Do I need an accountant for a limited company?

It’s a question faced by every small business owner when it comes to organising their finances and managing bookkeeping. You might be tempted to forgo hiring an accountant to save on costs; after all, paying for someone else to handle all this on your behalf is only going to add to your outgoings.

However, while it’s certainly possible to handle the accounting yourself, unless you’re well versed in the nuances of business finances, you might find the additional tax complexities and paperwork involved with running a limited company too much to handle alone.

Simply put, finding a good account will make sure all your books are in order while minimising the chances of costly tax mistakes – but that’s not all they can do for your business.

With that in mind, here’s why you might want to consider hiring an accountant for your limited company.

Why do you need an accountant for a limited company?

Be it calculating all the costs associated with paying corporation tax, settling the year’s VAT requirements or planning for the next financial year, managing the finances of any business can quickly turn into a full-time job.

Even the limited bookkeeping associated with filling in a sole trader self-assessment return can get surprisingly in-depth, so imagine how complex the inner workings of a limited company are likely to become when you account for all the additional tax and shareholder responsibilities.

And it’s these added structural obligations, in particular, that make hiring an accountant all but essential for a limited company. 

Already familiar with the minutiae of business finances, a competent accountant will help to keep your business running smoothly in the background, allowing you to prioritise day-to-day operations instead of splitting your time between your primary job and calculating how much you might owe to HMRC.

This can be a lifesaver if you need assistance with the wider financials of your business. But even if you only want help submitting your yearly tax requirements, an accountant can ensure that you don’t overpay or underpay, or miss any vital deadlines.

Using an accountant is a sound strategy for any limited company, and their skills will only become more useful as your business increases in size and complexity down the line.

Are accountants a legal requirement for limited companies?

Hiring an accountant is not a legal requirement for a limited company, and many businesses do choose to handle their accounting themselves.

However, there are plenty of good reasons why you might want a reliable accountant at your disposal from day one.

What are the benefits of hiring an accountant as a limited company?

While their main role might be to manage the bookkeeping of your limited company, accountants are capable of providing your business with far more than just tax assistance:

• Admin reduction – One of the biggest advantages of hiring an accountant is that you’ll substantially reduce the level of admin work on your plate, allowing you to direct your energy towards growing your business and providing exceptional customer service.
• Minimal mistakes – While mistakes are sometimes unavoidable, having an accountant handle your bookkeeping will ensure that any reporting and tax calculation errors are kept to a minimum.
• Expense tracking – As a limited company, one of your core tax-saving measures will be claiming expenses, which can be time-consuming to manage yourself. An accountant can manage all this for you without the need for your involvement.
• Checking deadlines – Whether it’s your accounting period end date or a tax-return deadline, an accountant will keep you informed and alert you to any upcoming bills.
• Financial reporting – As part and parcel of the main accounting process, your accountant can handle all your financial reporting for you and help you to better understand the financial health of your business.
• Compliance – Your accountant will ensure that your business properly follows any financial compliance laws related to being a limited company.
• Tax advice – As an additional accounting service, your accountant may be able to advise on how to make your business more tax efficient in the future.
• Communicating with HMRC – As a business owner, the last thing you want to be doing on a busy day is talking to HMRC. With an accountant, you can transfer this responsibility to them, letting them handle such communications and update you as and when needed.

What are the risks of not using an accountant?

The main risk of not using an accountant is the potential for serious financial mistakes, missed deadlines, and compliance problems, all of which could result in hefty fines and penalties.

Needless to say, fines like these can seriously impact your bottom line and will almost certainly cost you far more to resolve than it would have done to hire an accountant from day one.

Do you need accountants all year round?

While it’s possible to work with an accountant full-time, it’s certainly not a requirement to have an accountant in your employ all year round. Many businesses choose to pay for accounting services only towards the end of the tax year.

A reliable way to ensure your finances are in good order while still saving money, this on-off relationship can provide your company with the best of both worlds, letting you benefit from an accountant’s core skillset until your business is big enough to take advantage of their wider services.

What to consider when hiring an accountant

There are a few things to bear in mind during the selection process to help you find the best match for your business:

• Accreditations – An absolute must for every business. Make sure that any accountant you hire has a full list of qualifications from an accredited UK body, such as the ICAEW and ACCA. The last thing you want is to be taking advice from an unregistered accountant with questionable experience.
• Services – Even if you only intend to hire an accountant to handle your end-of-year taxes, it’s still worth asking about their services so you can be doubly sure that they meet your needs.
• Rates – While many accountants will charge by the month, some may also charge by the hour. If you plan to hire them only in the short term, this might not be an issue. But if you plan to use an accountant regularly, consider which style of payment is the best fit for you.
• Communication – Although you might speak with your accountant only once every few months, it’s important to find someone you get on with and who meets your desired level of communication to avoid needless disagreements.
• Firm type – If your limited company is growing particularly fast, you might want to pick a full-time firm rather than an independent accountant, as they may better fit your needs.

Grow your business as a Trusted Trader

You should now have a better understanding of why it’s so important to hire an accountant as a limited company. Business finances really are a complicated matter, and we guarantee you’ll find running your new business much less stressful if you hand them over to a trained professional.

Of course, worrying about your finances will be a moot point if you’re struggling to find new customers to grow your business, which is why you might want to consider becoming a Which? Trusted Trader.

 Each of our Trusted Traders gets access to their own business page to display reviews and previous examples of their work – a sign to would-be customers that you’re a reputable business to work with.

Get in touch today to learn more about our vetting process, and don’t forget to visit our trade hub for more business guides, including advice on how to choose the right business structure for your needs.