Are Accountant Fees Tax Deductible

Hiring an accountant is a sensible step for many individuals and businesses seeking to stay compliant with tax rules and keep financial matters in order. Whether it is preparing a Self Assessment return, running company payroll or submitting VAT returns, professional support can reduce stress and ensure accuracy. But are accountant fees tax deductible?

In the UK, accountant fees are usually tax deductible when they relate to business activities or the production of taxable income. However, not all fees qualify, and the rules depend on whether you are self employed, a landlord, a company director or an employee. HMRC requires that expenses must be incurred wholly and exclusively for the purposes of the trade, rental business or employment to be allowable.

This article explains when accountant fees are deductible, how they should be treated in your tax return, and the differences in treatment across common business types.

Accountant Fees for Sole Traders

If you are self employed and run a sole trader business, you can usually deduct accountant fees that relate directly to your business accounts or tax affairs. These might include:

• Preparing your annual accounts

• Completing your Self Assessment return (for business income)

• Advising on allowable expenses or capital allowances

• Assisting with VAT registration or returns

• Payroll services for staff, if applicable

• Help with tax investigations relating to your business

These costs are allowable expenses and reduce your taxable profits. You can include them in the “accountancy, legal and professional fees” section of your Self Assessment tax return.

However, you cannot deduct:

• Fees related to your personal tax affairs (e.g. if you ask your accountant to handle income from savings or private pensions)

• Advice on personal tax planning, such as inheritance or private investments

• Assistance with mortgage applications or financial planning not directly linked to the business

If the fee covers both business and personal advice, your accountant should apportion the invoice and you may only claim the business portion.

Accountant Fees for Landlords

Landlords can deduct accountant fees that relate to the management of their property business, including:

• Preparing rental income accounts

• Completing the property section of a Self Assessment tax return

• Calculating allowable expenses or finance cost relief

• Advising on capital gains calculations on sale of rental property

• Dealing with HMRC queries or compliance letters regarding the letting income

You cannot deduct fees related to:

• Your personal Self Assessment return if it includes unrelated income

• Advice on your own home or private investments

• Personal tax planning not linked to the property business

The same principle applies: only fees incurred wholly and exclusively for the purpose of generating rental income are allowable.

Landlords who operate as a limited company can follow the same rules as other companies. Where the accountant supports company returns or directors’ responsibilities, most fees are allowable for Corporation Tax.

Accountant Fees for Limited Companies

For limited companies, accountant fees are generally fully tax deductible as a business expense, provided they relate to company activities. Allowable services include:

• Preparing statutory accounts

• Filing Corporation Tax returns

• Handling VAT and PAYE submissions

• Providing company secretarial services (e.g. filing confirmation statements)

• Advising on day-to-day tax matters

• Payroll for directors and employees

• Maintaining bookkeeping and digital records for the business

These fees reduce the company’s taxable profit and are included in the accounts as part of administrative expenses.

However, fees for personal services provided to directors or shareholders are not allowable. This includes:

• Personal Self Assessment returns for directors

• Personal financial planning

• Pension advice unrelated to company contributions

• Mortgage or property-related advice for directors

If the accountant’s invoice includes both company and personal services, the company may only claim relief on the company portion. The personal element may need to be paid separately by the director or treated as a benefit in kind.

Accountant Fees for Employees

Most employees cannot claim tax relief on accountant fees, even if the services relate to their tax code or employment income. HMRC only allows tax relief on expenses that are:

• Wholly and exclusively for work

• Required by the employment contract

• Not reimbursed by the employer

Using an accountant to complete a Self Assessment tax return, correct your tax code, or advise on share schemes is generally not deductible unless you are self employed or a company director.

In rare cases where you are required to complete a return solely because of your employment (e.g. as a higher earner under PAYE), and you must use an accountant to comply, you may be able to claim limited relief. This should be checked carefully.

VAT on Accountant Fees

If your business is VAT registered and your accountant charges VAT, you can usually reclaim the VAT element of the fee, provided:

• The service relates to taxable business activities

• You have a valid VAT invoice

• You are not on the Flat Rate Scheme (or if you are, you follow the correct rules)

If any portion of the accountancy service is for non-business or exempt activities (such as managing residential lettings in a VAT-exempt business), you may need to restrict or apportion your VAT recovery.

How to Record Accountant Fees

To claim accountant fees correctly in your tax return:

• Keep a copy of all invoices showing a breakdown of services

• Record them in your bookkeeping software or spreadsheet under professional fees or accountancy

• If the invoice includes both business and personal items, ask your accountant to split the bill or raise separate invoices

• If you operate through a company, ensure any personal tax return fees are not paid by the company unless declared as a benefit in kind

For Self Assessment, you enter accountant fees as part of your allowable expenses if you are self employed or a landlord. For companies, you include them in your statutory accounts and Corporation Tax computation.

Are Tax Investigation Fees Deductible?

Yes, in most cases. If you take out tax investigation insurance or your accountant provides services during an HMRC enquiry, the costs are usually deductible if the investigation relates to your business.

This includes:

• Representing you in correspondence with HMRC

• Attending meetings or reviews

• Responding to information requests

• Appealing penalties linked to business tax affairs

If the investigation is purely personal (such as foreign income, personal capital gains or inheritance), the fees are not deductible.

Conclusion

Accountant fees are generally tax deductible in the UK when they relate to your business, rental activities or company obligations. This includes the preparation of accounts, tax returns, payroll and VAT filings. However, fees for personal matters are not deductible and must be clearly separated in your records.

Sole traders, landlords and limited companies should ensure that any personal services included in their accountant’s fees are either excluded from the tax claim or declared appropriately. Keeping clear records and separating business from personal costs will help avoid disallowed expenses or HMRC enquiries.

If you are unsure how to apportion your accountant’s invoice, or whether certain fees qualify for tax relief, speak to your accountant. A well-structured engagement and accurate bookkeeping will ensure you claim all allowable expenses while staying fully compliant.