How to choose the best IT contractor accountant

There really is nothing worse than dealing with an accountant who is a poor communicator. Or one with substandard accounting skills and/or is a late filer. How do you find the best accountant for a stress-free life as an IT contractor?

Need an accountant? Where do you start?

You may have heard that one of the downsides of running your own limited company is the ‘hassle’ you will have to take on as a company director – dealing with the tax authorities, Companies House, and so on.

It’s true that all company directors take on several responsibilities after incorporation.

As a company director, you might decide to do your own accounts. But, in reality, a specialist accountant can easily manage these tax and statutory obligations. For a reasonable fee.

The number of specialist accountancy firms targeting the contractor marketplace has grown at an astonishing rate over the past twenty years.

The contracting industry is lucrative, and contractor clients tend to have very simple accounting needs.

So it is unsurprising to see so many firms vying for business, especially given the cost-savings online accounting software adds to the mix.

So, how do you choose the best accountant from the hundred or so contractor accountancy firms advertising on the web?

Clearly, there are many subjective reasons why one contractor may opt to join one firm over another.

Here are some practical measures contractors can take when comparing contractor accountants:

1. Is the accountant a genuine contractor specialist?

This is an important point. Most contractors work in a similar way, and their accounting needs are broadly the same: they get paid monthly or weekly, with few regular outgoings.

Most opt to take a small salary, and draw down most of their income via dividends,

A specialist accountant will be very familiar with the accounting lifecycle of a typical contractor, while a standard or high-street accountant may not understand what a contractor actually does.

They may also not appreciate the importance of complying with IR35 (the Intermediaries Legislation) which can have a dramatic effect on take-home pay.

You will find that most contractor accountants charge a fixed monthly fee; you may end up paying more with a general accountant who doesn’t appreciate how simple your needs are in practice.

2. What is your accountant’s monthly fee?

Following on from the previous point, the costs of hiring an accountant will always be an important factor for contractors.

Unfortunately, it is not always true that the more you pay, the better the service you get.

For an all-inclusive service, you will pay between £70 and £150 per month. The fee will cover everything from dealing with Companies House to running your company payroll each month and completing your company’s annual accounts.

However, there is nothing more important than feeling comfortable with your accountant, knowing that your tax affairs are being looked after competently, and your tax deadlines are being met.

So, for this reason, we recommend that your decision isn’t overly influenced by price, as other factors (such as customer service) are arguably more important.

3. What service will you receive as a client?

Although you can never be sure what life is like as a client of a particular firm until you experience the service, there are steps you can take to minimise the odds of choosing a dud accountant.

• Will you be assigned to a dedicated account manager?
• How many other contractor clients does the manager look after (over 75 might be pushing it a bit)?
• Is there a service guarantee, i.e., will the accountant respond to enquiries within x hours?
• Is there a money-back guarantee if, for some reason, the service is not up to scratch?
• Does the accountant offer face-to-face meetings, such as an introductory chat, or annual tax planning reviews?

Find out more about the typical tasks and duties your accountant should carry out here.

4. Technology

Gone are the old days when contractors would put all their paperwork into an envelope each month and send it to their accountant for ‘processing’.

The web has made life for contractors and accountants so much simpler. That said, not all contractor accountants have embraced new technology to the same degree.

Many firms will boast about their ‘online accounting’ systems, but what does this term actually mean?

Some firms will ask you to upload an MS Excel spreadsheet via an online interface. In contrast, others provide a completely online service – allowing you to view and update your accounts in real time.

You may be asked to use a bespoke accounting system, or a third-party add-on, such as the excellent FreeAgent software. This seems to be the most popular accounting software in the market currently (2024).

As long as the job gets done on-time, the technology a particular firm has on offer may not be of great importance to you. However, for many (especially as most of our readers are highly IT literate), this is a very important factor when choosing an accountant.

Make sure you know what type of accounting software a firm uses when conducting your research.

5. Reputation

The best contractor accountancy firms gain most of their new clients via word-of-mouth recommendations from existing clients.

If you know any contractors, ask for their opinions (good and bad) on the accountancy firms they have used in the past.

You could also do some online research via industry bulletin boards and ‘comparison sites,’ although we would urge caution. Many so-called ‘reviews’ will have been written by service providers rather than contractors.

What is a preferred supplier?

If you are a new contractor, your recruitment agency may also encourage you to join a large contractor accountancy firm.

There is often a ‘preferred supplier’ relationship between recruiters and service providers, whereby the agent receives a commission for each contractor they sign up.

So, don’t be rushed into making a decision on the spot—take your time to see what else is available first.

What happens if you want to change accountants in the future?

If you’re not happy with your current accountant due to poor service, a hike in fees, or any other reason, switching providers is usually a fairly simple process.

Once you have given notice, your new accountant will seek ‘professional clearance’ from your current accountant, and the handover process will begin.

As you can imagine, with any type of transfer, things don’t always go as smoothly as you would like

Find out how to maximise your chances of a smooth switch in our guide to changing accountants.

Where can I find a list of accountants?

Visit our directory of contractor accountants for some initial suggestions, and try our comparison table of the leading contractor accountancy firms in the sector.