Don’t Believe the Hype: Why AI Accounting Software Still Can’t Do Your Accounts for You (Yet)

If you’re a musician running your own business, you’ve probably seen the adverts.

“AI will do your bookkeeping.”

“Just take a photo of a receipt and everything is handled automatically.”

“Your taxes are calculated for you.”

A growing number of accounting apps aimed at UK sole traders preparing for Making Tax Digital for Income Tax (MTDfIT) promise exactly this: automated invoices, expenses, transaction analysis and tax reporting - all from your phone.

It sounds appealing. And to be clear, technology in accounting is improving rapidly.

But there’s an important reality musicians need to understand:

Software is helpful. It’s not a substitute for proper accounting judgement.

The Promise of AI Accounting Software

AI Accounting Software platforms like this aim to simplify bookkeeping for sole traders by automating common tasks such as:

• Categorising bank transactions

• Capturing receipts automatically

• Generating invoices

• Tracking expenses

• Preparing records for MTD-ITSA compliance

For busy freelancers and musicians juggling touring, teaching, composing and multiple income streams, the idea of “hands-off bookkeeping” is understandably attractive.

In theory, artificial intelligence should be able to look at your bank feed and determine:

• What type of expense it is

• Whether VAT applies

• How it should be reported for tax purposes

But the reality is more complicated.

Why “AI Doing Your Accounts” Isn’t That Simple

In our practice, we work with musicians whose finances often involve:

• International touring income

• Multiple revenue streams (royalties, performances, teaching, session work)

• Foreign tax withheld overseas

• Different VAT treatments

• Complex expense categories

These are exactly the types of scenarios where automation struggles.

Even the best software still relies on pattern recognition, not true accounting judgement.

For example, an AI tool might see a payment to an airline and categorise it as travel expense.

But for musicians the real question might be:

• Was that travel for a UK performance?

• An overseas tour?

• A personal trip?

• Or a mixed-purpose journey?

Those distinctions matter enormously for tax reporting.

And software simply cannot understand the context the way a human can.

When We Tried to Automate Bookkeeping with AI

We actually ran an experiment in the practice last year to see whether AI could help streamline some of the bank transaction data flowing into our clients’ Xero feeds.

The results were interesting.

AI handled country categorisation very well. This is something we need for our international clients, where income and expenses often have to be tracked by country for Foreign Tax Credit Relief reporting.

It also performed reasonably well when categorising transactions into the correct account codes, particularly because we had given it a very strict list of accounts to choose from.

Where it really struggled was VAT.

The combination of complex VAT rules, international touring activity and the specific circumstances of our clients proved difficult for the system to interpret consistently.

In the end we reached about 75% accuracy.

Which might sound impressive - but in accounting terms, it simply isn’t close enough.

If accuracy isn’t extremely high, you still have to manually check every transaction. And at that point, the time spent checking the AI’s work can actually exceed the time it takes to code the transactions yourself.

Accuracy Is the Real Issue

As was evident by our own experiment, the biggest challenge with AI bookkeeping isn’t whether it works sometimes. It’s whether it works accurately enough.

Even if software correctly categorises 75–85% of transactions, that still leaves a significant number requiring manual review.

And when accuracy isn’t high enough, something frustrating happens:

You end up needing to check every single transaction anyway.

At that point, the automation doesn’t save time - it actually creates extra work.

For professional accountants, the threshold for useful automation is extremely high. Anything below roughly 95% accuracy still requires full oversight.

And that’s why the idea that software can completely replace accounting expertise simply isn’t realistic right now.

Why This Matters Even More for Musicians

Musicians are not typical sole traders.

Your financial life often includes:

• Royalties from multiple territories

• Touring income taxed overseas

• Agents and promoters withholding foreign tax

• Grants and funding income

• Equipment purchases with complex VAT treatment

• Multiple currencies

Each of these areas involves tax rules that software cannot reliably interpret on its own.

For example, if foreign tax has been withheld on performance income, your accountant needs to ensure:

• The income is reported correctly in the UK

• Foreign tax credit relief is claimed properly

• Double taxation is avoided

No bookkeeping app can currently handle that level of complexity without professional oversight.

The Future of AI in Accounting

None of this means technology is useless.

In fact, many of these new AI-driven bookkeeping tools, along with the automation being developed by platforms like Xero and QuickBooks are improving all the time.

AI will almost certainly play a bigger role in bookkeeping over the coming years.

By 2027, it’s entirely possible we’ll see far more advanced automation.

But today, the reality is this:

AI can assist with bookkeeping. It cannot replace accounting expertise.

And for musicians with international income and complex tax positions, that distinction matters.

What Musicians Should Focus On Instead

Rather than chasing the latest “fully automated accounting app”, musicians will get far more value by focusing on three things:

1. Good record-keeping

Use simple systems to capture receipts and track income as it happens.

2. Understanding your tax position

Especially if you earn income from multiple countries.

3. Working with an accountant who understands the music industry

Generic bookkeeping advice often doesn’t work for creative professionals.

The Bottom Line

AI accounting tools are exciting and evolving quickly.

But the idea that software can simply “do your accounts for you” is still more marketing than reality.

For musicians running a professional creative business, accounting still requires context, judgement and specialist knowledge.

Technology will help with efficiency.

But it won’t replace the need to understand what’s really happening in your finances.

If you're a musician wondering how Making Tax Digital for Income Tax will affect you, explore our MTDfIT Hub for Musicians.