FinancesHow much does an accountant cost for a small business in the...

How much does an accountant cost for a small business in the UK?

Managing the finances of your business is important and your cashflow is essential – but what about sorting out the annual tax return? If you are not confident in managing the tax returns and financial side of your business, you can use a qualified accountant to help. They can also help with VAT, book-keeping and managing payroll – and trusting your company’s financial affairs to an accountant can be a very sensible step for even the smallest business.

If you are a sole trader or freelancer, you might submit your own annual tax return to HMRC and you could use an accountant to help you with this. If you run a limited company, an accountant can help compile and submit your annual company tax return. Accountants are often able to help with tax planning for your business and with financial transactions such as raising finance through investors to selling your business. (It’s worth noting that accountants are not the same as financial advisors, who normally help a private individual with their investments and pension planning.)

Determining the cost of an accountant

The cost of hiring an accountant for a small business in the UK will vary significantly based on a range of different factors including your location, the size and type of business, and what services you need help with.

1. Location

Location plays a vital role in determining the cost of hiring an accountant. Accountants in major cities like London may charge higher rates compared to those in smaller towns or rural areas. The cost of living and demand for accounting services in a particular location can influence the fees charged by accountants. For example, a London-based chartered accountant might have a minimum charge of £1,000 whereas a firm in a regional town might be £600 for managing the annual tax return.

2. Complexity

The complexity of your business’ financial affairs be used by an accountancy firm in working out its costs. If you have a simple business with no employees, you are not registered for VAT and you have only sales and costs in the UK then expect a cost of between £600-1,000 for your company’s annual accounts and any tax calculation. For small businesses, this normally means compiling and filing abridged accounts for your company that, once you have approved them, are submitted to Companies House.

If you have complex international trade or you have several linked companies, or lots of employees, then the costs will increase. And for complex company tax affairs, perhaps involving international trade, then a specialist accountancy firm should be used and their fees will be higher.

3. Experience and expertise

The experience and expertise of an accountant can significantly impact their fees. For example, tax-experts or accountants with a specialism in particular element of finance, such as fund-raising or international trade, often charge more for their services due to the complexity of the matters dealt with.

For qualifications, UK accountants qualifications to look out for are:

CTA – chartered tax advisor, specialist in complex tax matters; there’s also the ATT – Association of Taxation Technicians that is normally for helping a business with its tax matters.

AAT – Association of Accounting Technicians is a qualification for those who want to study to be an accountant without an accountancy degree; you can then move on to becoming a chartered accountant.

ACA – Associate Chartered Accountant qualification is normally for graduates who want to become a chartered accountant.

ACCA – The Association of Chartered Certified Accountants is a qualification that’s normally a route into management accounting, auditing and taxation.

There is one main official body that regulates accountants in the UK:

ICAEW – Institute of Chartered Accountants in England and Wales regulates chartered accountants in England and Wales.

And the ACCA – Association of Chartered Certified Accountants is a global body for professional accountants, also based in the UK.

So which do you need to look for as an expert to help your business? Normally, a qualified accountant registered with the ICAEW would be able to help, with a CTA or ATT being able to help on tax matters.

4. Which services do you need?

The range of services required from an accountant also affects the cost. Some businesses may only need basic bookkeeping and annual accounts and tax calculation services, while others may require more comprehensive services such as financial forecasting, payroll management, and financial analysis. The complexity and scope of services required will determine the fees charged by accountants.

Cost of an accountant for your business

While the cost of hiring an accountant varies based on factors such as location, experience, and services required, it’s helpful to have an idea of the current average cost. According to recent surveys and industry data, the average annual fee for a small business accountant in the UK ranges from £500 to £3,000, depending on the factors mentioned earlier.

It’s important to note that these figures are estimates, and the actual cost may vary based on specific circumstances. Additionally, these figures may not capture the full range of services and expertise that different accountants may offer.

For example, an accountancy firm that already handles your annual company accounts might also be able to manage payroll for your company with just a couple of employees might be as low as £50 per month. If you have a specific requirement or perhaps need to deal with an enquiry with HMRC, then you will likely be charged at an hourly or day rate.

Monthly fees

Newer firms entering the accountancy market offer packages to small businesses for a monthly subscription fee. These can be as low as £30 per month and increase as you add more services; typically this would cover compiling a simple set of year end accounts to file with Companies House and any tax calculations. You might also get free accounting software as part of the subscription. Three firms that offer this type of deal include TheAccountancy.co.uk, Sleek.com, Crunch Accounting

Factors that May Impact the Cost of a UK Accountant in 2024

In addition to the predicted changes mentioned earlier, several other factors may influence the cost of hiring a UK accountant in 2024. It’s important to consider these factors to gain a comprehensive understanding of the potential cost implications.

