Whether you’re dipping your toes into contracting for the first time or are a seasoned pro, a good accountant is essential.
The right contractor accountant will take care of your tax paperwork and help you make sure you don’t pay more than you have to.
More importantly, they’ll advise you on complicated rules like IR35, so you can concentrate on your work without worrying about dealing with HMRC.
Of course, hiring a contractor accountant is a personal thing. They’re someone you’ll be working with closely and trusting with your money (hopefully for many years to come).
So how do you make sure you choose the best contractor accountant? Here are 10 steps.
Before we discuss how to choose an accountant, a quick word on when to hire one.
While you might think it’s a big expense, especially if you haven’t made any money from contracting yet, it’s worth hiring one before you even start, for two reasons:
They’ll make the process of setting up as a contractor much smoother
They’ll advise you on your tax obligations
Umbrella or limited company?
Most clients and recruiters won’t hire you unless you work through an intermediary (i.e. a company).
It goes without saying, but you should only work with an accountant if they’re suitably qualified.
At a bare minimum, they should have an AAT foundation certificate. This is an entry-level qualification which gives a good grounding in bookkeeping, costing, and other basic issues around financial administration.
Professional bodies
More experienced accountants will typically:
Have an accountancy degree, a more advanced AAT qualification, or an ATT, ACCA, or CIMA qualification
Be affiliated with a professional body such as:
ICAEW (Institute of Chartered Accountants in England and Wales)
ICAS (Institute of Chartered Accountants in Scotland)
ACCA (the Association of Certified Chartered Accountants)
CIMA (the Chartered Institute of Management Accountants)
Professional accountancy bodies have specific training and continuing professional development requirements.
So if your accountant belongs to one, it shows they’re serious about meeting high standards of expertise and professionalism.
It’s worth looking them up on professional bodies’ member directories to confirm their credentials.
Account managers vs. qualified accountants
In many cases, the firm itself will hold the relevant qualification(s), not necessarily members of staff who do much of the day-to-day paperwork.
In other words, you’re likely to have an ‘account manager’ who handles day-to-day issues and tasks. They might be training for an accounting qualification themselves.
They will need to seek approval from a qualified accountant when finalising your company accounts, and certain other duties.
3. Do they specialise in contracting?
As a contractor, you have to comply with complex legislation such as IR35 and the rules around expenses. These can have serious financial consequences if you get them wrong.
You’ll also want to keep your tax bill as low as possible.
Many contractors do this by paying themselves a small salary and taking the rest of their income as dividends.
Not all accountants understand how contractors work and get paid, or are up to date with the latest tax laws that apply to contractors. Working with someone who is clued up will help you avoid problems down the line.
4. Individuals vs accountancy firms
The case for larger firms
Like other businesses, accountants can vary enormously in size, from one-man bands to large firms with thousands of employees across the country (or even across the globe). Both have their pros and cons.
A larger firm with lots of employees will probably have a wider skill set. They’ll be more likely to have worked with contractors before. And they may be able to offer you additional services such as financial advice and legal support.
The flipside is that you’ll probably be a small and lower-priority client for them. This means you may be assigned to a junior or get shifted from one accountant to another depending on who is available.
Chances are the service will also be more impersonal. And because larger firms have bigger overheads, you can expect to pay more.
The case for smaller firms
A smaller firm or an individual may be able to offer you a more tailored, personal service at a lower cost.
That said, they won’t always have the expertise to meet your needs in-house or be in a position to provide additional services.
They may also be less responsive when things get busy, especially if they have higher-paying clients to deal with.
5. Are they comfortable with tech?
Paper-based vs. digital
How will you submit your records and financial information to your contractor accountant?
Will you pack up your shoebox of receipts and mail it off to them, after which they’ll mail back physical copies of your accounts and tax paperwork for you to sign? Or is everything paperless and online?
These days, almost all accountants will ask you to upload to an online portal, have their own bespoke digital platform, or use third-party accounting software such as Xero, the excellent FreeAgent, or Quickbooks.
Using specialist contractor software
HMRC doesn’t specify what format your financial records should be in, as long as they’re complete, accurate, and readable.
