How Much Does an Accountant Cost for a Small Business? [Ballpark figure]

Accountants are people who work with money, and they may work with individual businesses to get said business’s finances in order and work out how much tax they need to pay. But are accountants worth it?

It is true that they are are highly-trained, and have niche skills that could help your business save money in the long run. But let’s look at if they are worth the initial investment. 

How much does an accountant cost for a small business? 

Accountant’s services cost varying amounts, depending on where in the country they are based, what services you require, and how big your business is. It’s important to work out what your specific company’s needs are, and then calculate how much an accountant will cost for you.

For small businesses with up to 50 employees, accountants might do tasks like: bookkeeping, monthly and annual payroll, tax advice and other general advice. The fee for an on-call accountant for a small business with a few employees could be anything from £60 to £250. 

On the other end of the scale, self-employed people might just require an accountant one time, for a tax return. They would pay a one-off fee for this work, which can range from £150 to £400. This is generally quoted on a case-by-case basis – the more complicated the work, the more likely accountants are to charge a higher rate.

However, accountants will work hard to help the self-employed person pay less tax, and in some cases paying this fee can actually help the person save money. 

If a self-employed person or owner of a small business wants to pay an accountant for certain services, this is also possible. Again, this ranges greatly, depending on where the accountants and clients are based, as well as the amount of data (depending on the scale of turnover and the number of employees) that the accountants are dealing with.

For example, VAT returns can cost between £100-£250, and business accounts can range from £150-£700, depending on how much money the accounts are turning over. 

As you can see, accountants for small businesses vary greatly depending on what you need. It is recommended to get in touch with prospective accountants and work out what they can offer and its value. 

What About Accounting Software?

A money-saving alternative is using an accountancy software. These platforms can keep track of a business’s expenses and incomings throughout the year, working tax out as they go. They can also calculate and submit a tax return directly through the software itself. 

These do come at a cost – generally around £100 for a year of accounting – but are sufficient for the needs of many small businesses. This could be a good choice if you’re a sole trader and you just want to do your own fairly simple self assessment.

The disadvantage of using an accounting software is that there is no scope for actual human advice, should it be needed by the employer. Accountants are great at providing this, as well as knowing how they can help someone to save money. 

For many people, it can prove hard to keep up with your tax returns, paying national insurance and per hour salaries. In this case, it’s definitely worth looking at getting yourself a reliable accountant. A small business owner’s mind should ideally be focussed on their company, not worrying about your tax returns.

Do I need an accountant? 

Of course, there is also the option to keep track of finances individually and submit a tax return independent of any accountant or software. Many self-employed people and business owners do this very successfully, and this will mean that they can completely omit any accountancy fees.

To go down this path, the person should keep detailed records of what income the business has received and when, as well as business expenses. They should have spreadsheets detailing expenses and incomings and doing the sums for them, to make sure everything is accurate.

They will then need to submit their return directly to HMRC, and will need to know any other information that they require. This might mean a bit of extra research on their part, as they need to state all of their streams of income, including interest and pension funds. 

Obviously, people who go down this route will not be able to get any official accountancy advice on their taxes, and may risk paying too much tax. In my opinion, limited companies should look to into hiring their own accountant.

In some cases, it’ll be better for a sole trader to do things themselves (but even then, an accountant is fairly cheap if you’re not good with numbers!).

Conclusion

For businesses that can afford it, hiring an accountant is a great way to make sure that finances are kept in order and tax is paid appropriately – including ensuring that they aren’t paying too much tax when factoring in business expenses. 

However, independent contractors may find it more cost effective to use an accounting software, such as Xero or Free Agent. These programmes work as a virtual accountant, using an algorithm to calculate tax. 

People who are money savvy, or who have been self-employed or running a small team for a while, might choose to go down the independent route, keeping track of their expenses in spreadsheets and filing their taxes directly with HMRC. 

There is no right or wrong path to take, and each decision varies greatly depending on the business. For those wondering how much an accountant costs, it’s best to ring around and check with local accountants, specifying the services required and the team size, as there is no blanket rate. 

For someone who wants a more budget rate, accounting software may be more appropriate – and of course, filing taxes with HMRC directly does not entail any accounting costs so is ideal for someone on a budget who is confident with their own accounting abilities.