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Do you have to appoint an accountant for your limited company?

If you are thinking of becoming a limited company contractor, choosing an accountant to look after your tax affairs will typically be one of your first tasks. But, do you have to appoint an accountant?

Although there is no legal obligation to do so, here are some important reasons why you should always hire an accountant:

Reasons to hire an accountant

  • A typical contractor accountant will cost between £70 and £120 per month. In real terms, the monthly cost of a fixed fee accountant has barely changed due to competition between suppliers. Typical fixed fee rates for contractors are substantially lower than the annual fees charged by many general small business accountants.
  • As a limited company director, you are personally liable for any mistakes made in the preparation of your accounts. Using a professional to look after your accounts will minimise the risk of errors being made.
  • Taking care of your own accounts will consume several hours of your time each month, which you could be otherwise spending enjoying your leisure time.
  • If you look after your own accounts, you will need to complete dozens of financial tasks each year, including; calculating and paying your income tax, dealing with Corporation Tax, National Insurance (NICs) and VAT, dealing with HMRC and Companies House, completing your personal, corporation, VAT and company Confirmation Statements. This is just a fraction of the work you will need to put in.
  • The tax savings a specialist accountant could help you realise may well be in excess of the annual fees they charge in return.
  • Accountants will have knowledge of the latest changes in tax legislation and will be able to advise you accordingly.
  • If HMRC has any enquiries into your tax affairs, your accountant will deal with them on your behalf. Many people would not relish the chance to have to deal with the tax authorities in person.
  • If you need a solid reference for a mortgage or tenancy application, your accountant will usually be happy to provide one for you at no extra cost.

Other options

With some excellent accounting software on the market (such as FreeAgent), it has never been easier to manage your day-to-day accounts, however, software will not be able to compile and submit your annual company accounts for you.

You may choose to use an accountant to compile your company accounts and take care of the rest of your tax affairs yourself. In this case, you might expect to pay the equivalent to half the annual fee of a typical contractor accountancy service for an annual accounts only service.

You will inevitably have questions along the way or need help dealing with HMRC on certain issues, so you should carefully consider if you will be better off overall by opting out of paying for an accountant.

The vast majority of contractors do use an accountant, as they do take care of a wide range of obligations on your behalf, leaving you free to concentrate on making the most out of your contracting career.

You can try our directory of specialist accountants as a good starting point.

Last updated: 13th August 2019