If you choose to contract via your own limited company, you will need to hire an accountancy firm to look after your tax and accounting needs (unless you’re confident of doing this on your own!)
Most specialist firms charge a monthly fee to look after a contractor’s company books; from our recent analysis of the leading firms’ current prices, you can expect to pay anything from around £60 to over £150 + VAT per month for a contractor accountant.
In recent years, some firms have introduced different levels of service based on price, but from our experience, the ‘gold’ or ‘VIP’ packages offered by some firms simply include add-ons not related to your company’s fundamental needs, such as business insurance, ‘free’ IR35 reviews, and suchlike.
So, although the typical fees charged by contractor accountants vary significantly, there are a number of core tasks you should expect any accountant to carry out on your behalf.
Start-up accountancy tasks
When you first sign up to a new provider, there are a number of tasks which have to be undertaken to set up your new company. Some firms do not charge extra for these start-up tasks, and others do (so make sure you check before signing up).
- Incorporating your new company via Companies House. These days, this is a quick and automated process which would cost £12 if you formed a company directly via the web.
- Registration of your company to pay VAT, Corporation Tax, Employers’ National Insurance / PAYE
- Set up a business bank account (you must have a separate bank account for your limited company). Find out more here.
- Each firm will have its own flavour of online accounting system so that you can view and submit accounting information/expenses. The complexity of such systems varies enormously, from submitting spreadsheets via email, to comprehensive online accounting systems.
What core ongoing tasks do accountants undertake?
- Run monthly payroll for one employee (typically the contractor). You may be charged an extra annual fee if you have further employees.
- Submission of payroll data to HMRC (via the relatively recently implemented RTI system).
- Deal with Companies House correspondence, including completing your company’s Confirmation Statement. In a minority of cases, you may be charged the £13 fee separately.
- Deal with all HMRC-related correspondence, such as changes to your personal tax code or tax-related queries.
- Completion of your company’s quarterly VAT returns.
- Completion of your company’s annual accounts (which are sent to HMRC and Companies House).
- Completion of CT600 (annual Corporation Tax return).
- Dividend planning advice (usually this is included, although the depth of specific tax advice varies).
- Answering any day-to-day questions you may have relating to your tax affairs.
Additional services offered by accountants
Alongside the core tasks listed above, most accountants provide a variety of bolt-on services – some are ‘free’, and others will incur an additional cost.
- IR35 contract reviews (providing an opinion on the IR35 status of your contract, or providing access to a third party professional IR35 contract review service).
- Bookkeeping – with most firms now offering some type of online accounting (either bespoke or a commercial system), entering details of your everyday transactions may be charged as an optional extra if you do not do this yourself.
- Completion of your personal self-assessment tax return (as a ‘free’ service, as you cannot reclaim the cost of this personal service against your company’s Corporation Tax bill).
- Provision of a registered office address for your company. This means that all official paperwork (from Companies House and HMRC) goes straight to your accountant, rather than your home address. You may also prefer to have a more ‘professional’ sounding address to use on your company stationery/communications.
- Provide accountancy references for letting agencies/mortgage companies (sometimes chargeable).
- In the majority of cases, you will be assigned your own dedicated contractor accountant and single point of contact. However, where several fee packages are available, this may not always be the case, so check first before signing up.
- Financial services, including mortgage/pension advice. Some firms, especially larger ones, have their own in-house IFA firms, whereas others can refer you to partner firms.
Try our guide to choosing the right contractor accountant for tips on what to look out for when selecting a service provider to look after your company’s tax and accounting affairs.
Tax-efficient protection via your own limited company
- Protect your contract income if you can't work - pay via your company
- Life insurance - save up to 50% - your ltd company pays the premiums
