Why Following Finfluencers for Tax Advice Could Cost You 💸
In today’s digital age, it’s no surprise that platforms like TikTok and Instagram are brimming with financial advice, with so called ‘finfluencers’ dishing out tax tips in bite-sized videos.
But can you really trust tax advice from someone whose expertise might be more in hashtags than HMRC rules? 🤔
The allure of “quick and easy” tax tips is strong, especially for small business owners, freelancers, and the self-employed who are always on the lookout for ways to save time and money.
However, tax is not one-size-fits-all, and taking shortcuts based on misinformation could land you in hot water with HMRC.
In this blog, we’ll explore why relying on social media for tax advice can be risky, and why an experienced professional tax advisor or (CTA) is always your best bet for getting it right.
Why Is Following Tax Advice from Social Media Risky?
At first glance, it might seem like harmless fun to follow finfluencers offering quick tax-saving tips.
But unlike a professional accountant, most influencers don’t have in-depth knowledge of UK tax legislation or how it applies to specific circumstances.
Misinterpreting or oversimplifying tax rules is common, and what works for one person might be completely wrong for someone else.
For example, one popular TikTok trend claims you can “write off” virtually anything as a business expense—holidays, designer clothes, even meals out with friends.
While there are legitimate business expenses, the rules around what you can and cannot claim are strict.
Filing incorrect claims could trigger a tax investigation, fines, or even prosecution. 😬
Common Misconceptions Spread by Finfluencers
Here are just a few examples of how things can go wrong:
- “You can claim anything as a business expense!”
Sure, if your “business” involves needing a tropical beach to work, maybe you think you can justify that holiday to yourself and your pals.
In reality, HMRC only allows you to claim expenses that are wholly and exclusively for business purposes. 🌴
- “Side hustle income doesn’t count!”
Another dangerous myth is that side gigs or informal work don’t need to be reported. This is false! All income, including side hustles, must be declared. Not reporting it could lead to penalties from HMRC in top of having to pay all of the tax owed and interest too.
There are rules around the Trading Allowance meaning that the smallest of ‘side hustle’ businesses selling less than £1000 of goods per annum do not have to declare this income to HMRC, but again the rules are strict and must be understood.
- “Form a limited company to avoid tax!”
While this can be beneficial in some cases, setting up a company for tax savings alone can backfire if not done correctly. If HMRC decides your company isn’t genuinely operating for business purposes, you could face significant tax bills and fines.
Even transferring your existing business into a company can lead to tax charges if not done properly. Not only this, but the advantages of setting up a limited company purely from a tax point of view have diminished significantly in recent years and only apply in very particular circumstances.
How Can Incorrect Tax Advice Impact My Finances?
Following poor tax advice can have serious consequences for your wallet and your business. Filing incorrect returns could mean:
- Tax penalties and interest – If you underpay, HMRC will come calling, often with interest and fines added on top.
- Increased scrutiny – Once flagged, HMRC may closely monitor your filings in the future. A Tax Investigation can cost you dearly in both time, money and have a negative impact on your mental health! Oh and don’t expect leniency if your excuse is that you were following finfluencer advice 🙈
- Lost reliefs – Some well-meaning influencers may overlook reliefs or allowances you’re entitled to claim, meaning you could actually end up paying more tax than you have to.
What to Do If You’ve Followed Bad Tax Advice
If you’ve already followed some questionable tax advice from online finfluencers, don’t panic! There are ways to fix the situation:
- Correct your tax return: If you realise an error, you can amend your tax return within 12 months after the filing deadline.
- Seek professional advice: Consulting a qualified accountant is crucial if you’re unsure how to rectify the situation or if you’ve received a letter from HMRC.
- Accept responsibility and be honest: Contrary to popular belief, HMRC do their utmost to support business owners and individuals who have made genuine mistakes. However, if they find that you have knowingly avoided tax or tried to cover up your perhaps innocent mistakes, repercussions can be eye watering!
Why You Should Always Consult a Qualified Tax Professional
Social media is great for fashion tips or finding your next holiday destination, but for tax advice? Not so much.
Tax professionals undergo years (and years) of training, professional exams, and continuous professional development. Moreover, they are regulated by professional bodies like the Chartered Institute of Taxation or the ICAEW, meaning they are always up to date with the latest tax laws and can offer personalised advice. This expertise is especially crucial if you run a small business or have complex financial affairs. They will also have insurance cover should there be a hiccup, or should HMRC guidance change retrospectively as has been known to happen!
A good, certified accountant or a tax advisor will help ensure:
- Your business expenses are legitimate and compliant with HMRC rules.
- You’re taking full advantage of tax reliefs.
- You avoid costly mistakes that could result in fines.
Conversely, the majority of finfluencers are winging it!
How to Differentiate Between Good and Bad Tax Advice Online
If you still want to learn about tax online, look out for red flags to avoid falling for bad advice:
- Check credentials: Are the finfluencers qualified accountant or experienced tax advisors?
- Cross-check information: Compare the advice with official sources, like HMRC’s website. You don’t have to agree with what HMRC think, but you do need to be able to explain why.
- Beware of ‘too good to be true’ tips: If it sounds like a loophole or easy money, it’s probably wrong.
Final Thoughts: Protect Yourself from Bad Tax Advice
In the end, your best financial decisions will come from seeking advice tailored to your unique situation. If you’ve been following finfluencers for tax tips, now’s the time to reconsider. For genuine tax advice, consult with professionals who understand UK tax laws inside and out. If you’ve already made mistakes, don’t worry—get in touch with us at IN Accountancy for expert advice. Whether it’s help with personal tax returns or managing your business finances, we’ve got you covered.
Stay financially savvy and stick with the pros—your wallet and your conscience will thank you! 🧠💼
For a financial advisor’s perspective on the role and risk of following finfluencers when it comes to wealth management advice, do check out this blog from Helen Thomas at FPC: