How Much Should a Start Up Expect To Pay an Accountant in Year One

Understanding how much an accountant costs in the first year of running a business is one of the most common questions new founders ask. The answer matters because the first year is a sensitive period. Cash flow is tight, admin can feel overwhelming, and the choices a business makes early on can shape its tax position and structure for years ahead. Knowing what to budget for helps founders avoid surprises and choose a service that fits their stage of growth.

This guide explains typical accountant costs for UK start ups, what affects the price, what services are worth paying for, and what founders can avoid in year one. It covers sole traders, limited companies, VAT registered businesses, growing teams, and start ups that outsource everything from bookkeeping to payroll. The aim is to provide clear realistic figures that reflect modern UK pricing rather than guesswork.

Why Year One Costs Are Different From Later Years

Before looking at fees it helps to understand why the first year is unique. Start ups often need more help early on because they face decisions and tasks they have not dealt with before. This includes:

• Choosing the right business structure

• Registering for tax

• Understanding bookkeeping

• Setting up software

• Avoiding director’s loan issues

• Learning how to take salary or dividends

• Understanding VAT thresholds

• Handling first invoices and expenses

A founder who has never operated a business before may need more support than someone who is simply switching accountants after years of experience. This is why some accountants offer start up packages that are more hands-on.

At the same time, start ups usually have fewer transactions and limited income which helps keep costs down. The right accountant balances these two needs by supporting the business without overserving or overcharging it.

What Influences the Cost of an Accountant in Year One

The fee a start up pays depends on several factors. In my opinion the most important ones are:

1. Whether the business is a sole trader or a limited company

A sole trader is cheaper to manage because:

• There is no Corporation Tax

• No statutory accounts

• No director payroll

• No dividends

• The annual requirement is a Self Assessment tax return

A limited company has more compliance which increases the accountant’s workload.

2. Whether the business is VAT registered

VAT is one of the biggest drivers of cost. Filing quarterly VAT returns, reconciling VAT correctly, and helping with Making Tax Digital increases the time the accountant must spend on the account.

3. Whether the client needs bookkeeping done for them

Bookkeeping can take hours each month especially for retail, e-commerce, trades, or businesses with many small transactions. If the founder does their own bookkeeping costs stay lower. If the accountant must do it, fees increase.

4. The complexity of the business model

Examples of businesses that tend to cost more due to higher complexity in year one include:

• E-commerce businesses that use Shopify, PayPal, Klarna, Stripe, and multiple sales channels

• Construction firms that use CIS

• Consultants who travel frequently and claim expenses

• Hospitality businesses that use EPOS systems

• Start ups with overseas suppliers or customers

Simple service businesses with a small number of invoices typically cost less.

5. Whether payroll is required

Payroll adds ongoing monthly work. Even a single director payroll requires RTI submissions and compliance checks.

6. Whether regular advice and support is included

Some accountants charge only for compliance. Others include unlimited advice throughout the year. The latter is more useful for start ups but naturally more expensive.

7. Whether the accountant is a specialist in start ups

Specialist start up accountants often offer packages that include guidance and setup support which can increase the fee but reduce costly mistakes.

Typical Accountant Costs for Sole Traders in Year One

Sole traders are the simplest type of start up to support so fees are usually modest.

Basic Self Assessment Only

£150 to £350 per year

Suitable for:

• Low volume trades

• Freelancers

• Side businesses

• Start ups with few expenses

This usually includes:

• End of year accounts summary

• Completion of Self Assessment

• Basic tax advice

Self Assessment with Bookkeeping

£50 to £120 per month

Suitable for:

• Sole traders with many transactions

• Tradespeople with receipts and expenses

• Those who want hands-off record keeping

This includes bookkeeping plus end of year filings.

Sole Trader with VAT

£80 to £150 per month

VAT adds complexity. Most accountants charge extra for quarterly VAT returns which is why this tier costs more.

Typical Accountant Costs for Limited Companies in Year One

Limited companies have more compliance which increases the price but the range varies depending on what is included.

Basic Year End Accounts and Corporation Tax Return Only

£600 to £1,200 per year

Suitable for:

• Companies that do their own bookkeeping

• Low volume B2B service providers

• Directors who understand payroll and dividends

This is the bare minimum. It usually includes:

• Year end accounts

• Corporation Tax return

• Annual confirmation statement

• Basic support

It does not include bookkeeping, VAT, payroll, or monthly help.

