Unless endless paperwork, administration, stress and not taking home as much money as you could are part of your business plan, once you’ve chosen to contract as a freelancer, finding the right contract accountant should be one of the first things on your to-do list. Here’s our guide to choosing the best one for you.
What does a contractor accountant do?
As well as handling all the paperwork and making sure that you legally minimise your tax bill, an accountant can also be a great source of advice to help you develop your business.
- Set up and run your business accounts,
- Advise you whether to be a sole trader or limited contractor and help you set up your limited company.
- Register your company for VAT, Employers’ tax, corporation national insurance and file your VAT returns.
- Completing your company’s Annual Accounts, file them with Companies House, and deal with any HMRC-related correspondence.
- File your Confirmation Statements.
- File your personal tax return.
- Dealing with any ongoing admin and company-related paperwork and answer any questions you have on them.
- Providing tax planning advice and bookkeeping.
- Provide you with professional references, for example if you want to apply for a mortgage.
Is there a legal requirement to have a contractor accountant?
There’s no legal requirement to have an accountant unless you have a Limited Company that’s large enough to require an audit. Limited Companies must complete an Annual Return CT600 Company Accounts, and Directors are required to complete Self-Assessment Tax Returns.
What do you/your company need from a contractor accountant?
Contractor accountants can take the potential headache out of sorting your tax affairs, admin and other paperwork, which can be extremely time consuming, leaving you free to focus on your business. As well as handling all the paperwork and making sure that you legally minimise your tax bill, an accountant can also be a great source of advice to help you develop your business.
They can assist you with various business problems and if your business faces problems at any point that are beyond their experience, they will usually have close connections to other professionals such as bankers and lawyers, who can help. Often, your accountant’s connections could be just as important to you as the accountant themselves.
Accountancy firms also vary in size enormously, and you should choose one that suits your purposes A larger practice might have thousands of contractor clients, which comes with its downsides and benefits. Do you wasn’t more tailored advice from a smaller firm? Is cost the main factor to you? Do you require a contractor accountant that specialises in your industry? All important questions to consider whilst looking for one.
Should you hire an accountant before you start contracting?
You’ll most likely need advice when you write a business plan and hiring a goodprofessional accountant at an early stage will mean you get the benefit of their financial knowledge, advice and experience immediately. This could save you time and money rather than hiring one later when your affairs could be more complicated. Get someone you can build trust and a relationship with who will be able to see and guide your business progression rather than playing catch-up later.
What qualifications should your contractor accountant have?
Always look in to what qualifications and experience a contractor accountant has. An accountant does not need specific A-Levels or a degree but the AAT qualification is the minimal level of qualification required for most kinds of accountancy. Look out for qualifications like the ACA, ACCA or CIMA, which allow them to become a chartered accountant.
A large number of accountancy firms that provide services to contractors are not regulated by any professional body, meaning they’re answerable to no-one If they make a mistake with your accounts and you get hit with a large tax bill then you will have no one to complain to, and you’re on your own!
If you choose an accountancy firm that is regulated by a professional body, then you can complain to the ACCA (Association of Certified Chartered Accountants) or ICAEW (Institute of Chartered Accountants in England and Wales) and the firm in question will risk losing their Chartered status if they don’t fix any issues.
What experience should your contractor accountant have?
All professions operate differently, so the advice you would receive if you were a freelance writer should be different than if you were a construction worker or and IT contractor. You ideally should have a contractor accountant that has other clients that work in your field or at least experience of dealing with your chosen industry Receiving tailored accounting advice as a contractor is essential.
It’s also a good sign that they’re aware of the upcoming changes to the IR35 legislation, more on that later. Contractors should ensure that their contractor accountants only perform legitimate tasks and avoid the Managed Services Companies rules.
Overall, it’s vital to choose an accountant that completely understands the needs of you and your business.
How much do contractor accountants cost?
The average monthly fee for a contractor accountant usually ranges from around £60 anywhere up to £150, and the services they offer can vary greatly depending on price.
The very least a contractor accountant should provide are:
- Annual accounts
- Tax returns
- Payroll
- Self-assessment
- VAT returns
- References
Some accountants will charge a low retainer but may charge extra if you need further advice. Be sure to ask if there are hidden fees!
Can a contractor accountant save you money?
Not only should a good contractor accountant complete your tax returns and paperwork correctly, but also do so in a way that can legitimately save you money. They will make sure you take advantage of every legal way to minimise your tax bill and ensure that you take full advantage of ever-changing tax laws, so that you pay as little tax as possible.
Because your personal finances are of course directly related to your business income as a freelancer or sole trader, another advantage of having a good accountant is that they will give you personal financial advice, too.
Which of their services are best for you?
It’s always best to look for a professional or firm who can at the very least offer a dedicated point of contact. There are additional services that may not be included in the initial quote that you were given, but there are also additional; service you may not particularly need for your business.
- Will you require face time or phone meetings or can your accounts largely be done over email?
- Do you need bookkeeping?
- Do you need a personal tax return?
- Will you need unlimited/in-depth support, or if there is a cap on your questions?
- What are their average response times to queries and does it suit your business and how you work?
- Do you only require a basic ‘online only’ service?
- Will you need to take advantage of their wider financial/business knowledge?
Can they help develop and grow your business?
A contractor accountant can also be a great source of advice to help you develop your business. If you want it to be a success, it’s vital to make the right financial decisions, as well as the right managerial ones early on.
They can act as a business consultant, assisting you with various business problems, and offering good solutions based on their experience. Your accountant they will come to know your business almost as well as you do and will often provide objective input from someone who isn’t so immersed and attached to your business or pet project.
Are they an expert on IR35 and can they help explain it to you/navigate you through it?
Alongside the tax expertise offered by a qualified accountancy firm, a specialist will be aware of specific rules and regulations which affect the contracting industry, particularly IR35. This legislation is a minefield, and if your contract work is affected your take-home pay could be greatly reduced.
There are several other pieces of legislation which may affect you, including the MSC legislation, Agency Workers Regulations, and Section 660. A lack of knowledge on these rules can keep you from what you actually want to focus on – your business. You could struggle to keep up with not just the demands of your work, your accounts, ultimately costing you money and potentially causing your business to fail.
Get someone in with expert knowledge of the latest rules and legislation and who knows how to navigate them.
In summary
Make a list of the services that suit your business needs and compare the packages they offer. Decide what you want from your accountant, and whether you need hands-on, in-depth advice. Maybe a tech-savvy accountant that has solutions to your business needs online could
perhaps you will prioritise accountants depending on which professional bodies they are regulated by and what qualifications they hold. Or it may be vital to get someone who knows your particularly industry inside out.
Regardless of what you need, our tools will help you find the perfect accountant for your needs.