Do I need an accountant for my small business?

At Towerstone Accountants we provide specialist small business accountancy services for owners, directors, and growing businesses across the UK. We created this webpage for small business owners who want clear guidance on managing finances, meeting tax obligations, and making informed decisions without jargon. Our aim is to help you stay compliant, improve cash flow, and build a more resilient business.

This is one of the most common questions I am asked by small business owners, and it usually comes with a mix of curiosity, uncertainty, and sometimes guilt. Many people wonder whether hiring an accountant is a sign that their business is growing up, or whether it is an unnecessary expense they should delay for as long as possible.

As a chartered accountant who runs their own firm, and who works daily with sole traders, limited company directors, landlords, and small business owners across the UK, I can say with confidence that there is no single answer that fits everyone. The real question is not whether you need an accountant, but when having one adds value, reduces risk, and genuinely makes your life easier.

In this article, I want to give a clear, honest, and practical answer. I will explain what accountants actually do for small businesses, what you can realistically handle yourself, when things usually start to go wrong without professional support, and how to decide whether now is the right time for you.

This is written from first hand experience, not theory. I see the consequences of both choices every year.

What People Usually Mean When They Ask This Question

When someone asks me whether they need an accountant, they are rarely asking a purely technical question. What they are really asking is one or more of the following:

• Am I doing this properly

• Am I missing something important

• Am I paying more tax than I should

• Am I exposing myself to risk without realising it

• Is this all going to catch up with me later

These concerns are valid, especially in the UK where tax rules, reporting requirements, and deadlines can feel relentless. Small business owners are expected to understand and comply with systems that even experienced professionals find complex.

The pressure is even greater when you are trying to grow a business while managing cash flow, clients, and day to day operations.

What an Accountant Actually Does for a Small Business

Before deciding whether you need an accountant, it helps to understand what the role really involves. Many people think accountants only do tax returns or file accounts once a year. That is only a small part of the picture.

For small businesses, an accountant can help with:

• Setting up the business correctly from the start

• Choosing the right structure, such as sole trader or limited company

• Registering with HMRC for the correct taxes

• Keeping records compliant and organised

• Preparing and submitting tax returns

• Advising on allowable expenses

• Planning for tax rather than reacting to it

• Helping with cash flow and budgeting

• Acting as a buffer between you and HMRC

Some accountants focus only on compliance. Others take a more advisory approach. The level of support you need depends on your situation, but the scope is often wider than people expect.

Can I Run a Small Business Without an Accountant

Yes, it is entirely possible to run a small business without an accountant, especially in the early stages. HMRC does allow individuals to manage their own affairs, and there are many software tools designed to make this easier.

However, possible does not always mean sensible.

In my experience, people who successfully manage without an accountant tend to fall into one of these groups:

• Very small businesses with simple income and minimal expenses

• People with strong financial or accounting knowledge

• Businesses that are short term or part time

Even then, many eventually reach a point where professional input becomes necessary.

What Usually Goes Wrong When There Is No Accountant

I often meet clients for the first time when something has already gone wrong. They did not intend to ignore rules or make mistakes. They simply did not know what they did not know.

Common issues include:

• Missing registration deadlines with HMRC

• Incorrect expense claims

• Forgetting about tax until the money is gone

• Confusion over VAT thresholds

• Mixing personal and business finances

• Filing returns late or incorrectly

These problems rarely appear immediately. They build quietly over time, which is why they can be so damaging.

The Cost of Mistakes Versus the Cost of an Accountant

One of the biggest misconceptions is that using an accountant is expensive. In reality, the cost of not using one can be far higher.

Penalties, interest, overpaid tax, missed reliefs, and stress all have a financial cost, even if it is not immediately obvious.

For example:

• Late filing penalties start small but escalate quickly

• Overpaying tax means less cash available to grow the business

• Errors can trigger HMRC enquiries, which take time and energy to resolve

When you compare this to the cost of an accountant, especially one who works proactively, the value becomes clearer.

Sole Trader Versus Limited Company Considerations

Whether you need an accountant often depends on how your business is structured.

For sole traders, things are simpler on the surface. Income tax and National Insurance are handled through Self Assessment, and reporting requirements are lighter than for companies.

However, simplicity can be misleading. Sole traders often struggle with:

• Understanding allowable expenses

• Setting aside tax correctly

• Dealing with irregular income

• Planning for growth

For limited companies, the need for professional support is usually greater. Companies have separate legal and tax responsibilities, and mistakes can have wider consequences.

