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.
There's no legal requirement to hire an accountant when you run a limited company in the UK, but there are situations where not having one is genuinely risky. 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 the cost of errors (penalties, missed tax reliefs, HMRC enquiries) usually exceeds the cost of a good accountant.
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 format
Filing the Corporation Tax return (CT600) with HMRC
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
Clear triggers: when you definitely need an accountant
Some situations make professional accounting support not just advisable, but essential:
You're approaching the VAT threshold (£90,000 turnover) - VAT registration, scheme selection, and Making Tax Digital compliance all require careful setup.
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 considering IR35 - assessing whether IR35 applies to your contracts requires specialist expertise.
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.
You receive an HMRC enquiry - you should absolutely have professional representation if HMRC investigates your company's tax affairs.
Your profit significantly exceeds £50,000 - at this level, the tax planning opportunities available through an accountant typically outweigh their fees several times over.
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 |
Full service (growth stage) | £2,500 - £5,000+/year | All above plus tax planning, bookkeeping review, quarterly calls |
What to look for in a small business accountant
Chartered or certified status: Look for ACA, ACCA, or CIMA qualified accountants. These are regulated professions with professional indemnity insurance.
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.