Do I need an accountant as a limited company?
Starting a limited company comes with a lot of big decisions to make, especially around your financial responsibilities. From tax filing to legal and compliance requirements, there’s a lot to get your head around, especially if you’re new to entrepreneurship.
If you’re asking the question ‘Do I need an accountant as a limited company?’, chances are it could benefit you. In fact, a whopping 92% of SMBs use the service of an accountant, with half of them using their services at least weekly. Using an accountant can alleviate any worries you may have about managing your business’ finances, so you can focus on the exciting stuff like steering your business towards success.
We’ve put together this blog which covers the role of accountants for limited companies, the key benefits they can offer and whether it’s worth the investment for your new enterprise.
How can an accountant help a limited company?
Starting your own business often requires you to wear several hats, especially to begin with. You’ll be figuring out how to market your product or service, becoming your own boss and running the day-to-day operations. Another key responsibility is managing the financial side of the business, which can feel daunting.
Just some of the financial responsibilities you’ll need to take care of as a business owner include:
Dealing with Corporation Tax: Calculating and paying your Corporation Tax is an important responsibility - should you miss a deadline or make an error, you may need to pay a penalty.
End-of-year accounts: You’ll need to prepare and file your annual accounts with Companies House and ensure they comply with accounting standards.
Managing VAT returns: You’ll need to manage VAT invoices, calculate VAT due and submit your returns to HMRC. You’ll usually need to submit a VAT return to HMRC every 3 months, known as your accounting period.
Your company’s payroll: If you have employees, you’ll need to take care of your company’s payroll. This involves calculating income tax, National Insurance Contributions (NIC), and making sure your employees are paid the right amount on time.
Handling HMRC and Companies House filings: You’ll need to keep up with your Companies House and HMRC filings to stay compliant with legal requirements.
Your personal tax return: You’ll need to submit a personal tax return each year which can feel complicated, especially if your income includes money from other sources or dividends.
Your annual confirmation statement: You must file a confirmation statement at least once a year to ensure the details Companies House holds about your company are up to date.
Ongoing bookkeeping: Keeping records of all your transactions and bank statements as a business is key for financial health and compliance.
Quite the list, isn’t it? These tasks may sound unnecessary or time-consuming, but are crucial for running a successful business and ensuring you adhere to legal requirements.
But you’ll be relieved to hear, should you choose to hire an accountant, the above will all be taken off your hands. Working with a finance professional means you can delegate these responsibilities to an expert who has the knowledge and experience to manage them correctly. This can alleviate any fears of filing something wrong or missing a deadline, so you can solely focus on growing your business.
So, if you’re asking ‘Can I do my own accounts for a limited company?’, the answer is yes, but you may benefit from trusting an expert to take care of the financial side of things for you instead. We’ll cover the ways an accountant can help you in more detail below.
Company tax return
While you don’t legally need an accountant to help file your tax return, having one can give you the peace of mind that all the boxes are ticked and no mistakes have been made. They can help you file your company’s tax return by accurately calculating your company’s profits, expenses and any allowable deductions. They’ll ensure all of your financial records are organised correctly, and use this information to calculate how much corporation tax you owe.
Accountants are well-versed in all areas of tax, so are confident in handling complex tax calculations. This can be a major time saver, especially as a new business owner with a never-ending to-do list! An accountant can free up your resources, so you can focus on the important and more exciting stuff like marketing your business and keeping clients happy.
Filing annual accounts
As a limited company, filing annual accounts is a crucial responsibility and should you miss a deadline, you may need to pay a significant penalty. Hiring an accountant will ensure that your annual accounts are prepared correctly and filed on time, so you can avoid those costly late submission fees.
Just some of the ways an accountant can help with filing annual accounts include:
Sticking to deadlines: As a business owner, you’ll likely have endless things to remember, making it easy to forget filing deadlines. Your accountant will prepare your annual accounts well in advance, so you don’t need to worry about missing the deadline.
Avoiding late fees: As mentioned, if your accounts are filed late Companies House will impose automatic penalties starting at a whopping £150 for being just one day late. These penalties increase significantly the longer the delay. Hiring a professional means you won’t worry about missing a deadline and being out of pocket.
Trusting an accountant to file your annual accounts means you can focus on running your business with the peace of mind that your accounts are all taken care of. You’ll know you comply with legal requirements and won’t face any unnecessary fines.
