Accountants for Contractors
Are Contractor Accountants Worth the Cost?
It doesn't matter what industry you work in or the services you provide, as a contractor, you need to manage your finances. It's an important part of running a business, both on a day-to-day basis and for long- term, sustainable success. However, knowing whether to manage things yourself or enlist the help of accountants for limited company contractors isn't easy. From tax obligations to compliance with limited company regulations, having an accountant for limited company contractors can provide peace of mind, but it comes with a cost.
At GoLimited, we know that handling your own limited company accounts is tempting. After all, it's certainly cheaper. But, cheaper doesn't necessarily mean better, and you could be lacking the financial know-how to really get to grips with what's required of you. Below, we've compared the pros and cons of hiring accountants for contractors, taking a look at whether it's really worth the cost.
Tax and Compliance Expertise
One of the main benefits of hiring a contractor accountant is that they have in-depth, detailed understanding of tax laws and regulations, especially those related to contractors with a limited company. For contractors, tax rules can be complicated, especially when IR35, VAT registration, corporation tax and allowable expenses are thrown into the mix. A good contractor accountant will ensure that you stay compliant, which is especially important if you are operating through a limited company. This can help you avoid costly mistakes, fines or even legal issues further down the line.
Less Stress, More Time
Who doesn't want a stress-free professional life? There's a lot that goes into managing your finances as a contractor, time that could be better spent wooing clients and completing projects. You need to keep track of your income and expenses, submit regular reports and file your tax return, none of which is quick. By hiring a contractor accountant, you can focus on other aspects of running a limited company, knowing that a professional accountant is handling everything else. They ensure that tax deadlines are met, keeping you on track and preventing any rushing around at the last minute. You can dedicate your entire focus to growing your company.
Peace of Mind
Unless you have a lot of experience with contractor accounting, you're bound to have a niggling feeling that you've done something wrong. You might worry you've forgotten an important report or you've put the wrong information on your tax return. Having an accountant means that you don't have to worry about missing a deadline, making an error or not complying with HMRC regulations for limited companies.
Cons of Hiring Contractor Accountants
Tere aren't many cons that come with hiring accountants for contractors, but that's not to say there isn't a downside or two. If there's one thing that puts a lot of people off hiring a contractor accountant, it's the cost. Accountants' fees can be high - understandably so, considering the knowledge and expertise needed - and it can put a dent in your budget, depending on the service you need and the complexity of your finances. For relatively new or small limited companies, with a limited budget, this can feel like an avoidable expense. You'll need to weigh up the cost of hiring a contractor accountant against the tax benefits, time saved and ease that doing so brings.
Another downside is the risk of reliance. Though contractor accountants can be hugely beneficial, there is a risk of you becoming overly reliant on them, meaning that you don't take the time to learn about your own finances. There's no need for you to learn about the basics of taxation and accounting as a contractor, which can become a problem if you eventually want to handle things yourself. It's important to have an understanding of your business' financial position, even if you're outsourcing the management side of things to an expert.
How to Choose Accountants for Contractors with a Limited Company in the UK
When it comes to finding accountancy services for a limited company, there are a few things to consider, such as:
Look for Limited Company Specialism
One of the first things to look for is an accountant with experience working with limited companies and contractors. It's important that you have accounting services tailored for contractors and limited companies, and working with a specialist accountant for contractors will ensure that's the case. Not all accountants are the same; some specialise in freelancers and contractors, whilst others specialise in limited companies. For a contractor running a limited company, you'll want an accountant with specific experience dealing with contractors or small businesses.
Check Qualifications and Memberships
A good contractor accountant should have the right qualifications and memberships to ensure they are up to date with tax laws and financial regulations. Look for accountants who are members of recognised professional bodies, such as the Association of Chartered Certified Accountants, Institute of Chartered Accountants in England and Wales or the Chartered Institute of Management Accountants. Being a member of these ensures that the contractor accountant follows a strict code of conduct and is committed to ongoing professional development.
Make Sure They're Experienced
You don't want to risk something going wrong with your company finances, so make sure to choose a contractor accountant with relevant experience. Consider how long they're been operating and if they have experience working with contractors with limited companies specifically. A seasoned accountant who has worked with a lot of contractors in your sector will be familiar with industry-specific tax issues and any unique challenges you might face.
