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How much does an accountant cost in the UK? Outsourcing Costs explained.

So how much does an accountant cost in the UK? The answer is – it depends. If you want a simple individual tax return then expect to pay anywhere between £75 to £350+ VAT depending on the quality of service. Most small businesses can expect to pay around £500 a year for a standard set of accountants (and submission to Companies House) however, the price is completely dependent on your company situation. 

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The cost of outsourcing your accounting can depend firstly on the size of the business, the type of business you own (self-employed or limited company) the number of employees you have, the number of company directors and other factors such as where your business is situated. If you are self-employed and need your tax return filed and your accounts done then an average range would be between 250 to 1,000 + VAT.

If you are a Limited Company then fees will increase in proportion to the number of employees and turnover. If your company has annual revenue of, say, 30,000 then expect to pay around 150 for business accounts, a monthly fee of anywhere up to 200 if you require payroll services and another 100 fees for VAT returns.

Specialist services like tax planning can cost a lot more in the region of £125 to £150 per hour which is, of course, higher than a standard bookkeeping service but if you are looking for basic accounting service, you can expect to pay from £25 to £90 an hour.

As you've seen above, the cost accounting really depends on the services you require. In the remainder of this article, we will breakdown Individual, Self-Employed and Limited Company accountancy services so you can understand why an accountant could help you.

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Individual Tax Return costs in UK

It is important to remember that most people do not need to fill in a tax return. If HMRC believes you are paying the right amount of tax through the PAYE (Pay As You Earn) system on your wages or salary then you will not be sent a tax return. In generally, it can cost between £100 a year and £400 a year for a set of personal accounts, depending on how complicated your accounts will be. HRMC will generally issue tax returns if you are:

  • Self-employed
  • A Company Director (but not if you are the director of a not-for-profit company)
  • Have rental or other income from a property
  • Have income that is not taxed before you get it (and cannot be collected through PAYE)
  • Receive child benefit and someone in your household has a taxable income above 50,000
  • A pensioner with retirement income over a certain threshold (at time of writing 1.073 million)

Can anyone do my accounts?

If you do need to complete an individual tax return then here is what you can expect if you engage an accountant.

Firstly, anyone can call themselves an accountant so it is good practice to make sure they are chartered accountants and registered with the Institute of Chartered Accountants in England and Wales (ICAEW) or ICAS for Scotland. Look for the accreditation.

What will the accountant need from me?

Your chosen accountant will need some information from you, so be get this ready in advance. It is likely they will need your: P60 which details tax paid over the tax year, P11D detailing expenses or benefits as necessary, your P45 if you left employment, possibly some copies of pay slips, personal pension contributions, statements for income generated from personal investments as applicable, any state benefits you have received and any tax relief or allowances that you are entitled to. Your accountant will then conduct a review, complete the self-assessment then provide you a copy for final approval before it is either submitted on-line or in paper form.

Many people complete this process themselves using the HMRC on-line portal but if your personal arrangements are complex then it would be as well to consider a good accountant to ensure your return is completed correctly and - just as importantly - you pay the right amount of tax.

Self-Employed Tax Return Costs

As for individuals, there are many self-employed people who manage their own accounts and tax obligations. However, being self-employed is as much about your own time management as anything else which is why lots of people turn to accountants for help. Why?

Time is one reason. An accountant can do all the work needed to file your returns and help you understand and meet all the other financial obligations placed on the self-employed. This frees up your time to focus on growing your business. As your business grows, the help of a trusted accountant partner will become more and more important.

Minimising your tax liability. How much tax you pay depends on how much profit your business makes and clearly you want to keep as much of that profit as possible to reinvest in your business. The UK has one of the largest tax codes in the world meaning that even a straightforward return can seem complex. Tax rules change all the time, with some helping your business and some that do not. A good accountant can stay on top of this and not only ensure you are compliant but quite possibly save you money too.

The services provided for the self-employed include not only access to a qualified accountant or tax specialist when you need it but also an annual tax review and the preparation of your annual accounts.