Limited company directors must deal with:

• Corporation tax

• Annual accounts

• Confirmation statements

• Payroll and dividends

• Director responsibilities

In these cases, having an accountant is less about convenience and more about compliance and protection.

VAT and the Point Where Things Change

VAT is one of the biggest tipping points where many small businesses decide they need an accountant.

Registration thresholds, different VAT schemes, and complex rules around what is taxable can quickly overwhelm even organised business owners.

Common VAT issues include:

• Registering too late

• Choosing the wrong scheme

• Incorrectly reclaiming VAT

• Cash flow problems caused by VAT bills

An accountant can help assess whether VAT registration is required, which scheme suits your business, and how to manage VAT without damaging cash flow.

Time, Focus, and Opportunity Cost

Another factor often overlooked is time.

Every hour you spend trying to understand tax rules or fix bookkeeping issues is an hour you are not spending on your business. That opportunity cost matters.

Many clients tell me they tried to do everything themselves at first, but eventually realised:

• It took them far longer than expected

• They were constantly second guessing themselves

• It distracted them from earning income

An accountant does not just save time, they help you focus on what actually grows your business.

Using Accounting Software Without an Accountant

Modern accounting software has made it easier to manage finances, but it has also created a false sense of security.

Software records what you enter. It does not tell you whether what you entered is correct, tax efficient, or compliant.

I often see businesses using software well from a technical point of view, but still making strategic mistakes, such as:

• Claiming expenses incorrectly

• Misunderstanding profit versus cash

• Assuming software replaces advice

Software is a tool. An accountant provides judgement and context.

Tax Planning Versus Tax Filing

Filing a tax return is about reporting the past. Tax planning is about shaping the future.

Without an accountant, most small businesses focus only on filing. They react to tax bills after they arise.

With an accountant, planning can include:

• Timing income and expenses

• Using allowances effectively

• Structuring remuneration properly

• Preparing for larger liabilities in advance

This proactive approach often makes a significant difference to cash flow and confidence.

Stress, Sleep, and Peace of Mind

This may sound intangible, but it comes up repeatedly in conversations with clients.

Many small business owners carry financial stress quietly. They worry about HMRC letters, deadlines, and whether they have done things correctly.

Having an accountant often brings:

• Reassurance that things are being handled properly

• Someone to ask questions without feeling foolish

• A sense of control rather than constant uncertainty

That peace of mind has real value.

When You Probably Do Need an Accountant

While every situation is different, there are clear signs that professional support would help.

These include:

• Your income is growing or becoming more complex

• You are unsure how much tax to set aside

• You are approaching VAT registration

• You want to incorporate or restructure

• You feel behind or overwhelmed

At this stage, delaying support often costs more than it saves.

When You Might Not Need One Yet

Equally, there are situations where an accountant may not be essential immediately.

For example:

• Very small side businesses with minimal income

• Short term projects with limited transactions

• Individuals with strong financial knowledge

Even then, a one off consultation can be valuable to check that everything is set up correctly.

Choosing the Right Accountant for a Small Business

Not all accountants are the same, and finding the right one matters.

A good small business accountant should:

• Explain things clearly without jargon

• Understand your type of business

• Be approachable and responsive

• Focus on both compliance and advice

You should feel comfortable asking questions and confident that your interests are being looked after.

Cost Expectations and Transparency

Many small business owners worry about open ended costs. This is understandable.

Most accountants now offer fixed fee packages, which provide clarity and predictability. These often include annual accounts, tax returns, and basic advice.

When comparing costs, it is important to consider what is included, not just the headline price.

The Relationship Over Time

One of the biggest benefits of having an accountant is the relationship that develops over time.

As your accountant understands your business better, their advice becomes more tailored and more valuable. They can spot trends, flag risks early, and help you plan with confidence.

This long term view is difficult to replicate without professional support.

Final Thoughts

So, do you need an accountant for your small business?

Not everyone needs one on day one. But most successful small businesses reach a point where professional support becomes not just helpful, but essential.

An accountant is not just someone who files paperwork. At their best, they are a guide, a safeguard, and a strategic partner.

If you value clarity, confidence, and long term stability, then having an accountant is rarely a mistake. The real risk is waiting until something goes wrong before seeking help.

Small businesses succeed not by doing everything alone, but by knowing when to bring in the right support.

You may also find our guidance on How do I choose the right accountant for my small business and Do I need to do a Self Assessment as a small business owner useful when exploring related small business questions. For a broader range of practical advice, you can visit our small business guidance hub.