Understand How Much They Charge
Not all accountants for contractors charge the same amount, so you need to understand how much they charge, and how those fees are calculated. Some accountants for contractors charge by the hour, whereas others offer fixed fee accountancy services for limited companies. Make sure that you understand the pricing structure before you sign a contract, as this will help you to avoid unexpected costs at a later date. You might be tempted to choose the cheapest contract accountant that you find, but you need to weigh the price up against what they offer. The cheapest option may not have the level of expertise that you need, and this could cost you more in the long run.
Ask for Reviews and Recommendations
One of the best ways to determine the quality of an accountant is by reading reviews or asking for recommendations from other contractors with limited companies. Look for reviews from people who have used the accountant's services for limited companies before, as their experiences will be the most relevant. Personal recommendations from other contractors or business owners are also helpful, as they can give you an honest insight into what it's like working with a particular accountant.
Compare Your Options
When you're trying to choose accountants for contractors with a limited company, you need to shop around and compare your options. Speak to different contractor accountants and get a feel for how they approach things, and find out as much as you can about their services. Ask them questions that are specific to their experience with contractors, including how they handle tax planning and if they prioritise staying up to date with changes to tax regulations. Try to compare both large firms and small firms, as they'll all have something slightly different to offer.
Do I need an Accountant Limited Company FAQs
Can I have a limited company and a private bank account?
As a director of a limited company, you must keep your personal and business finances separate. A limited company is a separate legal entity, so you are required to open a dedicated business bank account for its financial activities, in the name of that company. Using a private bank account for company transactions could result in accounting errors, issues with HMRC, and non-compliance with company law. That does mean, however, that you can still have your own private bank account for personal transactions, no associated with the limited company.
How do I submit limited company accounts?
Submitting limited company accounts involves filing documents with both Companies House and HMRC. Here’s the process:
1.Prepare the Accounts:
- Include a balance sheet, profit and loss account, and any supporting notes.
- Micro-entities and small businesses may be eligible to submit simpler accounts.
- Ensure compliance with UK GAAP or IFRS standards.
2. Submit to Companies House:
- You can file online via the Companies House portal or submit by post.
- Deadline is 9 months of the end of your company’s financial year.
3. File with HMRC:
- Accounts are submitted as part of the Corporation Tax Return (CT600) using HMRC’s online services.
- Deadline is 12 months of the end of your financial year.
Worth noting: Sole directors often use accountants to ensure accounts are correct and deadlines are met.
Late submissions may incur penalties.
How much does an accountant charge to set up a limited company?
The cost of having an accountant set up your limited company depends on the level of service provided. Typical fees include:
- Basic Company Registration is from £50–£150 plus VAT. It covers filing with Companies House and issuing incorporation documents.
- Full Setup Services is from £150–£500 plus VAT and may include:
- Company registration.
- Assistance with opening a business bank account.
- Registering for VAT and PAYE (if applicable).
- Initial tax planning advice.
Worth noting: Some accountancy firms also offer packages that combine company formation with ongoing bookkeeping or payroll services.
Can I prepare my own limited company accounts?
Yes, you can prepare your own limited company accounts, but it requires a solid understanding of:
- Accounting Principles: You must follow the relevant financial reporting standards (UK GAAP or IFRS).
- Required Documents:
- A balance sheet showing the company’s financial position.
- A profit and loss account detailing income and expenses.
- Any necessary explanatory notes.
While it’s possible to handle this yourself, errors can lead to penalties or issues with HMRC and Companies House. Many directors opt to hire an accountant to ensure accuracy and compliance.
Can I do my own end of year accounts as a limited company?
Yes, you can prepare and file your own end-of-year accounts, but it’s a detailed and time-consuming process. You’ll need to:
1.Prepare the Accounts:
- Compile your company’s financial records (e.g., invoices, receipts, bank statements).
- Calculate profit, expenses, and tax liabilities.
- Ensure the accounts comply with the Companies Act 2006.
2.File with Companies House:
- Submit your company accounts within 9 months of the financial year-end.
3.File with HMRC:
- Include your accounts as part of your Corporation Tax Return (CT600).
4.Risks:
- Without proper knowledge of tax laws and accounting standards, you may make mistakes, potentially resulting in fines or penalties.
- Professional accounting software can help, but it’s still advisable to consult an accountant for guidance.
As you can see, there are a few things to consider when you're choosing the right accountant for a limited company, but putting the time and energy into finding the best accountants for limited company contractors does pay off. At Go Limited, we know that a lot of contractors weigh up the pros and cons of hiring a contractor accountant, but many do end up enlisting the help of someone who provides accountancy services for a limited company.