Limited Company accounting costs in the UK

As we said at the outset, the services your accountant can provide for your company (and your accounting fees) depend a lot on its size and what you need. There are general compliance requirements for companies that keep you in good standing with HMRC and most companies need to undertake, which include:

  • Annual Accounts
  • Corporation Tax
  • VAT returns
  • Payroll and PAYE
  • Income tax
  • Bookkeeping 

As well as dealing with the HMRC on your behalf. Good accountants may also offer ‘value added’ services like profit analysis, help with your strategic planning, help you with financial software installation and use, etc. As with the above two services, a good accountant partner can free you up to work on your business and become a trusted partner in ensuring you are not only compliant but are correctly planning for the future. 

What will you be paying for?

Now that you know the cost of an accountant, you can work out whether it’s worth outsourcing your accounting and what you get for your money.

Getting The Business Started

Starting a business in 2020 has never been easier. However, many systems need to be put in place to create a solid framework for a prosperous business venture. An accountant can assist you by:

  • Deciding what business structure fits your business (i.e., LLC, corporation, sole proprietorship, partnership)
  • Supporting with financial analysis of a business plan 
  • Guiding you on what accounting software you should use
  • Advising and assistance when opening a bank account for your business
  • Ensuring your accounting systems comply with government rules and regulations
  • Advising on different methods to track daily expenses of your business activities.
  • Teaching the importance of separating personal expenses from business expenses

Day-To-Day Business Operations

You have worked hard to get your business up and running, but now you will need a qualified accountant to maintain any systems you had help setting up. Tasks an accountant can support you with daily are:

  • Simplifying financial statements so you can have a deeper understanding of your business's expenses
  • Managing payroll and payment methods
  • Ensuring that independent contractors are listed as contractors and not as employees of your business
  • Professional advice on expected tax payments to make throughout the year
  • Closing your financial books when the year ends
  • Collecting and presenting your taxes, and essential documents to the HMRC

Scaling Your Business

When it is time to expand your business, an accountant will be a necessary resource that will advise on the management of your financial process and ensure any business investments in the growth stage are well documented and tracked. Accountants can also assist with:

  • Identifying areas of growth with insight on your cash flow habits, management of your inventory and pricing of your product or service
  • Assist with the prevention of any penalties from HMRC
  • Provide professional assistance, with audit inspection, if needed
  • Build financial forecasts that support your business decisions
  • Support you with creating a budget for your business that will be compatible with your business objects
  • Present you with the necessary resources when selling your business

You have now learnt the different areas in which an accountant can progress and maintain your small business's financial operation. As the decision-maker, you can hire an accountant full time to monitor the financial activity of your small business or start-up. However, if you don't have the budget for a full-time accountant try hiring a part-time or freelance accountant who will have important duties but will have less hands-on responsibility, reducing expenses in your business. For example, try to build an accounting team to support your small business in different stages of its growth. The accountant can handle financial planning whilst the bookkeeper can manage your books daily. This combination can make a powerful duo that can support you during the growth and maintenance of your start-up. 

A crucial matter you will need to consider is the finances of your small business and recognising when it is time to recruit a professional. Once you have established this you will need to find a credible accountant with the ability and experience to maintain the economic wellness of your small business. 

Finding a credible accountant could be a daunting thing to think about especially if you are a new business, however, it is something that should be considered if you want long term success and financial maintenance with your start-up or small business.

To summarise, accountants can help you with:

  • Advice on tax avoidance legislation (IR35)
  • Annual accounts
  • Bookkeeping
  • Corporation Tax Returns
  • Day to day advice provided from your account
  • Director’s tax return
  • Quarterly VAT returns

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Reasons to outsource your accounting

Now that we've answered the question 'how much does an accountant cost,' you'll need need to decide whether it's worth your time to hire an accountant.

As a business owner, you might think that it is a good idea to handle every function of your business, believing that this constant hands-on approach makes you a good business owner.

Well, think again. If you manage your day-to-day accounting operations, you will quickly find yourself investing too much time and effort into making sure your accounting system runs smoothly, from issuing, paying invoices, processing payroll to maintaining cash flow as well as preparing financial statements.

