Rajiv Mehta | 28th June 2024 | 10 min read
Social media is no longer just a place to share your latest cooking or bungee jumping adventure. It's now a hub for advice on nearly every aspect of life, including business and tax matters. Platforms like TikTok, Facebook, Instagram, and X (formerly Twitter) have become go-to sources for millions seeking quick tax tips.
However, the rise in self-proclaimed tax experts doling out advice on these platforms has led to significant concerns about accuracy and legality. Having recently dealt with the arduous task of correcting such advise, we have decided to write this blog to alert our readers and clients.
The Surge of Tax Advice on Social Media
Recently, there's been a notable uptick in tax advice circulating on social media. This advice spans a wide range of topics, from corporate taxes and employment income to capital gains and inheritance taxes. However, the quality of this advice varies greatly, with much of it being misleading or outright incorrect.
For instance, incorrect advice on deductible expenses or filing deadlines has led individuals into non-compliance with HM Revenue & Customs (HMRC) regulations. The UK tax system is notoriously complex, requiring a deep understanding of various rules and regulations. Incorrect advice can result in underpayment or overpayment of taxes, both of which have serious consequences.
Influencers and bloggers, for example, must declare income, including monetary gifts and other forms of compensation. Many might overlook this due to bad advice, leading to hefty fines and back taxes. At Financial Angels, we've recently corrected such mistakes for businesses that relied on inaccurate social media advice.
The Risks of Inaccurate Tax Advice
Following tax advice from unverified sources can lead to severe consequences, including penalties from HMRC. Even minor errors in tax filings can result in significant financial liabilities. Social media often overlooks the nuances of tax laws, such as specific criteria for claiming expenses or the implications of different tax statuses and residences. This oversight can lead to incorrect filings and subsequent fines or HMRC investigations.
One striking example involves a small business owner who followed social media advice about Business Property Relief, only to face a costly HMRC investigation. The advice was incorrect, leading to significant fines and back taxes. With professional guidance from Financial Angels, the issue was resolved, highlighting the critical need for qualified and professional advice.
Another case involves an individual who assumed as they had not made a profit on their secondary income, they didn't need to declare this on their tax returns! This mistake resulted in an unexpected tax bill and penalties.
The Role of Professional Bodies
Unlike unregulated social media advice, the tax profession in the UK is governed by strict codes of conduct and ethical standards set by professional bodies and HMRC. These guidelines ensure that tax professionals provide accurate and reliable advice, helping taxpayers manage their obligations without unnecessary risk.
Professionals, like those at Financial Angels, emphasise the importance of obtaining tax advice from qualified and regulated advisors.
Remember, regulated advisors have studied for their qualifications and charge more than the off-the-cuff advice from social media, but this cost is justified. The correct advice saves money and stress in the long term, unlike the "free" advice that can lead to expensive mistakes.
We believe that improving tax literacy is a key solution to combating misinformation.
Integrating basic tax education and common business sense into the national curriculum would help future generations understand the essentials of personal and corporate taxes, empowering individuals to discern between legitimate advice and potentially harmful misinformation.
Practical Tips for UK Taxpayers
Given the risks associated with social media tax advice, it's essential to approach such information with caution. Here are some practical tips to help navigate the digital landscape of tax advice:
- Verify the Source: Always check the credentials of anyone offering tax advice online. Reputable sources will have professional qualifications and affiliations with recognized bodies.
- Understand Your Obligations: If you're self-employed or earning money through non-traditional means (like blogging or influencing), you must register with HMRC and understand what constitutes taxable income, including gifts and other benefits.
- Keep Accurate Records: Maintain detailed records of all income and expenses. This will help you complete your tax return accurately and provide evidence in case of an HMRC audit.
- Seek Professional Advice: For significant tax matters, consult with a certified tax advisor or accountant. While they may charge more than social media "experts," their advice is tailored to your circumstances and ensures compliance with all relevant laws and regulations.
- Be Cautious of Promises: Be wary of advice promising easy solutions or large refunds. The UK tax system is complex, and legitimate tax planning rarely offers quick fixes.
- Cross-Reference Information: Before acting on any tax advice, cross-reference it with reputable sources, such as official HMRC guidelines or advice from certified tax professionals.
- Use Reliable Resources: Utilise trusted resources for tax information. Websites like financialangels.co.uk offer comprehensive guidance on various tax-related topics and can be a valuable tool for ensuring compliance and avoiding pitfalls.
- No Magic Wand: There is no magic wand to pay less tax. However, careful planning lets you mitigate your tax liabilities legally.
Conclusion
While social media is an excellent platform for sharing knowledge, it's crucial to verify the credibility of sources, especially regarding complex matters like tax advice.
Engaging with qualified professionals, such as those at Financial Angels, ensures that the advice you receive is accurate, compliant with HMRC regulations, and tailored to your specific circumstances.