people and professional volunteers from the fields of law, architecture, accountancy and housing. Volunteers together give about 80 hours of their time free to Homebaked every week.”

Good, affordable food

The popular bakery is famous for its delicious pies and fresh bread. Usually the café is packed to the rafters on matchdays, but busy at other times, too. “It exists to provide good quality, affordable food for the locals and match day visitors, as well as training and jobs for local people, who earn a living wage,” Watkiss stresses.

“The bakery provides jobs for 15 people, of which, 12 live in the immediate area. And through our volunteering programme, we’re helping others to gain work experience and build their CVs. Some of our former employees have gone on to open their own food businesses,” she adds.

Watkiss spent 25 years working as an accountant for insurance company, Royal & Sun Alliance. “Initially, I helped Homebaked with its business planning in the summer of 2013, before becoming treasurer in 2014,” she smiles.

“Homebaked proves that a different type of business – one owned by the community – can be successful and thrive, while helping to alter perceptions of our community and area”, Watkiss states. “We’re based in a building that was a bakery for more than 100 years, it’s iconic in the neighbourhood, and that tradition has been preserved. The café is an informal gathering place for the community, as well as a great alternative place for fans to buy food on match days.”

Cause for celebration

Homebaked has received funding from the John Moores Foundation, Power to Change and the European Regional Development Fund. Watkiss adds: “We’re now 90 per cent funded by our traded income and we’ve just accepted our first social investment from [social impact business] First Ark.

“The aim has always been to create a self-sustaining community-based business. In the year to January 2018, our sales grew by 117 per cent. Our revenue comes from the bakery and café, as well as wholesale pie sales and catering for markets and events, which help us to keep prices affordable in the café,” she explains.

So, what advice does Watkiss offer to people interested in setting up a similar business to benefit their local community? “Be clear about why you’re doing it and what you’re trying to achieve – always refer back to these,” she replies. “Remain nimble, too, because you’ll be breaking new ground and you must keep learning and changing. And finally – be proud and celebrate your successes, because making a positive difference in your community or neighbourhood really is something worth celebrating.”

• Written by DeadGoodContent Founder and Content Director, Mark Williams