Finding yourself overwhelmed with these accounting operations leaves you with little to no time to handle other functions of your business. Hence, it is prudent to take a step back and see the bigger picture and leave the accounting function to outsourced accounting experts who can implement and maintain a capable accounting system for you. Accountant costs have listed five reasons to use an outsourced accounting service:

1) An accountant will allow you to focus on working on your business not IN your business

Managing the daily accounting operations of a business can get in the way of a business owner’s primary role for the company, which is to plan and focus on strategically growing the business.

It is, of course, vital for a business owner to know the money flow that goes in and out of the business but this can quickly become very complicated as there are many different facets to a business.

When you outsource your accounting function, you would have a dedicated bookkeeper collecting, organising, and filing every accounting data, hence freeing you, as the business owner to focus on ways to expand your business. Every business owner needs to learn how to delegate tasks to subordinates. Hence, delegating the accounting tasks to an outsourced bookkeeper whose expertise in keeping company financial records organized, timely preparation of financial statements as well as the implementation of bookkeeping best practices and system, can be crucial to the success of your business for the foreseeable future.

2) An Accountant can save you money on business resources

When an in-house bookkeeper is hired, the employee would have to be trained and put on the payroll. This requires the company to invest a lot of time, money and also in human resources to get the employee up to speed with his/her bookkeeping role as well as integrating him/her into the company’s culture.

While a bookkeeper is certainly needed to run the accounting function of your company, you do not want to put that person on the payroll if that role is not revenue-generating. Your business’ payroll should be allocated to individuals who are bringing business to your company, such as sales professionals and marketing executives.

An outsourced accountant would send you financial reports by a week’s or month’s end, so they only get paid for work completed in that time frame. Essentially, you would not only free up space on your payroll by outsourcing your accounting function but also acquire some of the finest bookkeeping professionals the accounting industry has to offer. Added to that benefit is the fact that you do not need to train, monitor and manage the outsourced bookkeeper and constantly be wary of the quality of accounting work delivered, as you would be when you employ an in-house bookkeeper.

3.   An accountant will keep your books organised 

As your business expands, so will the number of business receipts and invoices and if not managed properly, they can turn into a big mess for your accounting function. Outsourcing your accounting function is a great way to solve this problem as it can help your business stay organized.

Outsourced accountants possess vast experience in organizing existing books and standard accounting operating procedures into a more efficient, standardized system. This, in turn, will make the closing and reporting processes of your business quicker and more streamlined as well as presenting you with important financial information when you need it to make vital business decisions, for example, being able to pull a Profit and Loss Statement at a moment’s notice to present to business investors.

Having a standardised accounting system also means your business’ accounting processes have a decreased margin of error as well as being more easily scalable. This good accounting practice implemented by outsourced bookkeeping service will ultimately help your business achieve a variety of desired business outcomes, such as better service, more accurate financial information and ultimately, increase in revenue for the business.

Along with these positive outcomes, a business with well-organised books can also develop better benchmark accounting processes that comply with current laws and regulatory requirements.

4) An outsourced accountant will allow your business to grow and add more locations

The focus of every business owner is to expand and grow the business. Whether the growth strategy is through introducing new products or services, mergers and acquisitions or tapping into new markets, it is of utmost importance to have an experienced accounting team support these business expansion plans.

Many businesses make the mistake of adopting a reactive approach in accounting management, where they try to remedy problems. For example, when there is an emergency need to produce organized books and thorough financial forecast for fundraising, businesses would scamper at the last moment to allocate resources to simplify and standardize their accounting system to produce those financial documents. Hence, this is why procuring an outsourced bookkeeping service can prove to be useful to your business as you would always have accounting experts in the wings, implementing proactive accounting policies to seamlessly integrate into your company’s expansion plans when it’s strategically most appropriate to do so.

Also, as your business adds more locations, having an outsourced accounting service can not only help you integrate your accounting processes across multiple branches but also gives you the flexibility of scaling up or cutting back on accounting expenditure, to achieve your business’ expansion goals.

5) An accountant can provide back-office support

Every day back-office accounting tasks such as payroll processing, human resource management, and processing of receipts, invoices and bank reconciliation can be supported by an outsourced bookkeeping service, thus, freeing you to focus on increasing the company’s bottom line.

