What Can an IT Contractor Accountant Do for You?
- Prepare and file your company accounts.
- Help with Corporation tax responsibilities – calculating taxable profits and preparing your Company Tax Return.
- Help with VAT; determining whether registration is required and dealing with VAT returns.
- Manage payroll – managing salary payments and associated PAYE/National Insurance responsibilities.
- Provide advice on dividends.
- Advise on the type of expenses you’re able to claim.
- Prepare and file for a self-assessment tax return.
- Advise and manage Making Tax Digital responsibilities.
- Provide IR35 guidance.
Why Might an IT Contractor Use an Accountant?
Here are just a few examples of what a good accountant can do for you:
Ensure you’re filling tax forms correctly and on time
Tax and company reporting rules can be complicated, so it can be easy to make mistakes if you do it yourself – this could result in incorrect tax calculations, missed deadlines and potentially penalties.
Help to save you time and money
An accountant can take care of your accounts, routine bookkeeping and tax administration, leaving you to spend more time on the running of your business. Their expert knowledge and advice can also help to minimise your tax bill each year.
This is confirmed by Business.gov.uk, which states that hiring an accountant can save business owners time and help to identify tax-efficient opportunities.
Salary advice
If you work through your own limited company, there are ways in which you can make your salary more tax efficient.
It’s very common for a limited company director to pay themselves using a combination of salary and dividends to achieve this – an accountant can advise you on how to do this.
Help you to understand what expenses you can claim
Claiming expenses is another way in which contractors can ‘get money back’, as doing so can help to reduce your tax bill at the end of each year.
An accountant can help to identify legitimate expenses and ensure they’re recorded correctly.
Read our IT Contractor Expenses: What Can I Claim? page for further information on this.
Support the growth of your business
An accountant can provide guidance using their own expertise and experience, which can help your business to grow and succeed further.
Do Limited Company IT Contractors Need an Accountant?
A limited company contractor has a lot more administrative responsibilities compared to someone operating as a sole trader, such as having to deal with:
- Companies House
- Corporation Tax
- Company Tax Return
- Payroll
- PAYE
- Dividends
- VAT
- Business expenses
While it is possible to manage this yourself, it’s worth considering whether you’re confident enough to take this on, and whether your time could be better spent elsewhere on the business.
This is why so many limited company contractors hire an accountant.
Do Sole Trader IT Contractors Need an Accountant?
A sole trader’s accounting requirements are much simpler than those of a limited company.
Their responsibilities usually include:
- Tracking income
- Tracking expenses
- Keeping records
- Completing self-assessment
- Paying owed tax
While these tasks are in general less time-consuming in comparison, an accountant can still be valuable when it comes to things like seeking advice on allowable expenses, filing tax returns, dealing with complex tax affairs or VAT obligations.
Do Umbrella IT Contractors Need an Accountant?
Generally, an umbrella contractor doesn’t need the services of an accountant because the umbrella company handles the relevant payroll process for the contractor.
Take a look at our What is an Umbrella Company? page for more information on how an umbrella set-up works.
Can I Do My Own Contractor Accounts?
Yes.
However, while you can do your own accounts if you so wish, this is only recommended if you have a good understanding of UK tax laws.
If you make a mistake, there’s a chance HMRC could reject a tax form or even suspect foul play and investigate your finances.
A good accountant can take care of all this, saving you the stress of doing it yourself.
Accountant vs Accounting Software for IT Contractors
When it comes to the skills of an accountant versus accounting software, rather than choosing one or the other, the best solution can be to use both.
This is because both are beneficial, especially when combined.
| An accountant can help with | Accounting software can help with |
|---|---|
| Interpreting tax rules | Recording transactions |
| Corporation Tax | Creating invoices |
| Tax planning | Tracking expenses |
| Dividends | Bank reconciliation |
| Salary | Financial reports |
| VAT | Record keeping |
| IR35 considerations | |
| Compliance | |
| Business decisions |
How Much Does an IT Contractor Accountant Cost?
The cost of an accountant will, of course, vary from company to company and depend on several factors, such as:
- Limited company vs sole trader
- Number of directors
- Bookkeeping requirements
- Additional advice
- IR35 support
- Whether software is included
And while some believe that an accountant is a luxury and an unnecessary cost, the fact that they can save you time, reduce administrative burden, provide tax-planning benefits, and reduce the risk of mistakes offsets the costs for many contractors.
It’s also worth noting that accountancy fees are an allowable business expense, helping to further reduce your tax bill at the end of each year.
How to Find a Good Accountant
Looking for an accountant can be overwhelming – there are so many accountancy companies out there, all offering different packages and benefits, so you need to do your research and look around for the best fit for you.
Ultimately, you need to ensure they are professional, reliable and trustworthy.
Here’s what else to look for when choosing a good accountant:
- That they specialise in contractor tax – there will be a number of taxes and legislation that will only apply to contractors, so your accountant must understand all aspects of this.
- Qualifications – while an accountant is not required by law to have official qualifications, it might give you more peace of mind knowing that they do have them.
- A fixed monthly amount with no hidden fees! – not every accountant works on a fixed monthly fee, so it’s worth finding out if yours does – otherwise, you could find yourself with a surprise bill at the end of the year. Check that their package includes everything you need, such as tax returns, VAT returns, payroll, etc.
- Your own dedicated accountant – most people prefer to have just one point of contact; it means you’ll receive personalised advice instead of being passed around a team of people.
- A good reputation – whether it’s word of mouth or finding reviews online, it’s really important to do your research to find a reputable accountancy company.
IT Contractor Accountant Question Checklist
- Do you specialise in working with contractors?
- Do you deal with limited companies?
- Do you support sole traders?
- Do you provide IR35 advice?
- Is bookkeeping included?
- Is payroll included?
- Is VAT included?
- Is Self-assessment included?
- What accounting software do you use?
- Is there a fixed monthly fee?
How We Can Help You
Looking for an accountant can be overwhelming
At Dolan Accountancy, we include just about everything you need, wrapped up in one low fixed monthly cost of £125 + VAT per month.
Take a look at Our Services page to see everything that we can offer you as an award-winning accountancy company.
Our team of experts are available to answer any queries you may have, so drop us a line on 01442 795 100, email jaime.thorpe@dolanaccountancy.com, or contact us via live chat.
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