Monthly Limited Company Accounting Package

£80 to £200 per month

This is the most common for start ups. It usually includes:

• Bookkeeping or bookkeeping review

• Payroll for one director

• Dividend guidance

• VAT returns if applicable

• Year end accounts

• Corporation Tax return

• Confirmation statement

• Ongoing support

The price depends heavily on transaction volume and whether VAT is included.

For VAT Registered Limited Companies

£120 to £300 per month

VAT adds:

• Quarterly returns

• More detailed bookkeeping

• Checks on VAT schemes

• More frequent submissions

Start ups that register for VAT early often pay more in year one although some reclaim enough VAT to offset the cost.

For Start Ups with Staff Payroll

Add £10 to £25 per employee per month

Businesses with employees pay more because payroll, pensions, and HR compliance add ongoing work.

Sector Specific Start Up Costs

Some industries require more accountant time in year one because the accounting rules are more complex. Typical examples include:

Construction Start Ups (CIS)

£120 to £250 per month
CIS turnover reconciliation, monthly CIS returns, subcontractor verification, and VAT reverse charge rules increase complexity.

E-commerce Start Ups

£150 to £350 per month
Multiple payment providers, sales channels, VAT complexities, and stock accounting increase admin significantly.

Hospitality Start Ups

£150 to £300 per month
EPOS integration, staff payroll, tips and tronc systems, and heavy cashflow management require more guidance.

Property SPVs

£600 to £1,000 per year
Generally low transaction volume but specialist knowledge is needed for finance interest, capital allowances, and lender compliant accounts.

Professional Consultants

£80 to £150 per month
Simple structure but often require more tax planning guidance.

What Services Are Worth Paying for in Year One

In my opinion there are certain services that offer real value to start ups and others that are optional.

Worth Paying For

1. Annual accounts and Corporation Tax return
This is a legal requirement for limited companies.

2. Self Assessment (if a sole trader or company director)
Avoids mistakes and penalties.

3. Payroll setup for directors
Ensures salary is processed correctly.

4. Dividend guidance
Prevents overdrawn director’s loan accounts.

5. Bookkeeping setup and training
Even if you do your own bookkeeping professional setup stops errors.

6. VAT registration advice
VAT mistakes can be costly. Good advice upfront avoids rework.

7. Software setup
Xero, QuickBooks, or FreeAgent done properly saves time later.

Optional But Often Helpful

1. Full monthly bookkeeping
Choose this only if volume is high or time is tight.

2. Cash flow forecasting
Useful for funded businesses or those with large spending periods.

3. Regular management accounts
Not essential in year one unless the business is scaling quickly.

Red Flags When Choosing an Accountant

A start up should avoid accountants who:

• Charge extra for basic support

• Avoid answering questions

• Cannot explain salary vs dividend rules clearly

• Do not support cloud software

• Take more than a week to respond once you are a client

• Offer unusually low fees that suggest rushed or limited support

A good accountant is an investment not a commodity. Poor advice in year one can cost far more than the difference in monthly fees.

How Much Start Ups Actually Spend in Practice

Based on real world pricing across the UK most start ups fall into these ranges:

Sole traders

£150 to £600 per year

Limited companies (non VAT)

£900 to £2,000 per year

Limited companies (VAT registered)

£1,500 to £3,500 per year

E-commerce or complex start ups

£2,000 to £4,500 per year

A realistic budget for a brand new limited company with basic needs is £80 to £150 per month.

In my opinion a start up should be suspicious of anything below £60 per month for a limited company package because it likely excludes guidance, tax planning, or support that a new founder will need.

How to Keep Accountant Costs Down in Year One

Start ups can reduce costs by:

• Doing their own bookkeeping once trained

• Keeping personal and business spending separate

• Using cloud software properly

• Uploading receipts regularly

• Avoiding messy accounts

• Keeping transaction volume low at the beginning

• Asking questions early rather than fixing mistakes later

The cleaner the financial records the lower the accountant cost.

Final Thoughts

A start up should expect to pay anywhere from £150 per year to £4,500 per year depending on structure, complexity, VAT status, and how much work the accountant does. The best approach is to choose an accountant who supports your stage of growth, not the cheapest option on the list.

In my opinion a new limited company should budget £80 to £150 per month for proper support in year one. This gives the business the guidance it needs without overpaying or taking unnecessary risks with tax and compliance.

The first year is about building systems, avoiding mistakes, and learning how the financial side of the business works. The right accountant will save far more than they cost by keeping the business compliant, efficient, and ready to grow.