Do I Need an Accountant for My Limited Company

Introduction

When you set up a limited company, you take on several statutory obligations. These include filing annual accounts, submitting Corporation Tax returns, maintaining payroll records, and keeping Companies House up to date.

Although some directors handle these duties themselves, managing everything without professional support can be time consuming and risky. Mistakes with HMRC or Companies House can lead to fines, penalties, and unnecessary tax bills. An accountant ensures your company stays compliant while helping you operate efficiently and profitably.

You do not have to hire an accountant by law

There is no legal requirement for a limited company to have an accountant. Directors are responsible for ensuring that the company’s accounts, tax returns, and financial statements are accurate and filed on time.

In theory, you can handle everything yourself using accounting software and HMRC’s online services. However, unless you are confident in bookkeeping, VAT, and tax rules, professional support is highly recommended. Even small errors can cause significant issues with compliance or result in paying more tax than necessary.

Why most limited companies use an accountant

The financial rules for limited companies are more complex than those for sole traders. An accountant helps by managing both compliance and strategy. Key areas include:

1. Setting up the company correctly

An accountant can register your company with Companies House, set up your business bank account, and ensure you are correctly registered for Corporation Tax, PAYE, and VAT if required. They also help structure share ownership and director salaries in a tax efficient way.

2. Bookkeeping and record keeping

All limited companies must maintain accurate financial records of income, expenses, assets, and liabilities. Accountants can either manage your bookkeeping or set up a system for you using software such as Xero, QuickBooks, or Sage.

Proper record keeping ensures your year-end accounts and tax filings are accurate and compliant with HMRC and Companies House requirements.

3. Preparing and filing annual accounts

Each year, limited companies must file annual accounts with Companies House and Corporation Tax returns (CT600) with HMRC. These must follow strict accounting standards, and late submissions can lead to penalties.

An accountant ensures your accounts are prepared correctly and filed on time, saving you the stress of dealing with complex reporting requirements.

4. Managing Corporation Tax

An accountant calculates your Corporation Tax liability, ensures you claim all allowable expenses, and applies any reliefs you qualify for, such as research and development credits.

They also help plan the timing of dividend payments and director salaries to minimise tax legally and efficiently.

5. Payroll and PAYE

If your company has employees, including directors, you must register for PAYE and report payroll information to HMRC every time you pay staff. Accountants can handle this on your behalf, making sure you stay compliant with PAYE and National Insurance rules.

6. VAT registration and returns

An accountant advises when your business should register for VAT, helps choose the most suitable VAT scheme (such as flat rate or cash accounting), and prepares and files quarterly VAT returns.

Since VAT filing must now be done digitally through Making Tax Digital (MTD) software, accountants ensure your systems are fully compliant.

7. Business and tax planning

Beyond compliance, accountants play a strategic role. They can advise on:

How to extract income from your company in the most tax efficient way.

Cash flow management and budgeting.

When to invest in new assets or hire staff.

Whether to set up a holding company or restructure your business.

Effective tax planning often saves more than the cost of hiring an accountant.

When a limited company may not need an accountant

Very small companies with straightforward finances may be able to manage without an accountant, especially if:

You have experience with bookkeeping and tax reporting.

The company has minimal transactions each month.

You use modern accounting software that automates much of the process.

However, even in these cases, many directors still consult an accountant once a year to review the company’s accounts before filing. This ensures accuracy and peace of mind.

Example

A small IT consultant runs a one-person limited company with only a few clients and uses accounting software to manage invoices and expenses. They handle bookkeeping themselves but hire an accountant once a year to prepare the year-end accounts and tax return. This keeps costs low while ensuring compliance.

Cost of hiring an accountant for a limited company

Accountant fees vary depending on your company’s size, turnover, and the level of service required. Typical costs are:

Annual accounts and Corporation Tax return: £600 to £1,200.

Full accounting package (including bookkeeping, payroll, VAT, and advice): £1,000 to £3,000 per year.

One-off setup or consultation: £100 to £300.

Online accountants may charge less, while specialist firms offering tailored advice often cost more. For most small companies, the cost of an accountant is more than offset by tax savings and reduced risk of errors.

Advantages of using an accountant

Hiring an accountant offers several benefits:

Saves time by handling bookkeeping, payroll, and filing.

Ensures full compliance with HMRC and Companies House.

Reduces the risk of errors and penalties.

Provides expert advice to reduce tax and improve profitability.

Offers peace of mind that your finances are under control.

Many accountants also act as business advisers, helping you plan for growth, manage cash flow, and navigate financial challenges.

Example scenario

Emma is the director of a small marketing agency. She initially handled her company’s finances herself using accounting software but found it stressful keeping up with VAT and payroll rules. She hired an accountant who now manages her quarterly VAT returns, payroll, and annual accounts for £1,200 a year. The accountant also advised her on salary and dividend payments, saving her over £2,000 in tax.

Common mistakes directors make without an accountant

Missing filing deadlines for annual accounts or Corporation Tax returns.

Failing to claim all allowable expenses or reliefs.

Mixing personal and company finances.

Miscalculating dividend payments.

Forgetting to register for VAT on time.

An accountant helps prevent these issues by ensuring your company meets all its financial obligations.

Conclusion

While you are not legally required to hire an accountant for your limited company, doing so can save time, reduce stress, and often lower your overall tax bill.

An accountant ensures your company stays compliant with HMRC and Companies House, helps you plan for growth, and provides valuable financial insights. For most directors, the benefits of professional support far outweigh the cost.

If you are confident managing your accounts and tax digitally, you can handle basic compliance yourself, but even then, a professional review before submission can give you peace of mind and help avoid costly mistakes.