So whether you go with a paper-based accountant or someone who uses modern software is largely a matter of personal preference.
From our experience, we strongly recommend hiring a FreeAgent accountant. We’ve used the software since 2010 ourselves – it is tailor-made for contractors, and accountants also love it. It makes keeping on top of your accounts a breeze.
6. How much do they charge?
Typical monthly fees
How much accountants charge varies widely. Expect to pay as little as £50 a month, or £150 a month or more.
Be aware that most accountants quote their rates exclusive of VAT. This means you need to add 20% to their fees. So if an accountant says they charge £100 a month, that’s actually £120 a month.
If you’re VAT registered, this isn’t an issue, as your business can reclaim the VAT element.
What should be included?
You should also check what’s included in the fee. As a minimum, you should expect it to include:
Preparation of your annual company accounts
Company tax returns and VAT filings
Handling of correspondence from HMRC and Companies House
A certain amount of contact hours so you can ask questions and get advice and support with your tax affairs
The old adage goes that you get what you pay for. But this isn’t always the case with accounting.
While you should check what’s included in the fees and shop around, don’t make it all about price.
What’s more important is that you partner with someone you’re comfortable with, who is efficient and responsive, and who gives you good advice.
7. What’s not included in the fees?
Common exclusions
Just as important as what’s included in the fee quote is what’s not included. Services you may want to ask about (but may not be included in the fee) are:
Your personal tax calculation and self-assessment tax return (this is a personal, not a business expense).
Payroll. If you use accounting software such as Xero or FreeAgent, running this yourself is fairly straightforward. But you may want to offload the responsibility. Most contractors do.
References. For example, if you’re applying for a mortgage
Most reputable accountants will ask you to sign an engagement letter. This will specify what’s included and what’s not included in their fee, as well as their terms and conditions. But if you’re still unclear, it doesn’t hurt to ask.
8. What’s their reputation like?
Reviews and ratings
Your accountant may have a shiny logo, a slick website and affiliations with professional bodies. But that doesn’t necessarily mean they have a good reputation with your fellow contractors.
In fact, some of the best contractor accountants have pretty basic websites.
Do they live up to the hype? Or are they infamous for poor service?
Google reviews and comparison websites can be a good starting point for checking this out. That said, it’s not always possible to tell genuine reviews from fake ones. Some reviews may be paid for, and some may be written by people with an axe to grind.
With this in mind, you should take reviews with a pinch of salt.
Word-of-mouth recommendations
The best approach, once you make a shortlist of possible contractor accountants you could work with, is to ask people you know and trust for their thoughts.
Speak to fellow contractors or ask in professional groups such as LinkedIn. You’ll be more likely to get an unbiased opinion and trustworthy recommendations.
9. How responsive are they?
How efficient is your accountant? Do they quickly respond to your queries? Or do you have to chase them for days to get a simple yes or no reply?
At best, an accountant who is often unavailable or unreachable is frustrating to deal with. At worst, it may mean you’re not a priority for them, which could lead to missed deadlines, incorrect advice, and trouble with HMRC.
Of course, you won’t know for sure what someone’s like before you start working with them.
That said, it’s worth picking up the phone or dropping an email to accountants you’re interested in working with.
If someone isn’t open and helpful when they’re trying to win your business, chances are they’ll be hard to deal with once you sign up too.
And if your relationship with your accountant sours, don’t be afraid to switch.
While finding someone new and getting them up to speed may seem like a hassle, the peace of mind that your tax affairs are in order is well worth it.
10. Will they grow with your business?
Hiring an accountant may feel like a big expense, especially if you’re starting out as a contractor.
However, if you choose wisely, you’ll recoup the fees through tax savings and by staying on the right side of HMRC.
More importantly, you need to ask whether they are a partner you can trust for the long term. As your business grows, you may need more than just compliance — advice on tax planning, pensions, or even mortgage references. The best contractor accountants will grow with you.
If you’re ready to compare options, see our Top 10 contractor accountants guide, with a full comparison of monthly packages and fees.
