Do I need an accountant for my small business?

Whether you are just starting out or already trading, hiring an accountant can make a huge difference to your small business. While it is possible to manage your own finances using software or spreadsheets, an accountant brings professional knowledge, accuracy, and time savings that can more than justify the cost.

The decision depends on the size and complexity of your business, but even sole traders and freelancers can benefit from professional support.

When you might need an accountant

You are not legally required to have an accountant, but there are several situations where professional help becomes invaluable.

1. When you are setting up your business

An accountant can guide you through choosing the best structure for your business, such as a sole trader, partnership, or limited company. Each option has different tax rules and legal responsibilities.

They can also help with registering your business with HMRC, setting up a PAYE scheme if you hire staff, and ensuring you are compliant with VAT if your turnover exceeds the threshold.

2. When you want to save time

Handling bookkeeping, payroll, VAT, and tax returns can take hours each week. By outsourcing these tasks to an accountant, you can focus on growing your business rather than worrying about numbers and deadlines.

Accountants are familiar with accounting software like Xero, QuickBooks, and Sage, which means they can process data faster and keep your records in perfect order.

3. When your tax situation becomes complex

As your business grows, your tax position can become more complicated. Multiple income streams, employees, or company vehicles can make it harder to manage tax efficiently.

An accountant ensures you pay the right amount of tax, claim all allowable expenses, and take advantage of reliefs such as capital allowances or research and development credits.

4. When you want to avoid HMRC penalties

HMRC imposes fines for late submissions, inaccurate records, or underpaid taxes. An accountant ensures all returns and payments are completed accurately and on time, keeping you compliant and reducing the risk of penalties.

5. When you plan to grow or seek investment

If you want to expand, attract investors, or apply for funding, you will need detailed and accurate financial statements. Accountants can prepare management accounts, forecasts, and business plans that demonstrate your company’s financial health to lenders or investors.

What accountants do for small businesses

Accountants do much more than file tax returns. They provide financial insight and support that helps your business run smoothly and grow sustainably. Common services include:

• Bookkeeping: Recording income and expenses accurately.

• Tax returns: Preparing and submitting Self Assessment or Corporation Tax returns.

• Payroll: Managing employee pay, deductions, and pensions.

• VAT management: Registering, filing returns, and advising on schemes.

• Financial reporting: Creating profit and loss statements, balance sheets, and cash flow reports.

• Tax planning: Structuring income and expenses to reduce your tax bill.

• Business advice: Providing guidance on growth, pricing, and budgeting.

The benefits of hiring an accountant

1. Saves time and reduces stress

With an accountant handling your financial responsibilities, you can focus on running your business. They manage the day-to-day accounting tasks and ensure deadlines are met, leaving you free to focus on customers and growth.

2. Helps you save money

Accountants understand the tax system and know what expenses and reliefs you can claim. This often results in significant tax savings, which can offset the cost of their services.

They also help you avoid overpaying tax or making costly mistakes that could lead to HMRC fines.

3. Provides financial clarity

A good accountant gives you a clear picture of your business finances at any time. They can explain where your profits come from, which costs are too high, and how to improve cash flow.

This insight allows you to make better business decisions, plan ahead, and manage growth more effectively.

4. Keeps your business compliant

Tax and accounting regulations change frequently. An accountant keeps your business compliant with the latest HMRC rules, including Making Tax Digital (MTD), payroll requirements, and VAT obligations.

5. Offers strategic advice

Accountants are not just number crunchers; they are business advisers. They can help you plan for the future, manage debt, invest profits wisely, and identify opportunities to grow your business.

How much does an accountant cost for a small business

The cost depends on the size of your business, the level of support you need, and whether you choose a local or online accountant.

Typical small business accounting packages start at around £60 to £150 per month for basic bookkeeping and tax returns. More comprehensive services, including payroll, VAT, and management reports, can range from £150 to £300 per month.

Although this is an additional expense, most business owners find that accountants save them more money in tax and time than they cost.

Do small businesses need accountants for tax returns

If you are a sole trader with straightforward finances, you can complete your Self Assessment tax return yourself using HMRC’s online system. However, if you have multiple income sources, employ staff, or trade as a limited company, hiring an accountant is strongly recommended.

An accountant ensures your return is correct, minimises your tax liability, and handles any communication with HMRC if issues arise.

Example in practice

A self employed electrician handled his own bookkeeping and tax returns for several years but often struggled to keep up with deadlines. After hiring an accountant for £80 per month, he discovered additional expenses he had missed, reducing his tax bill by over £600. His accountant also helped him register for VAT when his income grew, preventing future compliance issues.

How to choose the right accountant for your business

When selecting an accountant, consider the following:

• Are they qualified (for example, ACCA, ACA, or CIMA)?

• Do they have experience working with small businesses in your industry?

• Do they use digital accounting software that integrates with your systems?

• Are their fees transparent and suitable for your budget?

• Do they offer proactive advice or just compliance work?

Meeting or speaking with an accountant before signing up helps you ensure they are the right fit for your business goals.

Conclusion

You are not legally required to hire an accountant for your small business, but their expertise can save you time, money, and stress. Accountants keep your finances in order, reduce your tax bill, and help you make informed business decisions.

Whether you are a start-up, sole trader, or growing limited company, working with an accountant gives you peace of mind that your business is financially secure and compliant with HMRC. Over time, their advice and support can play a key role in helping your small business thrive.