Whether you have recently set up a limited company or you have been managing your finances independently until now, hiring an accountant may be the best thing you do during the early days of running your business.
Trying to oversee your company’s accounting and tax affairs can be tedious and stressful unless you have prior experience, and can also take valuable time away from the day-to-day running of the business.
Why hire an accountant?
For this reason, the majority of limited companies hire specialist accountants to a) help with the initial set-up process, and b) to oversee the company’s ongoing tax and accounting affairs.
Over the past decade, scores of dedicated small company accountancy firms have emerged – facilitated, no doubt, by the huge advances in web-based accounting systems, which makes life easier for clients and the accountants themselves. In fact, it’s never been easier (or cost effective) to outsource your firm’s tax work to an accountant.
Here are some of the main tasks you can expect an accountancy firm to provide on an ongoing basis – as part of their monthly / annual fee.
What will your limited company accountant do?
- Setting up your limited company via Companies House (assuming you haven’t already done so).
- Take care of the initial tax registration forms for your company, including Corporation Tax, Value Added Tax, and registering your business as an ’employer’ (so you can run a payroll for the director and employees).
- Setting up and running a payroll system to process your salaries.
- Preparing your company’s quarterly VAT returns.
- Bookkeeping (this may or may not be included).
- Completing HMRC payroll-related forms (such as the end-of-year P60).
- Complete your Annual Accounts.
- Complete your Company Tax Return.
- Complete your personal tax return (for an additional fee).
- Provide mortgage, or tenancy references (possibly chargeable).
- Dealing with HMRC correspondence, on an ongoing basis.
- Submitting your Confirmation Statement each year (possible chargeable).
- Setting up a limited company bank account on your behalf.
- Conducting or facilitating IR35 contract reviews, if you provide professional services (for an additional fee).
Although your accountant will take care of your company’s tax and accountancy needs, their records will only ever be as accurate as the information you provide them.
What do you have to do for your accountant?
- Keep your accountant updated with any changes to the company’s personnel, salary levels, etc.
- Make sure you upload records of all income and expenditure on a regular basis (via third party software or otherwise). This is an essential task, and shouldn’t take long, especially if you dedicate a few hours to your accounts each month.
- Make sure you respond to your accountant if they ask you to provide bank statement, or other records. Or to check draft VAT, Corporation Tax, or personal returns, and other types of paperwork.
- You, as the director, are ultimately responsible for the accuracy and timeliness of all tax returns. Not your accountant.
How much will a limited company accountant cost?
Costs obviously vary between firms, depending on the amount of expertise they provide you, and the amount of work you expect them to do.
If your company’s affairs are relatively straightforward (for example if you’ve set up in business as a professional contractor), you can choose from a large selection of specialist aaccountants. They will charge anything from £70 to £180 per month for core support.
The more ‘add ons’ you require (such as inclusive insurance, bookkeeping, etc.), the more you can expect to pay.
Here are some of small company specialist accountants we have worked with over the past 10 years.
|Aardvark Accounting||£76||Full service, including FreeAgent software, payroll, IR35 advice.|
|Clever Accounts||£74.50||Complete service, unlimited support. Package for larger companies available for £104.50.|
|SG Accounting||£109||Full package, contractor specialists. Half price offer currently available.|
|SJD Accounting||£90||This is the 'Light' package. Essential package @£120 includes VAT accounting.|
|Vantage Accounting||£79||Price based on up to £85k turnover. Small company specialists.Half price offer available.|
For a comprehensive list of firms, here is a useful costs comparison table of 30+ specialist accountancy firms.
How to choose an accountant
We’ve been providing guides to small companies for almost 20 years, and from our experience, one of the best ways to choose an accountant is via recommendations from people you know and trust.
Don’t necessarily only consider price. Service is arguably more important – as there’s nothing worse than an unreliable accountant.
Before signing up, find out if you will have a dedicated point of contact. Some firms operate a kind of ‘conveyor belt’ system where you may not know from day-to-day who to contact if you have an query.
A good accountant can not only save your company money, but will also provide reassurance that your financial affairs are being looked after, tax deadlines are being met, and potential problems are spotted in advance. So, if you’re starting up a new business, what should you look out for when choosing a limited company accountant?
Although cost should not be the most important factor to consider, inevitably no company owner wants to pay more than necessary to secure a professional service. There are several ways accountants charge their clients:
- Annual fee – to cover all fundamental accounting tasks, including compiling your Annual Accounts, processing your payroll, VAT reconciliation, dealing with official paperwork, etc.
- Monthly fee – most contractor accountants charge for a full accounting service on this basis, in a very competitive market.
- Time basis – you may prefer to pay your accountant for the time they spend on your account. Additional services provided on top of annual/monthly fees will also usually be chargeable.
Make sure you compare like with like when choosing an accountant. This is easier with contractor-type packages, but for general accountancy services, ask two or three firms to provide a quote.
Do you want to hire a small, local firm, or would you prefer a larger, perhaps less personal service? How long has the accountant been established, and what other services do they provide?
Do they specialise in particular types of client, such as contractors, engineers, or dentists? For certain professions, it makes a lot of sense to hire a specialist, as they will have knowledge of specific tax legislation or regulations which may affect your sector. If you provide personal services (i.e. as an IT contractor, consultant, interim, etc.), the biggest single threat to your prosperity is in the form of the Intermediaries Legislation (IR35), so you should definitely only hire a firm with experience of dealing with this specific tax rule.
Modern or ‘Old School’
What type of service can your accountant provide? Most small companies value the time-saving benefits of cutting edge technology, rather than putting up with frustrating ‘old school’ methods of communication.
There are now several excellent online accounting systems, such as Xero and FreeAgent, which sit between client and accountant – massively simplifying the accounting process, and keeping both sides up-to-date with invoicing, tax deadlines and payments. You can even reconcile your bank statements with your online accounting platform, and submit tax returns to HMRC.
Unless your prospective accountant has a robust bespoke online system available, they really should be familiar with one of these third-party tools. Your life will be massively simplified as a result.
Is your accountant qualified with a professional body, such as the ICAEW or ACCA? Although day-to-day accounting tasks can be completed by non-qualified staff (this is not unusual), you should expect tax planning advice to be provided by a qualified person.
Several of the leading small business accountancy firms we work with at LCH take on over 50% of their new clients via word-of-mouth recommendations. If you have any trusted friends and colleagues who have had a good experience with their accountants, their views could prove to be invaluable. Unfortunately, from our experience, it is hard to use ratings or popularity indicators from the web to determine how good a firm is – as such measurements are so easy to manipulate. For this reason, recommendations from real people are essential.
Try our directory of limited company accountants as a starting point.