Do I legally need an accountant for my limited company?

Whether you’ve just set up a limited company or you have been managing your finances independently for a while, hiring an accountant can efficiently help your business.

Required or not legally required; that is the question with an accountant

While there is absolutely no requirement in UK legislation to hire an accountant for your limited company, it can be very beneficial.

According to the ICAEW, 91% of small businesses have used an external accountant in the past 12 months.

Why, if it’s not a legal requirement? Well here, exclusively for ContractorUK, Zeeshan Anwar of Dolan Accountancy explains the considerable advantages of having an accountant in your company’s corner, even if there is no requirement in law to have an accountant, as either a contractor or any other small enterprise.

Top 5 tasks a contractor accountant will do…

While not required in law, then, what can an accountant do for your limited company?

Generally speaking, accountants bring financial expertise beyond basic bookkeeping, ultimately saving you time and money.

An accountant can help you in the following areas:

1. Set up a new company

Incorporating your company – often known as forming a company – and registering the business cannot be done without completing requirements and compliances.

Your accountant can register your business with Companies House if you wish to save time in the early days. Your accountant will also liaise with HMRC regarding your tax registration. 

2. File annual accounts and tax returns

Limited companies have a responsibility to file annual accounts with HMRC and Companies House each year. Failure to do so can result in hefty fines and legal action. 

Accountants can produce the necessary paperwork and submit it on time. All limited companies are required to submit annual accounts which must include:

• Profit and Loss statement
• Balance sheet
• Any additional notes about the accounts

Along with submitting your annual accounts, your limited company must submit a company tax return at financial year end to declare its taxable profit and calculate your corporation tax liability.

Unlike the practice of taking on accountant themselves, submitting a company tax return is a legal requirement which you as a company director are required to meet.

Crucially, with the rate of corporation tax now varying between 19% and 25%, your accountant can prepare your corporation tax return, and calculate how much you owe HMRC.

3. Payroll

If your limited company has employees, managing payroll can be a time-consuming task. Accountants can handle payroll processing, ensuring that employees are paid accurately and on time.

While not legally required for payroll or any other part of running a company, an accountant will often stay abreast of changes in payroll tax regulations, reducing the risk of your company being non-compliant which could lead to HMRC penalties.

4. Bookkeeping

Day-to-day bookkeeping as a limited company director can be time-consuming and repetitive!

In bookkeeping, you have to keep a record of every transaction, receipt and invoice. Hiring an accountant (even though there’s no legislation in place to say you have to), to take on this task will save you time elsewhere. Indeed, we find most contractors prefer to do what they went into business to do in the first place; and that’s business!  

5. Financial planning and budgeting

Beyond compliance and regulation, accountants can play an important role in financial planning and budgeting. They can help you create realistic financial forecasts, identify potential cost-saving opportunities, and develop strategies for long-term financial stability. 

Final thoughts

While running your own limited company without an accountant is possible, and having an accountant isn’t a legal requirement, the benefits of having a financial professional on your team are substantial.

In the contractor sector specifically, which is heavily policed by HMRC with IR35 and other complex rules, your accountant’s input could make all the difference to staying on the right side of the Revenue.

Remember, accountants not only navigate the complexities of tax compliance but they can also contribute to financial planning and record-keeping, potentially making your business a better, slicker and more profitable operation. Ultimately, the expertise of these non-legally required but nonetheless significantly helpfully professionals can save you time, reduce the risk of financial errors, and position your limited company for long-term success.