Can I Claim Accounting Fees as a Business Expense

Introduction

Every business, from sole traders to limited companies, needs accurate financial records. Whether you hire a professional accountant or use software to manage your books, accounting fees are a necessary cost of doing business.

HMRC’s general rule is simple: you can claim any expense that is “wholly and exclusively” for business purposes. Accounting fees usually meet this test, but not all services provided by an accountant qualify for tax relief.

When accounting fees are allowable

You can claim accounting fees as a business expense if they are directly related to the day-to-day running of your business or to meeting your tax and reporting obligations.

Typical examples include:

Preparing and submitting annual accounts for a business.

Completing and filing Corporation Tax or Self Assessment tax returns.

Bookkeeping and payroll services.

Preparing VAT returns or providing VAT advice.

Financial forecasting, budgeting, or management accounts.

Providing tax planning advice related to business activities.

Assisting with HMRC enquiries or compliance reviews.

These costs are deductible because they help determine your business’s taxable profit and ensure compliance with tax law.

Example

A self-employed architect pays £1,200 a year to an accountant for preparing annual accounts, filing tax returns, and submitting VAT returns. All these services relate solely to the business and are therefore fully deductible as business expenses.

When accounting fees are not allowable

Not all accounting costs qualify for tax relief. If the fees relate to personal finances or activities outside the scope of the business, they cannot be claimed.

Examples of non-allowable accounting fees include:

Preparing your personal tax return if you are a sole trader and it includes non-business income such as dividends or property income.

Tax advice for personal investments or inheritance planning.

Costs related to forming a company or buying or selling shares for personal purposes.

Preparing accounts for a trust, charity, or private venture unrelated to the business.

In these cases, the expense is considered private and not wholly for business use, so it must be excluded from your tax deduction.

Example

A limited company director hires their accountant to help complete a personal mortgage application. The cost of this service is personal, not business-related, and cannot be claimed as an allowable expense.

Accounting fees for limited companies

If you run a limited company, the company can claim accounting fees as a business expense when they relate to the company’s operations.

This includes:

Annual accounts and statutory filing at Companies House.

Corporation Tax returns.

Bookkeeping, payroll, and VAT submissions.

However, if the accountant provides services for the director’s personal finances, such as personal tax advice, that portion of the fee must be treated as a benefit in kind and reported on a P11D form. The company can still pay the accountant, but the director may owe additional tax on the personal element.

Accounting fees for sole traders and partnerships

Sole traders and partners can also claim accounting fees for preparing business accounts, calculating taxable profit, and submitting Self Assessment returns for the business.

If your accountant also completes your personal tax return, only the part of the fee that relates to your business income is deductible. The portion relating to personal income, such as savings or rental property, must be excluded.

Example

A sole trader pays an accountant £800 to complete their business accounts and tax return. The accountant estimates that £650 of the work relates to the business and £150 to personal tax matters. The trader can claim £650 as a business expense.

VAT on accounting fees

If your business is VAT registered and your accountant charges VAT, you can reclaim the VAT on accounting fees, provided the services are for business purposes.

If any part of the service relates to personal matters, you must apportion the VAT and reclaim only the business-related proportion.

For non-VAT registered businesses, the total fee, including VAT, is simply recorded as a business expense.

How to record accounting fees

Accounting fees should be recorded in your business accounts under professional fees or a similar expense category.

When recording them, ensure you:

Keep all invoices and receipts from your accountant.

Record the payment date and amount in your accounting system.

Separate any personal element of the service if applicable.

These records will support your claim if HMRC reviews your accounts.

Claiming accounting fees through Self Assessment

If you are a sole trader or partner, include your allowable accounting fees in the expenses section of your Self Assessment tax return under “Accountancy, legal and other professional fees.”

Make sure the figure only includes costs that relate to your business operations, not personal financial matters.

Claiming accounting fees through a limited company

Limited companies claim accounting fees as part of their operating expenses when preparing year-end accounts.

When submitting your Corporation Tax return (CT600), the accounting fees are deducted from turnover as part of your total allowable expenses, reducing the company’s taxable profit.

The company must also record the transaction in its books and retain the invoice for audit purposes.

Accounting software and subscription costs

If you use accounting software such as Xero, QuickBooks, or Sage, the subscription fees are also deductible as business expenses. They count as part of your accounting and administrative costs.

However, if you use software for both business and personal finance, only the business portion can be claimed.

Example scenario

David, a solicitor, operates as a limited company. His accountant charges £2,500 annually for bookkeeping, payroll, VAT submissions, and Corporation Tax filing. The company also pays £30 per month for Xero accounting software.

All these costs relate to business administration and are fully deductible. The total annual claim of £2,860 reduces the company’s taxable profit and therefore lowers its Corporation Tax bill.

Common mistakes to avoid

Claiming for personal tax advice or mortgage assistance.

Failing to split mixed-use fees between business and personal work.

Forgetting to reclaim VAT on eligible accounting fees.

Recording fees in the wrong accounting period or expense category.

Being accurate and consistent in your record keeping ensures compliance and maximises your tax relief.

Conclusion

Accounting fees are generally an allowable business expense as long as they relate solely to your business activities. Services such as bookkeeping, VAT returns, and tax preparation qualify, while personal financial advice does not.

Sole traders, partnerships, and limited companies can all deduct these costs from their taxable profits, reducing their overall tax bill. By keeping clear records and separating personal elements from business costs, you can ensure your accounting fees are claimed correctly and in line with HMRC rules.