If required, outsourced back-office support can also provide a business with sophisticated accounting software at an extra cost to help streamline accounting processes and protect financial data through cloud-based platforms. For as low as £1.99 per invoice charged by outsourced accounting service for the usage of their accounting software, as opposed to purchasing a bookkeeping platform for a price that could swell to as much as £4,000 per month, businesses can enjoy state-of-the-art accounting software at a cut-price, where you can view your business’ financial data and health anywhere and at the touch of a button.

An added benefit of using accounting software is the ability to store and retrieve all financial data of the company securely through cloud platforms, which allow for fast, accurate financial reporting as well as tremendous flexibility. Moreover, if your business needs to retrieve and scrutinize a piece of financial information immediately, you can, for example, drill down to the actual invoice connected to every line-item expense through cloud reporting.

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Accounting Costs frequently asked questions

Why is there such a variation in prices?

A lot depends on the service you are getting. Small fees generally mean less service, so if you are submitting a self-assessment for a low fee, expect to do much of the legwork yourself with the accountant simply formatting your information correctly and submitting on your behalf. A larger fee could ensure you are not paying more than you need and receiving all the relief to which you are entitled - this could cost you less in the long run. Before you commit, ensure you understand exactly what services you are getting (and not getting) for the fee.

Fixed Price or Monthly Subscription? A lot of accountant firms will provide fixed fees for all their services but many will also offer a monthly subscription deal enabling you to spread the cost evenly over the year and control your cashflow. Again, these subscriptions vary in price depending on your specific needs but expect to pay 25 to 40 per month if you are a self-employed and 50 or upwards per month depending on the size of your limited company and the services required.

How do I choose an accountant?

The best way, as with any service provider, is to check their reviews to see what others thought of their services. As we said above, look for an accreditation that proves they operate to a widely acclaimed standard. Talk to them if possible and reassure yourself this is someone you can work with who has the experience you need.

Is an accounant it worth the money?

If you have multiple income streams or want to focus on your business more or want to ensure you are compliant with your tax obligations or just simply want to ensure you are minimising your tax liability to the maximum extent possible then yes, engaging an accountant could save you both time and money.
How long does it take? A straightforward individual self-assessment should take an accountant no more than a couple of days to prepare once they have all the information required. Similarly, for the self-employed, provided you have your books, invoices, and other requirements to hand, it should take no more than a week to prepare. For Limited Companies, it all depends on the complexity and size of your company. An accountant will help you prepare in time to meet any HMRC deadlines.

What are the different ways you can pay for your accountant?

Accountants can be paid by the hour, for the individual service you require and also monthly. You'll also be able to pay your accountant monthly which helps to ease cash flow issues.

Will the cost of accounting increase in the future?

The answer to that question is dependent on where your company is going in the future. If your company gets bigger, for example, a larger team of employees which will increase the payroll fees or just having a higher turnover, this will, of course, require more work which relates to paying more for the service you have had previously. This may also require adding extra services that you may require that previously you have not needed.

How can I reduce my accounting fees?

There are ways you can reduce the accounting fees, one way is maintaining a good record keeping, and providing the accountant with all relevant information to complete the job. This tip is useful especially if you are paying for an accountant hourly as they won't have to work as many hours and search through all the data your company has. Another way you can reduce the amount of money you spend on your accounts is to look around looking for the best deal which provides all the services you need. But remember that cheapest is not always the best. Make sure to do your research and compare accountant costs here at accountantcosts.co.uk.

Is it cheaper to outsource your small business accounting than to hire accounting staff?

The short answer to that question is Yes!
What defines a small business? A business is considered small when the company has below 50 employees and does not turn over more than £6.5 million according to the UK’s Companies Act 2006. This also includes self-employed workers, who are also normally known as a small business. Small businesses will not have to pay as much for accounting services. This is due to the amount of data the accountant has to work with. The accountant is not required to deal with as much data as it would do with a larger business and might not have to provide as many services.

We hope that this information has been useful and that you have a better idea when answering the question "how does much an accountant cost."

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