Is it a Legal Requirement to Have an Accountant?

Running a small business can be one of the hardest things you will do. Many decisions need to be made and procedural steps followed to comply with the thousands of pages of tax and accounting legislation we have in the UK.

Unfortunately, business doesn’t go to plan, so it helps to have a professional by your side. But, as with any professional service, an accountant will cost money. 

To save on costs, some small business owners will wonder whether it’s compulsory to have an accountant, or even a legal requirement. 

This guide explains whether you legally need an accountant, and even if you need an accountant if you have a small business.

Do I legally need an accountant? There is no legal requirement to have an accountant. Whilst it’s not compulsory to have an accountant, working with one has many benefits as they bring experience and knowledge to your business letting you concentrate on what you do best.

So, it’s not against the law to not have an accountant, and whilst you may choose not to use one, you do need to think about the expertise and knowledge, they will bring with them. 

Getting this wrong could prove costly from a financial and time point of view.

There are several things to consider, all of which we’ve outlined for you below to help you stay compliant and ask the right questions.

Do I need an accountant for my small business?

Whilst there is no legal requirement for a small business to have an accountant, we think you have enough on your hands dealing with sales, marketing, distribution, staff, customers to name a few.

The requirements for your small business will vary depending on the type of business you own. This will largely fall into two main categories being limited company and sole trader. 

We have approached the reasons why you need an accountant for your small business for these types of entities below.

Do I need an accountant for limited company?

Legally you do not need an accountant for a limited company.

However, there are many benefits to having an accountant for a limited company when you consider the thousands of pages of tax and accounting rules that need to be adhered to.

Your time as a business owner will be put to much better use doing what you do best.

We are pretty sure you did not set up a business to become a part time bookkeeper or accountant which can very quickly become a reality. The average micro-business spends 15 hours per week or 19% of their time doing financial admin tasks.

You should consider hiring a professional (for example an accountant) if you need help with your statutory accounts, corporation tax, VAT, payroll, and self-assessment.

Do I need an accountant as a sole trader?

No, you do not need an accountant as a sole trader. You may want one to help you prepare your year-end accounts and tax filings. Depending on the size of your sole trader business you will likely have to:

• Produce accounts.
• Calculate capital allowances.
• Complete self-assessment tax return.
• Payroll.
• Bookkeeping.
• VAT returns.

These are all time consuming and complex tasks. Bookkeeping alone covers raising sales invoices, processing purchases, paying suppliers, recording expenses and mileage claims, reconciling the bank accounts, VAT returns etc – here’s how much an accountant will cost you.

These are just the things to keep you on the straight and narrow. An accountant can also serve as business advisor and support for your business to help you grow your business.

For example, one of the most popular questions they are asked is whether it’s financially viable to get company cars through the business.

You should consider hiring a professional (for example an accountant) if you need help with your tax return.

How much does an accountant cost for a small, limited company?

As we have already identified there are several tasks that need to be completed when running a small business. Asking how much an accountant costs for a small limited company is a bit like asking how long is a piece of string. 

It depends.

Factors to take into consideration will be how much work you are prepared to complete and more importantly the quality of what you do. 

You see a lot of the time it is a false economy. 

Most of the fee you pay to an accountant goes into correcting your work rather than the advice, support, and guidance you think you are paying for and what your accountant ultimately would like to be delivering.

If you have Googled this question, you will get a whole host of solutions costing as little as £30 per month offering everything a small, limited company needs. 

Really?

Getting the accounting and tax of your business wrong can have disastrous consequences. The cheapest option might not be the best route.

You should always weigh up the size of your business, potential tax, and complexity of your business affairs to see what a good fit would be. What your needs will be in the future versus what you need know.

We would recommend getting at least three quotes and make sure they are on a like for like basis. Don’t get suckered into thinking that all quotes cover the same services. Make sure you get a full breakdown of the services provided so you can ensure they all meet the same requirements. 

Here is a list (keep you compliant) as a starting point of what a small, limited company needs:

• Statutory accounts.
• Corporation tax.
• Payroll
• P11D.
• VAT returns.
• Confirmation statement.
• Registered office.
• Self-assessment (Directors).

If you are paying any less than £1,200 +VAT per year for the above, then you will be doing well. Not to say that anyone charging less than that is not going to do a great job but as with any purchase do your homework.

Why you need an accountant?

OK, we’ve established that you don’t legally need an accountant. But you might now think you do need one, based on what we’ve told you.

Here are more reasons why you need an accountant, despite there being no legal requirement to do so.

When your small business might need an accountant

Again, the point you need an accountant will depend on your small business, your finance knowledge, and most importantly, your time. But bear this in mind… 

There are over 11,500 pages of tax legislation governing the UK tax system and the Companies Act split into 47 Parts with the Contents page alone running to 59 pages.

If that is not a good enough reason for why you need an accountant, we don’t know what is.

