If you run a small business in the UK, one of the first questions you may have when considering an accountant is: how much will it cost?

What does a small business accountant actually do?

Before looking at the cost, it is worth understanding what you are paying an accountant to do.

Depending on your business, an accountant may help with:

• Annual accounts
• Self Assessment tax returns
• Corporation Tax
• Bookkeeping
• VAT returns
• Payroll
• Cash flow and financial information
• Tax planning
• Business structure
• HMRC correspondence
• Companies House requirements
• Advice about business decisions.

Not every small business needs all of these services.

A sole trader with a small number of transactions may only need annual accounts and a Self Assessment tax return.

A growing limited company may need much more comprehensive support, including bookkeeping, VAT, payroll, annual accounts, Corporation Tax and advice throughout the year.

This is why comparing accountants purely on their headline monthly fee can be misleading.

How much does an accountant cost in the UK?

Small business accountant fees can vary considerably across the UK.

For a straightforward sole trader, basic accounting support may start at a relatively low monthly cost. More comprehensive packages that include bookkeeping, tax returns and ongoing advice will cost more.

For limited companies, fees are generally higher because there are additional statutory and tax reporting requirements.

A small owner-managed company may require:

• Annual company accounts
• Corporation Tax return
• Companies House filings
• Director Self Assessment
• Bookkeeping
• VAT
• Payroll
• Tax planning

The more services that are included, the higher the overall accounting fee is likely to be.

There can also be regional differences. Accountant fees in London and the South East can be higher than in other parts of the UK, although location is only one factor.

The complexity of your business and the level of service you receive are usually more important than simply where the accountant is based.

How much does a sole trader accountant cost?

Sole traders generally have simpler accounting requirements than limited companies, particularly if they have straightforward income and expenses.

A basic sole trader accounting service might include:

• Annual accounts
• Self Assessment tax return
• Income and expense calculations
• Tax calculation
• Basic tax advice

More comprehensive packages may also include:

• Bookkeeping
• Cloud accounting software
• Regular management information
• Tax planning
• Telephone and email support
• HMRC correspondence
  

As a result, sole trader accounting fees can range from relatively low-cost annual services to higher monthly packages where an accountant provides ongoing support.

When comparing prices, check whether the Self Assessment tax return is included.

A monthly fee can initially look attractive, but if the annual tax return, bookkeeping or other services are charged separately, the overall cost may be considerably higher.

How much does a limited company accountant cost?

Limited companies generally have more accounting and reporting responsibilities than sole traders.

A typical small limited company may need an accountant to deal with:

• Annual accounts
• Corporation Tax
• Companies House
• Director's Self Assessment
• Dividends
• Payroll
• VAT
• Bookkeeping
• Tax planning

This means limited company accounting fees are usually higher than straightforward sole trader accounting.

Some accountants offer basic compliance packages for small companies, while others provide comprehensive monthly packages that include bookkeeping, software, payroll and regular advice.

When comparing limited company accountant fees, ask exactly what is included.

For example, does the quoted fee include:

• Annual accounts?
• Corporation Tax return?
• Director's Self Assessment?
• Confirmation Statement?
• Payroll?
• VAT returns?
• Bookkeeping?
• Accounting software?
• Telephone and email support?

These questions can make a significant difference when comparing two apparently similar quotes.

What affects the cost of an accountant?

Several factors can affect how much you pay.

1. Your business structure
A sole trader generally has fewer statutory reporting requirements than a limited company.
A limited company therefore usually requires more accounting work.

2. Your turnover
Higher turnover does not automatically mean higher accounting fees, but businesses with higher turnover often have more transactions and more complex financial records.

3. Number of transactions
The number of sales, purchases and bank transactions can have a significant effect on bookkeeping requirements.
A business with 50 transactions a month is very different from one with several thousand.

4. Bookkeeping
If your bookkeeping is accurate and up to date, your accountant may spend less time processing your records. If records are incomplete or disorganised, additional work may be required. Some accountants include bookkeeping within their package, while others charge separately

5. VAT
VAT-registered businesses have additional reporting requirements. If your accountant prepares your VAT returns, this will normally form part of the overall fee.

6. Payroll
Employing staff creates additional responsibilities.
Payroll fees may depend on:

• Number of employees
• Frequency of payroll
• Pension requirements
• Payroll complexity

7. Number of directors or shareholders
A company with several directors or shareholders can require more work than a simple single-director company.

8. Property or other income
If you are a business owner who also has rental income, investments or other sources of income, your personal tax affairs may be more complicated.

9. Tax advice
There is a difference between an accountant who simply prepares your accounts and one who provides ongoing tax planning and business advice.

If you want an accountant to help you make decisions throughout the year, expect to pay more than you would for basic compliance alone.

What should be included in an accountant's fee?

There is no universal answer because accountants structure their packages differently. However, if you are comparing accountants, ask for a clear breakdown of what you are getting.

For a small business, you might want to establish whether the fee includes:

• Annual accounts
• Tax returns
• Corporation Tax
• Companies House filing
• Bookkeeping
• VAT
• Payroll
• Accounting software
• Tax planning
• Telephone support
• Email support
• HMRC correspondence

You should also ask whether there are additional charges for work outside the standard package.

