Artificial intelligence (AI) is reshaping how people work. From drafting emails to writing documents, AI tools have become a part of everyday life. However, in the areas of tax and accounting, the risks of relying on AI tools like ChatGPT or Grok are becoming increasingly clear.
But in recent months, a growing number of accountants across the UK have noticed a worrying trend: clients are turning to AI for financial or tax advice before speaking with a qualified accountant.
Recent surveys have suggested that almost 60% of UK taxpayers would be prepared to use AI tax advice to help them complete their Self-Assessment Tax Return. Another survey found that nearly two-thirds (64%) of UK businesses are now consulting AI chatbots for financial advice before speaking with their accountant.
A recent survey conducted by AI startup Ravical found that more than half of accountancy firms said they've had to correct inaccurate or misleading advice generated by chatbots. One in five accountants reported being “frequently asked to intervene after businesses rely on chatbot guidance”, according to the survey of 500 senior decision-makers.
When AI Gets It Wrong
Hodge Bakshi has had a number of cases where clients had acted on incorrect advice from AI tools, including using incorrect rates when calculating Capital Gains Tax, using tax rules from the wrong jurisdictions, and referring to fabricated information supposedly from HMRC. These could have resulted in penalties exceeding the amount of underpaid tax as well as potentially triggering a costly tax investigation from HMRC.
These issues aren't confined to business queries. In HMRC v Gunnarsson [2025] UKUT 247 (TCC), a taxpayer appealing a £13,000 SEISS clawback used an AI chatbot to draft his tribunal submission, only to find that three of the “cases” cited were entirely fictitious.
The Upper Tribunal judge, Rupert Jones, criticised the use of unverified AI material:
“The accuracy of artificial intelligence (AI) should not be relied upon without checking, particularly when it comes to statements or arguments that it makes concerning the law.”
While the judge accepted that the taxpayer was not legally trained, he warned that in future, misuse of AI could lead to sanctions. The case underlined a key principle: AI can assist with research, but it cannot replace professional judgement, due diligence, or accountability.
In another recent example, Deloitte has agreed to repay part of a A$440,000 (£215,000) consulting fee to the Australian Government after AI-generated inaccuracies were discovered in an official report produced by the firm. Deloitte had used a generative AI tool (Azure OpenAI GPT-4o) while preparing the report, which was later withdrawn after an academic identified incorrect citations and footnotes, prompting Deloitte to issue a corrected version and formally acknowledge its use of AI. Although the report's core findings and recommendations remained unchanged, the incident underscores the importance of robust verification, transparency, and human oversight when AI is used in professional work.
Risks of Using AI
AI tools often struggle with the complexity of the UK tax system, which is among the most intricate in the world and can often:
- Provide outdated information
- Use information for the incorrect tax period
- Use information for the incorrect country or jurisdiction
- Be unable to account for recent legislative changes
- Potentially refer to fabricated information
- Ignore or incorrectly apply tax reliefs
AI models often generate responses based on broad datasets which aren't tailored to your individual circumstances, the complexities of tax laws, regulations, and industry practices. As a result, they can often lack the depth of technical knowledge required for highly specific or nuanced tax circumstances, potentially leading to inaccurate or incomplete advice. Knowing the right questions to ask and knowing what information to provide can drastically impact the output provided.
AI Usage in HMRC
HMRC has admitted to using artificial intelligence to support its compliance and enforcement work. In a statement reported by the BBC, HMRC confirmed that AI is used to monitor social media posts as part of criminal investigations into suspected tax evasion. The department emphasised that this technology “would not replace human decision-making” and remains subject to strict legal oversight.
The technology will be used to monitor social media for signs of undisclosed wealth. AI tools will reportedly use image recognition to identify indicators of a luxury lifestyle, such as exotic holidays or high-end purchases.
There are significant risks with automating these processes, such as cases of mistaken identity, fake or hacked social media accounts, so human oversight is critical as criminal investigations based on incorrect information could do a lot of damage to HMRC's reputation.
Key Takeaways
From our own tests on AI tools, we've found that even in fairly simple cases, AI tools often provided inaccurate information which took a lot of prompting and correction to finally get to the correct tax position. In more complex cases, they failed to consider some of the reliefs or applied them incorrectly which could lead to an underpayment or overpayment of tax. For taxpayers who are not experts in these areas, it can be almost impossible to pick up these errors.
Whilst AI can be a useful starting point, not all AI tools can properly understand the complexity of the UK tax system, widely regarded as one of the most intricate globally. The constant stream of legislative change, differing interpretations of HMRC guidance, and layers of case law make it extremely challenging for even experienced professionals to stay current. AI models, trained on historic data, often lack awareness of the latest Finance Acts, tribunal rulings, or HMRC updates, and can easily generate outdated or misleading responses when asked to answer technical questions.
Using AI tools could also pose a risk to your data, as adding sensitive information into AI platforms may mean that it could be stored, used to train systems, or visible to system administrators Always be cautious about the personal information you provide, as it may be stored or used for future training.
If you are considering using AI for your taxes, proceed with caution. While AI tools are a valuable tool, they are not a substitute for professional judgment.
For up to date, tailored advice, contact us to speak to one of our qualified tax professionals who will advise you in a tax-efficient way that suits your personal circumstances.
Author
Sameer Bakshi | ACA CTA BFP
Director
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Based in Cardiff, Hodge Bakshi is a leading firm of Chartered Accountants and Chartered Tax Advisers with over 40 years' experience serving businesses and individuals across South Wales and the UK.
Navigating complex tax rules can be challenging, from understanding allowable expenses to ensuring compliance with ever-changing tax legislation. As Chartered Tax Advisers, our experienced tax specialists provide tailored advice to help our clients minimise tax liabilities, stay compliant with HMRC requirements, and maximise profits.