Do limited companies need an accountant?

Do limited companies need an accountant?

A limited company can be defined as a separate legal entity from the business owner. It's distinct from a sole trader because the company has its legal identity. The business owners or shareholders are not personally responsible for the company's debts.

A sole trader is a self-employed person that tends to have no other employees. Sole traders have complete control over the company's profits and assets and are also personally responsible for its debts. 

Running a limited company involves maintaining more detailed financial records, filing annual accounts with Companies House, and ensuring compliance with tax regulations set by HMRC. 

Although hiring an accountant for a limited company is not a legal requirement, most benefit significantly from having a professional handle their finances. An accountant’s expertise will help you avoid mistakes, fines, and penalties for errors in tax filings or late submissions.

What does an accountant working for a limited company do?

The role of an accountant for a limited company can vary depending on business needs, but it generally includes the following:

• Managing statutory accounts and tax returns: Accountants can prepare and file the company’s annual financial statements (profit and loss, balance sheet, and any notes regarding the accounts) and tax returns with HMRC and Companies House.
• Ensuring compliance with HMRC and Companies House regulations: Limited company accountants ensure the business adheres to all regulatory and legal requirements to avoid penalties for non-compliance.
• Advising on tax efficiency: An accountant helps the company reduce its tax liabilities through tax planning strategies, ensuring the business claims all allowable expenses.
• Supporting payroll and VAT registration if applicable: An accountant can manage your payroll, including employees’ tax and national insurance contributions, and help with VAT registration if your company meets the threshold.
• Offering financial planning and growth advice: A limited company accountant provides insights on budgeting, forecasting, and improving cash flow management to support business growth. 

What are the benefits of hiring an accountant for a limited company?

A limited company accountant offers many benefits, including:

Saving you time 

By outsourcing tasks to an accountant, business owners can free up time to focus on other areas. Limited company accountants can handle all financial reporting and ensure everything is completed on time, allowing owners to concentrate on operations and growth.

Accuracy

Accounting involves intricate details, and even minor errors in financial reporting can lead to hefty losses. Professional accountants are skilled in managing financial data and ensuring accuracy on tax returns, statutory accounts, and other vital documents. 

Tax efficiency

A proficient accountant can identify opportunities to minimise a company’s tax liabilities, such as claiming allowable expenses or utilising tax reliefs. This could include managing corporation tax, VAT, and payroll taxes efficiently for limited companies.

Business owners who are less tax-savvy might miss opportunities for tax savings, so it’s worth having an accountant on board.

Stress reduction

Understanding the tax laws and regulatory requirements can be overwhelming. A limited company accountant helps simplify the process and ensures compliance, taking a load of stress off your shoulders. This might include avoiding penalties for late filings, missed tax deadlines, or improper financial reporting. 

Professional advice

Although their speciality is accounting, accountants can also give expert advice on managing your company’s finances, optimising cash flow, minimising costs, and helping you plan for the future. They provide valuable insights regarding sustainable business growth and your company's financial health.

Can you manage limited company accounting yourself?

Small business owners can manage their own accounting. However, this comes with many challenges. 

Small businesses with straightforward finances may be able to manage day-to-day bookkeeping, but as the company grows or becomes more complex, the risk of errors increases. This is where a qualified accountant for a limited company comes in.

Maintaining accuracy, meeting deadlines, and keeping up to date with changes in tax laws is a full-time job in itself. Missing a tax deadline, for example, can result in fines or interest charges.

If you are one day late filing your company’s tax return, there is an automatic £100 fine, which doubles after three months. At six months, HMRC estimates your tax and adds a 10% penalty - and at 12 months, another 10% of any unpaid tax applies. 

The risks of penalties and lost opportunities for tax savings are significant, especially for businesses that are expanding or entering more complex financial situations. 

What should you expect from limited company accountant fees?

There is no one-size-fits-all accounting fee for limited companies.

Some accountants charge by the hour, while others may charge a fixed monthly or annual rate. A limited company accountant may also charge for ad hoc services.

Typical limited company accountant fees range from £25-£150 per hour for small businesses.

Your accountant might charge an hourly fee for:

• Basic bookkeeping: £25-£50 per hour
• Compliance and tax preparation: £50-£100+ per hour
• Consulting and financial advice: £100 - £150+ per hour

As a small limited company, you will probably have ongoing accounting needs, so an accountant who does regular work for you may charge a monthly fee ranging between £300 and £400.

The cost of an accountant will depend on various factors, including:

• Company size
• Turnover
• The accountant’s experience
• Complexity of services
• The frequency of services

How to choose the right accountant for your limited company

As with any business relationship, your accountant should be the right fit for your company. This will ensure your business remains healthy and compliant with all regulations.

Here are some tips for selecting the right person for the job.

• Look for professionals with experience in limited company accounting.
• Choose an accountant with relevant qualifications. Make sure they are accredited by recognised bodies such as the Association of Chartered Certified Accountants (ACCA), the Chartered Institute of Management Accountants (CIMA), and the Institute of Chartered Accountants in England and Wales (ICAEW).
• Assess their familiarity with your industry. A professional who understands your business can give you more tailored advice and services.
• Ask for testimonials or case studies to assess the accountant’s ability to meet your current and future business needs.
• Compare fees and service packages. You should shop around to be sure you’re getting the most competitive limited company accountant fees. 

Unbiased can quickly match you with a qualified accountant that’s right for your business. 

When should you hire an accountant for your limited company?

Consider hiring an accountant for your limited company in the following situations:

• During the incorporation process: If you’re just starting your limited company, an accountant can guide you through the legal setup, including registration with Companies House and HMRC.
• When preparing for your first annual accounts submission: An accountant will ensure your financial statements and tax filings meet all regulatory requirements.
• When scaling operations or handling complex tax scenarios: As your business grows, an accountant can help you navigate complex tax issues and help improve your financial strategy.

An accountant is invaluable when dealing with tax deadlines, changing regulations, or scaling your operations. As a business owner, an accountant can offer their knowledge and experience to help you avoid costly mistakes.

Get expert financial advice

Although hiring an accountant for a limited company is not legally necessary, it is certainly worth your while. They will save you money and time and reduce the stress of solving financial problems you may not be able to manage.

Allowing a skilled professional to do the job will help your business thrive. Let Unbiased match you with a qualified accountant who is the right fit for your limited company.