A clear fixed-fee agreement can make budgeting much easier.

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Are accountant fees tax deductible?

For many businesses, professional accounting fees relating to the business can be an allowable business expense.

However, the tax treatment depends on what the accountant is being paid to do and your individual circumstances.

For example, there can be a distinction between costs relating to business activities and costs relating to an individual's personal tax affairs.

This is one reason it is important to keep your accounting fees properly documented and understand what services you are paying for.

If you are unsure whether a particular professional fee is tax deductible, ask your accountant.

Is it worth paying an accountant for a small business?

This depends on your circumstances.

If your business is very straightforward, you may be able to manage some accounting tasks yourself using accounting software. However, an accountant can provide value beyond simply completing forms.

They can help you:

• Understand your tax position
• Identify allowable expenses
• Meet deadlines
• Avoid common mistakes
• Plan ahead for tax bills
• Choose an appropriate business structure
• Understand financial information
• Make better business decisions

The value of an accountant is therefore not simply the amount of paperwork they complete.

Good accounting advice can help you avoid a mistake that costs considerably more than the accountant's fee.

Should I choose a cheap accountant?

Price is important, particularly when you are starting a business.

But it should not be the only factor.

An accountant offering a very low monthly fee may be providing exactly what you need. Alternatively, the low headline price may only cover basic compliance, with bookkeeping, tax returns, advice and other services charged separately.

Before choosing an accountant, ask:
What exactly is included?
Get the services listed clearly.

Are there additional charges?
Ask what happens if you need extra advice or support.

Will I have someone I can speak to?

Consider how important personal contact is to you.

Does the accountant understand my type of business?
An accountant who regularly works with businesses like yours may be able to provide more relevant advice.



Are the fees fixed?
A fixed fee can make budgeting easier.

Fixed-fee accounting vs hourly accounting

Accountants can structure their fees in different ways.

Fixed fees

A fixed-fee arrangement gives you an agreed cost for an agreed scope of work.
The advantages include:

* Easier budgeting
* Greater transparency
* Clear expectations
* Less concern about every phone call or email

Just make sure you understand exactly what the fixed fee covers.

Hourly fees

Some accountants charge by the hour for certain services.

This can be appropriate where the amount of work is difficult to predict, particularly for specialist or one-off advice.

The disadvantage is that the final cost can be harder to predict.

For many small business owners, fixed fees provide greater peace of mind.

When should a small business hire an accountant?

You do not necessarily need an accountant from the first day of trading.

However, it can be worth speaking to one early, particularly if you are deciding how to structure the business.

You may benefit from professional advice if:

• You are starting a limited company
• Your turnover is increasing
• You are becoming VAT registered
• You are employing staff
• You are taking dividends
• You are buying business assets
• You are considering buying property
• Your tax affairs are becoming more complicated
• You are spending too much time on bookkeeping
• You are unsure how much tax you will owe
  

Getting advice before making a decision can sometimes be much more valuable than asking an accountant to correct a problem afterwards.

How to compare accountant fees

When comparing quotes, do not simply compare the monthly number.

Instead, calculate the total annual cost and compare what is included.

For example:

Accountant A
£75 per month

But charges separately for:

• Self Assessment
• VAT
• Payroll
• Bookkeeping

Accountant B
£125 per month

Includes:

• Annual accounts
• Corporation Tax
• Self Assessment
• VAT
• Payroll
• Bookkeeping
• Accounting software
• Ongoing support

Accountant A may initially appear cheaper.

But once all additional services are included, Accountant B could actually provide better value.

The important question is therefore:

What am I getting for the fee?

What should I ask an accountant before hiring them?

Before agreeing to work with an accountant, ask for a clear explanation of their fees and services.

Useful questions include:

1. What is included in your fee?
2. Is the fee fixed?
3. Is VAT included?
4. Are tax returns included?
5. Is bookkeeping included?
6. Are VAT returns included?
7. Is payroll included?
8. Is accounting software included?
9. Can I contact you during the year?
10. Are there additional charges for advice?
11. What happens if my business grows?
12. How do you communicate with clients?
13. What happens when tax rules change?
14. Will you deal with HMRC if there is a query?

The answers can tell you much more about the value of the service than the headline price alone.

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The right level of support for your business

A straightforward sole trader may have relatively simple requirements and therefore pay considerably less than a growing limited company with employees, VAT, bookkeeping and more complex tax affairs.

The most important thing is to find an accountant that provides the right level of support for your business at a fee you understand and can budget for?"

At Andrew Passer, we believe accounting fees should be transparent and straightforward.

We offer fixed-fee accounting packages and agree the scope of work and fee with you in advance. You can also contact us throughout the year for help with your accounting and tax questions.

If your requirements change, we will discuss this with you rather than surprising you with an unexpected bill.

Need an Accountant for Your Small Business?

If you are a sole trader, contractor, freelancer, landlord or limited company owner and want to understand how an accountant could help, get in touch.

We offer a free initial consultation to discuss your circumstances, explain what you may need and provide a clear indication of our fees.

Contact Andrew Passer to discuss your accounting requirements.