Accounting
Accounting Software vs Hiring an Accountant: Which Do You Need?
For most founders, the answer is both, in the right combination. We explain what each does, when you need them, and the best options for UK small businesses.
When Do Founders Need an Accountant?
You don't need an accountant from day one, but there are moments when it becomes essential. Here's how to know when that moment is.
By Callum Sommerton16 April 20264 min read
There's no legal requirement to hire an accountant when you run a limited company in the UK, but there are situations where professional support can materially reduce the risk of getting things wrong. This guide explains when an accountant adds real value versus when software can handle it, what you should expect to pay, and how to find the right person for your stage of business.
Do you legally need an accountant?
No, there's no law that requires a limited company to use an accountant. Directors can prepare and file their own annual accounts, Corporation Tax returns, and VAT returns if they have the knowledge and software to do so correctly.
That said, most directors of limited companies do use an accountant and for good reason. The filing requirements for a limited company are more complex than for a sole trader's Self Assessment return, and mistakes can mean penalties, missed tax reliefs or unnecessary HMRC headaches.
What an accountant actually does for a limited company
A small business accountant typically handles:
Preparing annual accounts (profit and loss, balance sheet) in the required formatAnnual Accounts Explained: What to File and When
Filing the Corporation Tax return (CT600) with HMRC. See out guide for the full processCorporation Tax Explained for Limited Companies
Calculating the most tax-efficient salary and dividend combination for directors
Setting up and managing payroll (PAYE)
Preparing and submitting quarterly VAT returns
Advising on allowable expenses and legitimate tax deductions
Year-end tax planning
Advising on R&D tax credits (if applicable)
Preparing figures for funding applications or bank loans
When professional help starts to make sense.
You can still manage these things yourself, but there are points where getting professional help becomes much more valuable.
You're approaching the VAT threshold - compulsory registration is generally triggered when taxable turnover goes over £90,000 in a rolling 12-month period, or you expect it to exceed £90,000 in the next 30 days. VAT registration, scheme selection and Making Tax Digital add another layer of admin.
You're taking on your first employee - payroll, employer National Insurance, pension auto-enrolment, and PAYE all need to be set up correctly from day one.
You're dealing with complex director loan account situations - if you've borrowed money from the company informally, there are specific tax rules that apply and penalties for getting them wrong.
You're working through your company on contracts where IR35 or off payroll status isn't clear - getting the tax treatment wrong can be expensive, so specialist advice may be worthwhile. See IR35 without the panic: A Plain-English guide
You're raising investment - investors will want properly prepared accounts and financial projections. An accountant can prepare these and may also advise on SEIS/EIS structuring. SeeSEIS and EIS advance assurance: what it is and how to get it
You receive an HMRC enquiry - professional advice or representation can be particularly valuable if HMRC starts looking into your company's tax affairs.
What does a small business accountant cost in the UK?
Service level | Typical annual cost | What's included |
Basic (sole director, simple accounts) | £500 - £1,200/year | Annual accounts, CT600, Confirmation Statement |
Standard (Ltd company, payroll) | £1,200 - £2,500/year | Accounts, CT600, payroll, VAT returns, director tax return (if required) |
Full service (growth stage) | £2,500 - £5,000+/year | All above plus tax planning, bookkeeping review, quarterly calls |
*fees vary significantly depending on complexity, location and whats included - but use this as a rough guide
What to look for in a small business accountant
Professional credentials: If you want a regulated professional, look for membership of recognised bodies such as ICAEW, ACCA or CIMA, and check what professional protections and insurance apply.
Experience with companies at your stage: An accountant who usually works with established businesses may not be the best fit for an early-stage founder.
Tech-forward: Your accountant should be comfortable with Making Tax Digital requirements and the accounting software you're using.
Proactive communication: A good accountant reminds you of deadlines before they arrive and flags tax planning opportunities, not just reacts when you contact them.
Clear pricing: Avoid arrangements where you can't predict what you'll be charged. Monthly fixed fees are generally preferable to hourly billing for most founders.
You don't have to choose between DIY and an accountant
For many founders, the answer isn't hiring an accountant for everything from day one or trying to manage everything alone. For a full breakdown of what software can and can't replace, see Accounting Software vs Hiring an Accountant: Which Do You Need?
FOUNDRS guides your setup in plain English, helps you stay on top of your company deadlines and connects you with an accountant when you actually need one.
Less admin when things are simple. More help when they aren't.