Advise on accounting software
Accounting software can streamline repetitive tasks such as invoicing and payroll, saving you time and minimising the risk of errors. Reliable software allows you to access your real-time financial data and make informed business decisions.
Accountants are experts in their field, so you can trust their opinions when it comes to choosing the best accounting software for your business. Given their background and expertise, as well as their understanding of your business’ needs, they can recommend software that best suits you. You’ll know that your chosen financial management tools aren’t just effective but also the right choice for your unique business’ needs.
Bookkeeping
Bookkeeping is a vital aspect of business management and can be time-consuming and complicated at first. That’s where an accountant can help. They can handle your day-to-day bookkeeping tasks, from preparing financial statements to recording transactions. You’ll never need to worry about your financial records not being accurate or compliant, as you’ll be working with an experienced professional.
Trusting an accountant to handle your bookkeeping responsibilities can streamline your bookkeeping processes, ensure your books are updated regularly and help you plan for future investments. Perhaps you’ll look to expand your business or buy new equipment - your accountant can take a look at your accounts and help you plan for your financial goals.
VAT returns
Value Added Tax (VAT) is an important financial obligation for many businesses. As a business, you need to register for VAT if your VAT-taxable turnover exceeds £90,000. You can also choose to register for VAT if your turnover is less than £90,000.
As a VAT-registered business, there are several conditions you must adhere to such as keeping records of how much VAT you pay for things you buy for your business, reporting the amount of VAT you charge your customers and the amount of VAT you pay to other businesses. Your accountant can ensure that your business handles VAT correctly, pays it on time and ensures you avoid any fines or penalties. They’ll track VAT on any applicable transactions and make sure your business claims all allowable VAT. They’ll also ensure that you meet each VAT return quarterly deadline.
Payroll
Regardless of the size of your company, managing your payroll correctly is crucial. Payroll management involves making sure your employees are paid accurately and on time, as well as ensuring the correct amount of tax and National Insurance is deducted and paid to HMRC.
Here are just some of the ways an accountant can support you with payroll management:
Paying your staff: An accountant can calculate the correct wages for all your employees, including the more complicated stuff like overtime and bonuses.
PAYE (Pay As You Earn): Your accountant will handle the tax side of things, making sure the correct amount of income tax is deducted from employees’ and directors’ pay under the PAYE system.
Meeting deadlines: Accountants ensure everyone is paid on time and also make sure all tax and NIC payments to HMRC are delivered on time, so you won’t need to worry about any late fees or penalties.
Reduce room for error
An accountant’s job is to do the finance side of things correctly. This means you won’t need to worry about making a mistake on any important forms, missing a deadline, or misreporting information. They’ll double-check your financial data before it’s submitted to Companies House or HMRC and also handle any complex transactions to give you the reassurance that they are taken care of correctly, in line with tax laws.
Speaking of tax laws - these regulations frequently change and it can be tough to keep up with as a business owner. With an accountant, you won’t need to worry about keeping up to date with the latest tax legislation - that’s their responsibility. You’ll have the peace of mind that you’re always compliant with any new rules or changes.
Reduce tax
A key benefit of working with an accountant is their understanding of tax rules and how you can minimise your tax as a business. They can advise you on any potential tax deductions, such as making the most of your director’s pay by paying yourself a smaller salary and taking the majority of your income as dividends. They can also explain which deductible business expenses you’re entitled to claim, such as office costs and travel expenses. With an accountant’s support, you’ll know the most tax-efficient way to pay yourself as a business owner, as well as any changes in tax law that may affect your business.
Is it worth getting an accountant for a limited company?
It’s understandable to want to keep costs down when starting a new business. But hiring an accountant for your limited company could save you significant money long term. When it comes to managing complex financial tasks such as tax returns and ensuring compliance with legal requirements, an accountant can be a huge asset to your business. An accountant’s expertise can save you time, be a source of knowledge and prevent any errors that could cost you significant money in penalties. It sounds like a worthy investment to us.
Looking for the right accountant for your business? Our business partner, BSC, can match you with an accountant that understands your business needs. Alternatively, if you’re thinking of taking the leap and starting your own business, SUAZ is here to help. With us, you can form your company for free (yes, really!) and we’re here to support you at every stage. Form your company with SUAZ today and experience a journey like no other.