Can I Use AI for My Tax Return?
AI tools are now embedded into our daily working lives, assisting us with writing emails, managing documents, analysing spreadsheets and automating various repetitive admin tasks. It’s only natural that many people are now wondering if AI can help file their tax return?
The answer is both yes and no. AI technology can certainly help with some aspects of your tax return but leaving it solely up to technology to prepare and file can leave you exposed to some serious risk. Knowing when it’s appropriate to use AI tools versus getting support from a professional accountant can help you avoid making expensive mistakes.
In this guide, we’ll take a closer look at whether you should use AI on your tax return, and what the potential pros and cons are.
Can AI Be Used for Tax Returns?
In the UK, there is currently no legislation stopping you from using AI programmes to compile information for your Self Assessment tax return.
Assuming your financial situation isn’t too complex, AI can help you stay organised with admin tasks and preparing your information before handing it over to your accountant.
But should you use AI to calculate your tax return and submit it to HMRC by itself? Absolutely not.
Using AI Without Professional Advice
Artificial Intelligence is getting better all the time, but it's not certified or regulated by law as an accountant. Platforms with AI technology do not hold legal responsibility for their advice, meaning they could make mistakes on complex or unique tax situations.
Tax rules also change all the time in the UK, so information sourced through AI technology may not be up-to-date with the latest HMRC legislation or guidance. If you accidentally make a mistake when filing your tax return, you may be hit with:
- HMRC penalties
- Interest on unpaid tax
- Investigations by HMRC
- Miscalculations on your tax bill
Remember, you’re ultimately responsible for the information you provide on your tax return, not the AI program you used to compile it.
AI Can’t Offer Professional Tax Guidance
AI lacks the abilities of an experienced accountant when it comes to identifying tax reliefs and reviewing your unique circumstances.
There are many parts to your tax return that AI could potentially get wrong. That’s why it’s important to work with a qualified accountant who can offer bespoke advice.
An experienced accountant reviews your tax return based on your personal circumstances, helping you stay compliant with tax laws while also minimising your tax bill with allowable tax reliefs.
AI Tools Don’t Have All the Answers
A lot of AI technology generates responses based on similar information available online. If the source being fed to AI isn’t correct, it will likely spit out an answer that sounds legitimate but is actually wrong.
Keep an eye out for the following problems:
Out-of-date information
HMRC updates tax thresholds, allowances, and codes annually, and sometimes even more frequently. AI technology may not be aware of the most recent changes.
Advice that’s too general
AI is programmed to cover as many topics as possible, so it only provides you with general advice and won’t have all the answers to your specific tax situation.
Complex tax topics aren’t always understood
AI does not have the capacity to fully understand more complex income streams or unique tax situations. Things like self-employed earnings, rental properties, investment income, cryptocurrency and limited companies all have their own tax rules.
Tax reliefs you aren’t aware of
Submitting your tax return without having it checked by a professional could mean you miss tax reliefs you’re actually entitled to.
When AI Can Come in Handy
That doesn’t mean AI technology can’t be useful however. AI can work in conjunction with a professional accountant to:
- Sort through receipts/invoices
- Prepare basic bookkeeping records
- Draft questions to ask your accountant
- Monitor key deadlines
- Provide information summaries
- Help manage documents and spreadsheets
If used correctly, AI technology can save you time and improve your accountant correspondence during tax season.
Why Accurate Tax Returns Are Important
Filing an incorrect tax return can be costly. With HMRC cracking down on non-compliance and encouraging taxpayers to move away from paper tax returns, making mistakes on your tax return is more important than ever.
Not only can errors cause you to pay more tax than you should, but an inaccurate tax return can have wider implications.
As many lenders request taxes, documents and accounts to be prepared, or checked by qualified accountants, having an inaccurate tax return may cause unnecessary delays. This is particularly relevant for the self-employed and company directors.
Should You Use AI for Your Tax Return?
AI technology has its place in the tax return process but should not be used to replace professional advice. Seeking support from an accountant is always the best way to file an accurate and compliant tax return.
That being said, there’s no harm in allowing technology to take care of menial tasks that can be automated. Tax software can help streamline your tax return process when used alongside traditional accounting methods.
At Phinch, we understand tax can be stressful, which is why we provide fast and affordable accountancy services to help you meet your tax obligations. Our team of professional accountants work with individuals, landlords, the self-employed and business owners to provide tailored support, from Tax Returns to Strategic Business Advice.
Talk to Phinch About Your Tax Return
If you’re looking for help with your tax return or need advice on how to manage your finances, speak to Phinch today.
We offer professional tax returns, bookkeeping and accountant services at affordable rates to make managing your taxes simple and stress-free.
