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

If you are thinking of setting up a limited company, 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?

Do you have to hire a limited company accountant?

No, there is no legal obligation to hire an accountant when running a limited company. And assuming you are going to qualify as a ‘small’ business, there isn’t a requirement to have your accounts professionally audited.

You do still have to submit your statutory year-end accounts to both HMRC and Companies House.

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

Some good reasons to hire an accountant for your company

The costs are reasonable

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.

There’s a lot of work involved

If you look after your own accounts, you will need to complete dozens of financial tasks each year. Typical tasks include:

  • Dealing with Corporation Tax.
  • Preparing year-end accounts.
  • Dealing with VAT and submitting quarterly returns.
  • Running the company payroll, calculating income tax and NIC liabilities.
  • Dealing with HMRC and Companies House.
  • Completing your personal tax return each year.
  • Submitting your annual Confirmation Statement.
  • Ongoing bookkeeping and reconciling bank statements.

Assuming you have the expertise to take on these tasks, do you have the time?

The risks of errors are reduced

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.

You’re paying for expertise, which could save you money

The tax savings a qualified accountant could help you realise may well be in excess of the annual fees they charge in return. A good accountant will have knowledge of the latest changes in tax legislation and will be able to advise you accordingly.

For contractors, this will mean being up-to-date on IR35, Off Payroll, and the MSC rules.

Good tax planning includes how to structure your company’s shares, and how to extract funds from your business in the most tax-efficient manner.

Do you really want to deal with HMRC yourself?

If HMRC has any enquiries into your company’s 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.

Especially with faith in HMRC service levels at a new low.

Professional references

And finally, 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. Many lenders will only accept a reference from a chartered or certified accountant.

Other options

With some outstanding accounting software on the market (such as Xero and the excellent 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 of 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.

Partner Contractor Accountants

Last updated: 15th January 2024