1. Economic Conditions

The overall economic conditions in the UK can impact the cost of hiring an accountant. During periods of economic uncertainty or downturn, businesses may face financial constraints and seek more cost-effective solutions. This could result in accountants adjusting their fees to remain competitive and retain clients.

2. Industry-specific Requirements

Different industries may have unique accounting requirements. For example, businesses in highly regulated sectors such as finance or healthcare may require specialized accounting knowledge and expertise. Accountants with industry-specific knowledge may charge higher fees to account for the additional expertise and compliance needs.

3. Individual Accountant’s Pricing Strategy

Each accountant may have their own pricing strategy based on factors such as their target market, level of expertise, and value proposition. Some accountants may charge premium rates for their specialized services, while others may adopt a more affordable pricing structure to attract a broader client base. It’s essential for business owners to evaluate different accountants and their pricing strategies to find the best fit for their needs and budget.

How to Find an Affordable Accountant for Your Small Business

Finding an affordable accountant for your small business involves a combination of research, careful evaluation, and clear communication. Here are some tips to help you find an accountant that fits your budget without compromising on quality:

1. Seek Recommendations and Referrals

Reach out to fellow business owners, industry associations, and professional networks for recommendations and referrals. Personal recommendations can provide valuable insights into the quality of service and affordability of accountants.

2. Request Multiple Quotes

Obtain quotes from multiple accountants to compare their fees and services. Be sure to provide them with a clear understanding of your business needs to ensure accurate pricing.

3. Assess Qualifications and Experience

Consider the qualifications and experience of potential accountants. While cost is an important factor, it’s equally crucial to choose an accountant who has the necessary expertise to meet your specific requirements.

4. Evaluate Services Offered

Evaluate the range of services offered by accountants. Ensure they can handle the accounting tasks and provide the level of support your business needs. Opting for a comprehensive package may be more cost-effective in the long run compared to piecemeal services.

5. Consider Online Accounting Platforms

Online accounting platforms offer cost-effective solutions for small businesses. These platforms provide access to accounting software and tools, allowing business owners to manage their finances independently while receiving support from the platform’s online community or customer support team.

Benefits of Investing in a Professional Accountant

While the cost of hiring an accountant may seem like an additional expense, the benefits of investing in a professional accountant far outweigh the costs. Here are some advantages to consider:

1. Time-saving

Hiring an accountant frees up valuable time for small business owners. Instead of spending hours on bookkeeping and financial tasks, business owners can focus on core operations and strategic growth initiatives.

2. Accurate Financial Reporting

Professional accountants ensure accurate financial reporting, reducing the risk of errors and non-compliance. This helps businesses maintain transparency, make informed decisions, and build credibility with stakeholders.

3. Tax Compliance and Optimization

Accountants are well-versed in tax regulations and can help small businesses navigate the complexities of tax compliance. They can also identify opportunities for tax optimization, potentially saving businesses money in the long run.

4. Financial Analysis and Planning

Accountants provide valuable financial analysis and planning services. They can help businesses identify trends, assess performance, and develop strategies for growth and profitability.

Alternatives to Hiring a Full-time Accountant

For small businesses with limited budgets, hiring a full-time accountant may not be feasible. Fortunately, there are alternative options that can provide cost-effective solutions:

1. Part-time or Freelance Accountants

Consider engaging part-time or freelance accountants who can provide the necessary support at a fraction of the cost of a full-time employee. This arrangement allows you to access professional expertise without the financial commitment of a permanent hire.

2. Virtual or Online Accounting Services

Virtual or online accounting services offer flexible and scalable solutions. These services provide access to qualified accountants who work remotely and can cater to your business needs on-demand.

3. Accounting Software and Tools

Utilize accounting software and tools to automate routine tasks and streamline your financial processes. These tools can simplify bookkeeping, invoicing, and expense tracking, reducing the need for extensive manual accounting work.

Summary

Understanding the cost of hiring a UK accountant for small businesses in 2024 is crucial for business owners seeking financial stability and growth. While the cost can vary based on factors such as location, experience, and services required, it’s essential to find an accountant that strikes the right balance between affordability and expertise.

By carefully evaluating factors that influence costs, exploring alternative options, and implementing cost management strategies, small business owners can make informed decisions about hiring an accountant that aligns with their budget and business objectives.

Remember, investing in a professional accountant not only ensures accurate financial management but also provides valuable insights and support for long-term business success. So, take the time to research, evaluate, and choose an accountant who can help you navigate the financial landscape with confidence.

Written by

Mark Hodgson
Mark Hodgsonhttps://gosmallbusiness.co.uk
Mark Hodgson is one of our expert writers. Mark is our lead researcher and editor who writes our main guides and expert topic coverage. He’s passionate about helping entrepreneurs, startups and small businesses with practical advice delivered clearly. Mark’s worked for a number of business magazines and titles and has started two small businesses himself, so has first-hand experience in setting up, managing and growing a small business and shares his expertise with our readers.

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