Why you can’t afford not to have an accountant

Setting up on your own can be exciting. It’s an opportunity to work with who you want to, when you want to, and how you want to, not to mention to work when you’re most productive (instead of when the boss decides you need to be productive), and to farm out the aspects of running a business that don’t appeal to you to the professionals.

It can be tempting to cut costs and adopt a ‘make do and mend’ mindset, especially if cash flow is inconsistent at the start. However, there is one expense that you really cannot afford to cut, and that’s a professional accountant.

I’m a sole trader – surely I can do a few basic bits of book-keeping on my own?

In theory, yes you could. If you’re confident keeping your paperwork in order, and you’re comfortable with filling in a tax return (and filing it on time!), then you could get away with it. The question is, do you want to “get away with it”, or do you want to not only make savings on your crucial first-year costs but keep up with an ever-changing set of rules and regulations?

Unless you’re setting up as an accountant – and we suspect you wouldn’t be here and reading this if you were – this really is a task best left to someone whose job it is to know tax law backwards. HMRC aren’t famed for listening to excuses, so don’t take the chance and employ an accountant for your sole trader venture.

I’m a limited company, so I know I need an accountant – however, I’m still finding cash flow difficult; what options are out there that will work for me?

Starting a limited company is relatively cheap – formed online, you can be up and running in a few hours for under £20 – but the paperwork and obligations mean that you will definitely need the input of a professional if you’re to have any time to build your business at all.

For example, incorporation is just the start; there are a variety of dates and filing obligations which, if missed, could lead to Companies House deciding to pull the plug on your venture, and fine you as well.

A good, basic online accountancy service needn’t cost much more per month than setting up your company in the first place. Support largely through email and cloud accountancy packages mean that you’ve got the option to take on that side of your book-keeping yourself, and can always see how well you’re doing, what you can afford to pay yourself, and – most importantly – what kind of cut the tax man will want from you.

Anything else?

Lastly, a few words on what can go wrong. No one likes to spend too much time on disaster planning, but at the very least the one thing every self-employed professional should be prepared to deal with is a tax investigation. Even if your paperwork is completed and in order, the sheer time taken up by a visit from the tax man means that having an accountant to take care of this for you is worth is worth their fees on its own.

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5 November 2020

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