Are Contractor Accountants Worth the Cost?

Setting Up a Business as a Sole Trader? 

When you first start contracting, you tend to start as a sole trader, as that’s the simplest approach to working for yourself. All you have to do is register with HMRC for Self Assessment, keep records of your income and expenses, and pay Income Tax and National Insurance Contributions (NICs). For low to moderate earnings, this can be perfectly manageable, and most contractors of this level can handle things themselves. With basic accounting software or a bespoke spreadsheet, most sole traders can track finances and keep on top of expenses.

But, there are times when you might want to consider a contractor accountant, especially if you decide to set up a limited company or your workload grows. Setting up a limited company as a sole trader can complicate the financial side of things, as can increasing your earnings and expenses. This is why many contractors enlist the help of a professional to ensure financial compliance and accuracy.

Why You Might Need a Limited Company Accountant

It is true that there are many benefits to running a limited company, from the ability to plan for the future, financial independence, and saving tax efficiently. However, this tax-efficiency can create some administrative burden. You will be required to file annual accounts at Companies House, file a corporation tax return with HMRC, complete payroll if you pay yourself a salary and deal with dividends. You’ll also need to register for and submit VAT returns, if applicable, and file an annual confirmation statement.

It can feel like a lot and, if you’re finding the idea of handling everything daunting, you’re not alone. Missing deadlines can result in fines and mistakes can attract penalties or HMRC investigations, so it’s a lot to take on alone. For many contractors, handling all of this at the same time as juggling client work isn’t realistic. This is where a contractor accountant steps in.

The Advantages of a Using a Contractor Accountant

Don’t make the mistake of assuming that hiring a limited company accountant is all about compliance. Though they do help you to stay compliant with HMRC, they do an awful lot more than that. In fact, they can transform the way you run your entire business and advise you on best practices.

Maximising Tax Efficiency

One of the main benefits of setting up a limited company is tax-efficiency, and a contractor accountant can help with that. Even if you choose to stay as a sole trader, there are things that you can do to maximise your take-home pay. You might decide to pay yourself a small salary and the rest as dividends, or you might be able to claim allowable business expenses like travel, equipment and training. When you work with a contractor accountant, they can make sure you’re operating in the most tax-efficient way.

Keeping You Compliant

There’s a lot to keep on top of when it comes to the financial side of contracting; tax law is complex and regularly changing, and there’s always something new to get your head around. When you use a contractor accountant, you can relax knowing that you’re always going to meet filing deadlines, avoid penalties and stay on the right side of HMRC. Compliance isn’t something you need to worry about.

Unmatched IR35 Expertise

As a contractor, you need to be aware of IR35 rules. These rules can be complex and they can have huge financial implications for contractors, so you need to know how they impact you. With so much to do as a contractor, working with an accountant hands the burden of IR35 over to a professional. An accountant with IR35 expertise can review contracts for compliance, advise you on working practices and reduce the risks if HMRC challenges your status.

Saving You Time and Stress

There’s a lot to keep on top of as a busy contractor, especially if you’re also running a limited company. When you have a contractor accountant working alongside you, you have one less thing to worry about. Instead of spending time trying to keep on top of finances, expenses, HMRC and compliance, you can focus your attention on clients, projects and growing your business.

Are There Downsides to Working with a Limited Company Accountant?

Unfortunately, there are a handful of downsides of working with a contractor accountant. Otherwise, whether hiring one is worth the cost wouldn’t be in question. Whether you’re operating as a sole trader or a limited company contractor, you need to weigh up the pros and cons.

• Cost - As you would expect, contractor accountants charge for ongoing support, usually on a monthly basis. That adds up throughout the year, and it can put a slight dent in your budget. For a new contractor with relatively low earnings, this might feel expensive. However, the money you save with tax-efficiency often outweighs the cost.
• Different Services - Not all accountants are equal, and it’s important to work with one who understands the unique needs of a contractor. Some contractor accounts offer tailored, proactive advice, whereas others simply handle compliance. If you choose a more affordable accountant, you might miss out on important services.
• Over Reliance - Ask any professional and they will tell you that delegation is a good thing. But, you should still have a basic understanding of your responsibilities as a contractor. Relying too much on an accountant, without checking their work and credentials, could leave you vulnerable.

As you can see, the downsides of working with a contractor accountant are minimal, which is why hiring one has become the ‘go to’ for many sole traders and limited company contractors.

Is it Worth Hiring a Contractor Accountant?

For most contractors, both sole traders and those operating via a limited company, the answer is yes. Despite contractor accountants coming at a cost, using one allows you to optimise your pay through dividends, claim expenses and enjoy the peace of mind that compliance is being taken care of. When all of this is taken into account, the cost of hiring a contractor accountant is often covered by the tax savings available. Plus, the reassurance that your business is compliant and that IR35 is being managed correctly is invaluable.

How to Choose a the Right Contractor Accountant

If you do decide that a contractor accountant is worth the cost, you’ll need to choose the right professional for you. Here are some of the key things to look for:

• Specialist Contractor Experience - Not all accountants understand IR35 or the unique challenges contractors face, so be sure to find one that does.
• Transparent Pricing - It’s important to know how much you can expect to pay, so it’s a good idea to choose an accountant with fixed-fee packages to avoid surprise costs.
• Cloud-Based Tools - Many modern accountants provide tools or apps to upload receipts, raise invoices and track tax liabilities. When your accounting is cloud-based, it’s a lot easier to keep on top of your contractor responsibilities. 
• Proactive Communication - Your chosen accountant should answer questions quickly and explain tax in a way that’s easy to understand. 
• Reputation - There’s a lot of contractor accountants out there, but you can narrow down your options based on reputation. Check reviews, testimonials or ask fellow contractors for recommendations.

At Go Limited, we know that hiring an accountant is a big decision, but it’s one that’s likely to pay off. When you have a contractor accountant helping you, you can focus your attention on clients, projects and business growth, knowing that an expert is handling bookkeeping, compliance and tax planning. Though there is a cost that comes with hiring an accountant, you’re likely to find that the money saved through claiming expenses and tax-efficient operations is significant enough to make the outgoing worthwhile.