Are Accountant Fees Tax Deductible

At Towerstone, we provide accountancy services in Bedford to local sole traders, landlords, and limited companies. We have written an article about Are Accountant Fees Tax Deductible to help you understand why professional fees usually qualify, and how they should be recorded.

This is a question I am asked constantly and usually at the point where someone is reviewing their expenses and wondering what they can legitimately claim. From experience accountant fees feel like they should be deductible because they are paid purely to deal with tax and business compliance. In many cases that instinct is right but not always.

In this article I want to explain clearly when accountant fees are tax deductible in the UK and when they are not. I will walk through how HMRC views different types of accountancy costs how the rules apply to sole traders limited companies landlords and individuals and where people most often get caught out. This is based on real world experience dealing with HMRC rules rather than assumptions.

By the end you should know exactly which fees you can claim which you cannot and how to treat them correctly in your accounts or tax return.

The basic HMRC rule on accountant fees

HMRC applies the same core principle to accountant fees as it does to most other expenses.

To be tax deductible the cost must be incurred wholly and exclusively for the purposes of the trade business or property income.

If the fee relates purely to running your business or meeting business tax obligations it is usually allowable. If it relates to your personal tax position it usually is not.

From experience most confusion comes from fees that cover both business and personal matters.

Accountant fees for sole traders and self employed individuals

If you are self employed accountant fees relating to your business are generally tax deductible.

This includes fees for preparing your business accounts calculating your trading profit and dealing with business related HMRC queries.

However there is an important distinction when it comes to Self Assessment.

The portion of your accountant’s fee that relates to preparing your business accounts is allowable. The portion that relates purely to completing your personal tax return is not.

From experience many accountants split their invoices to reflect this. If the invoice is not split you may need to make a reasonable apportionment.

For example if your total fee is £1,200 and £900 relates to business accounts while £300 relates to personal tax return completion only the £900 would usually be deductible.

Accountant fees for limited companies

For limited companies the position is usually more straightforward.

Accountant fees paid by the company for company related work are generally tax deductible for corporation tax purposes.

This includes fees for preparing statutory accounts corporation tax returns VAT returns payroll services and general compliance advice.

From experience this also includes routine business tax planning advice provided it relates to the company rather than the director personally.

Because the company is a separate legal entity HMRC views these costs as part of running the business.

Director personal tax returns and company payments

This is an area where mistakes often happen.

If a limited company pays for a director’s personal tax return that cost is not a company expense. It relates to the individual not the business.

If the company pays the fee anyway it is usually treated as a benefit in kind or posted to the director’s loan account.

From experience many directors assume the company can simply absorb this cost. It cannot without consequences.

The cleanest approach is usually for directors to pay their own personal tax return fees personally.

Accountancy fees for landlords

For landlords accountant fees relating to rental income are usually tax deductible against rental profits.

This includes fees for preparing rental accounts advising on allowable expenses and dealing with HMRC queries related to property income.

As with sole traders fees relating purely to the personal side of a tax return are not deductible.

From experience landlords often underclaim here because they assume accountancy fees are personal. In many cases part of the fee is clearly property related and allowable.

What about tax advice and planning fees

Tax advice fees are deductible if the advice relates to the ongoing operation of the business.

For example advice on VAT registration business structure payroll setup or capital allowances is usually allowable.

However fees relating to setting up a business purchase or sale of shares or personal tax planning may not be deductible in the same way.

From experience this area depends heavily on context and purpose. HMRC looks at what the advice was for not what it was called.

HMRC enquiries and investigation support

Fees paid to an accountant to deal with an HMRC enquiry relating to your business are usually tax deductible.

This includes correspondence meetings and preparing explanations for business related matters.

If the enquiry relates to your personal tax position the fee is usually not deductible.

From experience investigation support is one of the clearest examples of allowable business related accountancy costs.

Bookkeeping and payroll fees

Bookkeeping fees are almost always deductible because they relate directly to maintaining business records.

Payroll fees are also deductible because they relate to employing staff and meeting PAYE obligations.

These costs are seen as normal running expenses rather than advisory costs.

Accountancy software and subscriptions

Fees for accounting software used in your business are deductible.

This includes bookkeeping software payroll software and compliance tools.

From experience HMRC treats these as ordinary business overheads rather than professional fees but the tax treatment is the same.

Personal tax advice and private matters

Fees for advice on purely personal matters are not tax deductible.

This includes advice on personal investments inheritance tax planning unrelated to a business divorce related financial advice or personal capital gains outside of a trade.

From experience people sometimes try to include these costs because the adviser happens to be an accountant. HMRC focuses on purpose not profession.

Mixed purpose invoices and how to handle them

Many accountancy invoices cover multiple services.

In these cases HMRC expects a reasonable apportionment between allowable and non allowable elements.

From experience the safest approach is transparency. Either ask for the invoice to be split or apply a sensible percentage based on the work done.

Guessing aggressively is where problems arise.

How HMRC checks accountant fee claims

HMRC rarely challenges reasonable accountancy fees claimed correctly.

Problems arise when fees are claimed that are clearly personal or when no attempt has been made to separate business and personal elements.

From experience HMRC is far more interested in patterns than individual amounts.

Why getting this right matters

Accountant fees are often a significant annual cost. Claiming them correctly reduces tax without risk.

Claiming them incorrectly saves little but creates potential issues.

From experience it is always better to claim slightly less and be confident than to push boundaries on something HMRC understands very well.

Common misunderstandings I see

The most common misunderstandings include:

Assuming all accountant fees are deductible
Letting a company pay for personal tax returns without consequences
Not apportioning mixed invoices
Believing small amounts do not matter

These are easy mistakes to make but also easy to avoid with clarity.

Practical advice from experience

My practical advice is simple.

Ask what the fee relates to. Claim business related work. Do not claim personal work.

If in doubt ask your accountant to explain how the fee should be treated. They deal with this question all the time.

The key takeaway

So are accountant fees tax deductible. Yes often but not always.

Business related accountancy fees are usually deductible. Personal tax return fees and private advice usually are not.

The key is purpose. HMRC does not care who you paid. It cares why you paid them.

From experience once you understand that principle the rest becomes straightforward and you can claim what you are entitled to without worry.

For further guidance across related topics, visit our Bedford Accounting Hub, which brings together practical advice for Bedford clients.