Accountants spend years learning their trade and become qualified professionals. To retain their professional qualification, they must also complete a number of hours Continued Professional Development (CPD) each year to ensure they are keeping up with the changing business and tax legislation.

Do you have time to do that on top of running a small business? 

Reasons a small business should have an accountant

Even if you did, you wouldn’t want to. If you are still not convinced, we have listed some of the top reasons why you need an accountant:

1. Saves you time.
2. Save you money.
3. Accountability.
4. Support and advice.
5. Improve cash flow.
6. Remove worry.
7. Reliable management information.
8. Tax estimates.
9. Planning, forecasting, and budgeting.
10. Best practice.

FAQs on legally needing an accountant

Is it compulsory to have an accountant?

No, it is not compulsory for a small business to have an accountant, but you need to consider the complexity of your business, the filing and tax requirements.

An accountant trains for many years to provide a service to small business owners and completes ongoing continual professional development.

How will you manage the various rules and regulations attached to running a limited company for example without that knowledge, skill, and experience?

What happens if you don’t have an accountant?

As there is no legal requirement to have an accountant then nothing will happen to you if you don’t have an accountant.

Not having an accountant working with your business could mean you make mistakes which could cost you time and money which could have been avoided.

There is a tendency when running a small business that you want to do things yourself and save the cost but what is the costs in the long run to your business of making mistakes.

It is not unheard of to see small business owners lose their business after making simple mistakes. No one is expecting you to know everything about running a small business.  Accounting and tax legislation is complex, but the rules and regulations are there to protect all of us.

If you do not know the VAT rules for example and do not register, you could be held liable to pay HMRC any sale VAT from the point you should have registered. This could be enough to finish off a small business before it gets going.

At what point do I need an accountant?

There is no standard point at which you need to have accountant. It will depend on your level of comfort to go it alone.

The cost of having an accountant is normally a big consideration of when to get an accountant but they can also bring tremendous value to your business which far outweighs the cost.

If you have a simple business, with no employees and are not VAT registered then you may never need an accountant. If your circumstances are not changing and business, it quite consistent you would need to question the value that an accountant will have.

If your business is growing, you are planning for growth, changing products or services, registering for taxes, employing staff then you will probably want to get someone involved in the business that has expertise and knowledge that you can tap into.

Do you need an accountant if you have a small business?

You do not need to have an accountant and you can do it yourself, but you have to question why you would want to.  Accountants and bookkeepers spend many years gaining the knowledge and experience to complete the tasks they do for small business owners.  

On top of that they complete continual professional development every year to ensure that they keep their skills relevant and up to date.  Do you need an accountant? No.  Should you do it yourself? No.

Do I need an accountant to file my company accounts?

There is no legal requirement for you to have an accountant file your company accounts.

With over 11,500 pages of tax legislation governing the UK tax system and the Companies Act split into 47 Parts with the Contents page alone running to 59 pages that is why you should have an accountant file your company accounts.

Accountants spend years learning their trade and become qualified professionals. To retain their professional qualification, they must also complete a number of hours Continued Professional Development (CPD) each year to ensure they are keeping up with the changing business and tax legislation.

Can I do my accounts myself?

Yes, you can do your own accounting whether it’s a limited company or you are a sole trader. When you do your accounts yourself you will need to prepare and then file your annual accounts. 

Those that do their own accounts without the use of an accountant must be confident that they are aware of tax, national insurance and many other aspects that will affect the records you will need to keep as small business or sole trader.

The bottom line is that you are under no obligation to legally use an accountant to do your accounts. You are well within your rights to do your accounts by yourself.

Just make sure that you understand how to do this compliantly.

Do I need an accountant to close my business?

There is no legal requirement to use an accountant to close your business. 

However, some businesses can be complex so whilst you may not need an accountant to close your business, you may want an accountant’s guidance to ensure you don’t break the law or HMRC rules.

This is particular relevant if you’re thinking about closing a limited company that has debt to HMRC and creditors.

Conclusion

Running a business is a stressful time for you. Do you need to compound that by trying to learn the rules and nuances of being an accountant?

Whatever you decide to do, no one can make you hire an accountant. There is no law or legal requirement to have one… 

But what is important is how many legal requirements there are with regards to filing accounts and paying taxes.

You will probably have enough on your plate running your small business so whilst you can complete some of these tasks yourself without the help of an accountant, we would ask you to think about the financial and emotional consequences of doing so.

Accountants are detached emotionally from the business so will help you make rational decisions. 

Getting tax and accounts wrong can take more time and cost more money. Accountants will help you navigate this process to complete it as efficiently as possible. There is a financial cost to this service but there is also a cost to you of trying to go it alone.

You might also like…

• Should you register for VAT as a limited company?
• Tips for reducing tax on your company car usage
• Do you still need an accountant if you have Xero?

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