Can AI be trusted in personal finance?

AI (particularly Large Language Models, or LLMs) has rapidly become a popular tool across many industries in 2024, including personal finance. From AI-powered budgeting apps to virtual financial assistants, these technologies promise convenience and automation in managing money. But would you trust AI to manage something as critical as your taxes or pension?

When it comes to more complex areas like tax calculations, pensions, and financial planning, relying solely on AI can be risky. While AI can offer help in some areas, it lacks the logical reasoning and interpretive skills needed to navigate the intricate web of financial rules. For crucial financial decisions, hand-crafted, audited tools like Saving Tool UK—backed by human expertise and manual verification—provide the accuracy and reliability that AI simply cannot match.

So, can you really rely on AI to help with your financial plans?

Your Budget Buddy, But Not Your Financial Planner

There’s no denying that AI has value to offer in personal finance, especially when it comes to providing general advice or tracking spending patterns. AI-driven applications can:

• Offer insights into spending habits and suggest ways to save money
• Help you create budgets by analysing your income and expenses
• Provide general guidelines on how much to save or invest based on broad financial principles

These features make AI tools useful for day-to-day financial tasks and basic financial management. For instance, if you need a reminder to stick to your grocery budget or want to keep an eye on your monthly subscriptions, AI can be quite effective. However, these tasks don’t require the nuanced decision-making that more complex financial calculations do.

AI Doesn’t "Get" HMRC Rules — And That’s a Problem

Where AI falls short—and where it can become downright dangerous—is in dealing with complex, multi-layered financial regulations like taxes or pensions. While AI services can theoretically be updated with the latest information, the key problem lies in how AI applies that information. Current AI models lack the ability to apply logical reasoning or navigate the contextual intricacies required to interpret rules accurately.

For example, calculating taxes in the UK involves navigating a series of thresholds, allowances, and special cases. HMRC rules can be complex and often require nuanced understanding, such as knowing when personal allowances taper off, how different forms of income (e.g., dividends or capital gains) interact with your overall tax bill, or when you qualify for certain exemptions. AI may be able to retrieve the right figures or formulas, but it cannot be trusted to use them correctly every time.

Take the example of National Insurance contributions. In recent years, there have been multiple changes to National Insurance rates. While AI can be fed the correct rates, it may not always apply them correctly based on a user’s individual circumstances, such as their employment type or earnings thresholds. AI’s inability to interpret these complex, personalised rules means that mistakes can—and often do—happen.

When It Comes to Financial Calculations, AI Needs a Human Backup

There is no substitute for human-led verification and manual auditing. The UK tax system is intricate, with rules that constantly evolve and interact in ways that require expert interpretation. Each year, the UK government sets wide-ranging budgets that can affect every financial instrument available to planners—creating fresh interpretations and strategies.

Unlike AI, tools like Saving Tool UK are designed specifically to meet the needs of UK taxpayers, with each calculator and feature carefully tailored to reflect the latest rules. But what makes these tools truly stand out is that they are manually verified by experts who understand the complexity behind the numbers.

In our Introducing Saving Tool Advanced post, we explain how the platform goes beyond AI’s capabilities by ensuring each tool is crafted and audited to reflect the latest UK-specific regulations. This manual verification process guarantees that every financial calculation you make through Saving Tool UK has been rigorously tested for accuracy, offering peace of mind that AI simply cannot provide.

And remember: when it comes to financial planning, always do your own research and seek professional advice if you are unsure.

Guesswork and HMRC Don’t Mix: Why AI Is Risky for Your Wallet

AI models like ChatGPT are trained on vast amounts of data but lack the crucial skill of logical reasoning. When calculating taxes or planning for retirement, it’s not enough to just "know" the current tax rates or pension thresholds. These numbers must be interpreted within the context of an individual’s financial situation, accounting for allowances, exemptions, and other variables that AI may overlook.

For example, an AI might know the current Personal Allowance for Income Tax but fail to apply the correct tapering rules once an individual’s income exceeds a certain threshold. Likewise, AI could mistakenly calculate pension contributions without factoring in the Annual Allowance or Lifetime Allowance, leading to significant financial consequences.

This lack of logical reasoning becomes particularly risky in more specialised financial scenarios, such as handling dividends, capital gains, or navigating tax relief on pension contributions. Misinterpreting just one rule could lead to underpaying or overpaying taxes, and the ramifications of such errors can be costly.

Saving Tool UK: The Human Touch You Can Trust

Unlike AI-based tools, Saving Tool UK is built with a single purpose in mind: to serve UK taxpayers with accurate, reliable, and up-to-date financial information. Here are the key reasons why Saving Tool UK outperforms AI in financial planning:

• Human-Verified Accuracy: Every tool on Saving Tool UK has been crafted and audited by financial experts, ensuring that calculations are precise and aligned with the latest regulations
• Contextual Understanding: Saving Tool UK’s tools are built to account for the wide range of factors that can influence your financial situation, from personal allowances to specific tax reliefs, providing precise calculations that AI models often miss
• Transparency and Trust: Saving Tool UK’s tools provide clear, transparent calculations, allowing you to understand how each figure was arrived at. With AI, there’s no way to "see behind the curtain," and mistakes can be harder to identify

Use The Best Tools For You — But Know the Risks

AI is undeniably a powerful tool that can assist with many aspects of personal finance, from offering budgeting tips to helping you track spending patterns. It’s quick, convenient, and often useful for general guidance. However, when it comes to financial calculations that impact your taxes, pensions, or long-term financial planning, AI’s limitations become clear. The lack of logical reasoning and inability to navigate complex regulations make AI an unreliable option for these critical tasks.

That doesn’t mean you can’t use both AI and human-verified tools to manage your finances. AI can be a helpful starting point, but when it comes to calculating taxes or planning for the future, it’s essential to rely on a trusted, expert-verified resource like Saving Tool UK. By doing so, you ensure that the numbers you rely on are accurate, up-to-date, and tailored to UK-specific financial rules. In short, AI can assist, but for peace of mind and confidence in your financial decisions, using a verified tool is the safest way forward.