The short answer is no, you are not legally required to use an accountant when starting a business in the UK. But whether you need one is a different question entirely.
Most business owners who skip an accountant at the start end up paying more in tax than necessary, filing returns late, or making structural decisions that cost them money to unwind later. This guide explains what an accountant actually does for a new business, at what stage you genuinely need one, and when you can manage without.
What Does an Accountant Do for a New Business?
A good accountant does more than file your tax return once a year. For a new business, the value is front-loaded in the decisions you make at the start.
| Task | Why It Matters at the Start |
| Choosing the right business structure | Sole trader vs limited company affects your tax rate, liability, and admin from day one |
| Registering with HMRC correctly | Wrong registrations create problems that take time and money to fix |
| Setting up bookkeeping systems | Clean records from the start make everything else easier |
| Advising on allowable expenses | Knowing what to claim reduces your tax bill legitimately |
| VAT registration advice | Registering at the wrong time or on the wrong scheme costs money |
| Director pay structure (for limited companies) | Salary and dividend split affects how much personal tax you pay |
| Filing deadlines and penalties | Missing deadlines costs money. An accountant keeps you on track |
When You Probably Do Not Need an Accountant
There are situations where a new business owner can manage without an accountant, at least initially:
- You are a sole trader with simple income from one or two clients and minimal expenses
- Your annual turnover is well below the VAT threshold and is likely to stay that way
- You are comfortable using accounting software to track income and expenses
- You have time to research HMRC requirements and manage your own Self Assessment return
- Your business is low-risk with no employees, no complex expenses, and a straightforward income stream
In this situation, software like FreeAgent, QuickBooks, or Xero can handle most of the bookkeeping, and HMRC’s own guidance is reasonably clear for straightforward sole trader returns.
When You Almost Certainly Do Need an Accountant
You are setting up a limited company
A limited company has Corporation Tax returns, annual accounts filed at Companies House, a confirmation statement, director payroll, dividend paperwork, and a personal Self Assessment return. The admin is significant and the penalties for getting it wrong are real. An accountant who handles all of this for £800 to £1,500 per year almost always pays for themselves in tax savings and time.
You are employing staff
The moment you take on an employee, you need to run payroll correctly. This involves registering as an employer, submitting Full Payment Submissions to HMRC on or before each payday, calculating Income Tax and National Insurance deductions, and meeting a strict set of annual deadlines. Getting it wrong leads to automatic HMRC penalties.
Your income is growing quickly
If your turnover is approaching £90,000, you need to understand your VAT obligations before you hit the threshold. Crossing it without registering — even by accident — triggers backdated VAT bills plus penalties. An accountant can help you plan ahead and choose the right VAT scheme from the start.
You are mixing employed and self-employed income
If you have a job and are also running a business on the side, your tax position becomes more complex. Your personal allowance may already be used by your employment income. Rental income, side business profits, and employment income all interact. Getting the Self Assessment return wrong in this situation is common and costly.
You are not confident with numbers or deadlines
Confidence with numbers is not a prerequisite for running a business, but it is for doing your own accounts accurately. If you find the paperwork stressful, time-consuming, or confusing, that is a good signal that your time is better spent running the business while an accountant handles the compliance.
How Much Does an Accountant Cost for a New Business?
Costs vary depending on the complexity of your business and the services you need.
| Business Type | Typical Annual Accountancy Cost |
| Sole trader, simple income, one Self Assessment return | £250 to £500 per year |
| Sole trader with employees or VAT registration | £500 to £900 per year |
| Limited company, single director, no employees | £800 to £1,500 per year |
| Limited company with employees and VAT | £1,500 to £3,000 per year |
These are approximate figures. Prices vary significantly between accountancy firms, regions, and service levels. Always ask for a clear quote upfront that lists exactly what is included.
What to Look for in an Accountant as a New Business
- ICB or ACCA or ACA qualified: this means they are regulated and bound by professional standards
- Experience with businesses at your stage and in your industry
- Clear, fixed-fee pricing rather than hourly billing with no ceiling
- Proactive communication, not just reactive filing at deadline time
- Use of cloud accounting software so you have real-time visibility of your finances
Avoid accountants who are slow to respond, vague about fees, or who only appear once a year at tax return time. A good accountant is a year-round business partner, not just a filing service.
Can an Accountant Save You More Than They Cost?
| In most cases, yes A qualified accountant knows which expenses are allowable, how to structure director pay tax-efficiently, when to register for VAT and on which scheme, and how to use available reliefs such as the Annual Investment Allowance. Most new business owners who switch from DIY to a qualified accountant find their tax bill drops by more than the accountancy fee in the first year. |
The savings are largest when you are making decisions for the first time: choosing your business structure, setting up your payroll, registering for VAT, or deciding how to take money out of your company. These are decisions that are much cheaper to get right the first time than to correct later.
Frequently Asked Questions
Is it a legal requirement to have an accountant in the UK?
No. There is no legal requirement to use an accountant in the UK. You can prepare and file your own Self Assessment return, company accounts, and VAT returns. However, company accounts filed at Companies House must meet specific formatting and accounting standards, which most people without accounting training find difficult to produce correctly.
Can I do my own bookkeeping and use an accountant just for the tax return?
Yes. Many business owners handle their own day-to-day bookkeeping using software and bring in an accountant only to review the figures and file the annual return. This reduces costs while still getting professional oversight at the critical filing stage.
What is the difference between a bookkeeper and an accountant?
A bookkeeper records day-to-day financial transactions: income, expenses, invoices, and payments. An accountant interprets those records, prepares financial statements, files tax returns, and provides strategic advice. Some accountancy firms offer both services. For a very small business, a bookkeeper may handle everything up to the annual return, which the accountant then completes.
When should I first contact an accountant when starting a business?
Before you register, if possible. The decisions you make at the very start, including your business structure, how you register with HMRC, and how you set up your bookkeeping, have long-term consequences. A 30-minute conversation with an accountant before you launch can save significant time and money later.
Can an accountant help me if I have already made mistakes with my accounts?
Yes. Accountants regularly help business owners who have filed incorrect returns, missed deadlines, or misclassified expenses. HMRC allows corrections through amended returns, and an accountant can often negotiate reduced penalties when you come forward voluntarily. It is never too late to get professional help.
Thinking About Starting a Business?
M&B Tax Services works with new and early-stage businesses across the UK. We handle company formation, business structure advice, bookkeeping setup, and ongoing accounts so you can focus on building your business from day one.
We are ICB-regulated accountants based in Rugby. We give you a straight answer on what you need and what you do not, with no unnecessary upselling.
Book a free 30-minute call and we will walk through exactly what your business needs to get started on the right footing.
Joanna Bruty
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