You are a director of a limited company. You have a legal obligation to file accounts, submit tax returns, and maintain proper records. You also have a commercial obligation to pay the right amount of tax, not a penny more, not a penny less. The person who helps you do that is your limited company accountant.
This guide is written for UK directors, contractors operating through their own limited company, and small business owners who want to understand exactly what a limited company accountant does, what you should pay, and how to choose one that fits your business. We are an ICAEW-qualified firm. We work with businesses of every shape and size across the UK, from a single director in a Shoreditch co-working space to a 50-person operation in the Jewellery Quarter in Birmingham.
By the end of this guide, you will know the statutory services you need, the optional services that add real value, the warning signs to avoid, and the practical steps to take when appointing a new accountant.
What Does a Limited Company Accountant Actually Do?
Let's start with the basics. A limited company accountant is not a bookkeeper, though many bookkeepers call themselves accountants. A limited company accountant is professionally qualified, typically ACA (ICAEW), ACCA, or AAT at minimum, and holds a practising certificate. They are regulated by a professional body. They carry professional indemnity insurance. They can sign off accounts and act as your company's reporting accountant with Companies House and HMRC.
Statutory Compliance Work
Every limited company must file annual accounts with Companies House and a Corporation Tax return (CT600) with HMRC. These are not optional. Your accountant prepares these from your records. They calculate your Corporation Tax liability, apply any reliefs you qualify for, and submit everything by the deadlines.
Your accountant also handles:
- Confirmation Statement filing (annual, £34 filing fee)
- PAYE and RTI submissions if you pay yourself a salary
- P11D and P11D(b) for benefits in kind
- VAT returns if you are registered
- Dividend paperwork and minutes
- Director's loan account monitoring
Tax Planning and Advice
The compliance work is the minimum. The real value comes from tax planning. A good limited company accountant helps you structure your director's pay to minimise your overall tax bill, salary versus dividends, pension contributions, timing of purchases, capital allowances, and more.
For example, in the 2025/26 tax year, the dividend allowance is £500. The Corporation Tax main rate is 25% for profits above £250,000, with marginal relief between £50,000 and £250,000. Your accountant should model your optimal extraction strategy every year, not just once at incorporation.
Strategic Support
Beyond tax, a limited company accountant should help you understand your numbers. Gross margin, operating margin, working capital, cash conversion cycle, these are the metrics that tell you whether your business is healthy. Your accountant should explain them in plain English, not jargon.
They should also flag issues before they become problems. A creeping overdrawn director's loan account. A VAT registration threshold approaching £90,000. An R&D claim you are missing because you think your work is too ordinary.
Do You Need a Limited Company Accountant, or Can You Do It Yourself?
You can file your own accounts and Corporation Tax return. Many directors do, especially in the first year. But the question is not whether you can, it is whether you should.
The DIY Reality
Filing your own accounts through software like FreeAgent or Xero is straightforward if your affairs are simple. One director. One salary. One dividend. No VAT. No employees. No property. No R&D.
But even then, you need to understand:
- The difference between accrued and deferred income
- How to treat director's loan transactions
- What constitutes a distributable reserve
- How to apply marginal relief on Corporation Tax
- When to register for VAT
- How to report a property disposal within 60 days
Get any of these wrong and you face penalties, interest, and potentially an HMRC enquiry.
The Cost of Getting It Wrong
An HMRC enquiry into a limited company typically costs between £2,000 and £10,000 in professional fees to resolve, even if nothing is found wrong. If HMRC finds errors, the cost multiplies, back taxes, penalties, interest, and professional fees.
A good limited company accountant costs a fraction of that. Most small limited companies pay between £120 and £300 per month for a full compliance service. That includes your year-end accounts, Corporation Tax return, personal tax return, payroll, and ongoing advice.
When You Definitely Need an Accountant
You need a limited company accountant if any of the following apply:
- Your turnover exceeds £90,000 (VAT threshold)
- You have employees other than yourself
- You operate in the construction industry (CIS)
- You work through an intermediary (IR35 applies)
- You have multiple associated companies
- You claim R&D tax credits
- You buy or sell property through the company
- You are not confident preparing accruals-based accounts
What to Look for in a Limited Company Accountant
Not all accountants are the same. A high-street general practice that handles personal tax returns and sole traders may not be the right fit for a limited company contractor. Here is what to look for.
Professional Qualification and Regulation
Your accountant should be a member of one of the recognised professional bodies: ICAEW, ACCA, AAT, CIMA, or ATT. ICAEW is the gold standard for limited company work. As ICAEW-qualified accountants, we are bound by a code of ethics, carry mandatory PI insurance, and are subject to regular practice reviews.
Check the firm's register entry. Any accountant can call themselves an accountant. Only qualified, regulated professionals can call themselves chartered accountants.
Specialism in Your Sector
A limited company accountant who works mainly with contractors understands IR35, the 5% allowance, and the importance of a properly drafted contract. An accountant who works with e-commerce businesses understands stock valuation, deferred revenue, and cross-border VAT. An accountant who works with property companies understands capital allowances, ATED, and the 60-day CGT return.
Ask the firm what type of clients they work with most. If they say "all types", push for specifics.
Software and Technology
Your accountant should use modern cloud accounting software. Xero, QuickBooks, FreeAgent, Sage Accounting, any of these are fine. The key is that you can access your data in real time, share documents via a portal, and communicate through a secure channel.
Ask which software they recommend and whether it is included in their fee. Some firms include FreeAgent or Xero in their monthly fee. Others charge extra.
Responsiveness and Communication
You do not need your accountant to reply within five minutes. But you do need them to reply within 24 hours during the working week. And you need them to speak in plain English, not accounting jargon.
Ask about their communication policy. Do they offer phone support? Is there a dedicated manager? How do they handle urgent queries?
How Much Does a Limited Company Accountant Cost?
Fees vary significantly depending on the complexity of your affairs, the location of the firm, and the level of service you need. Here is a realistic picture for the 2025/26 tax year.
| Business Type | Monthly Fee Range | What's Included |
|---|---|---|
| Sole director, no employees, no VAT | £100 - £150 | Year-end accounts, CT600, payroll, personal tax return, software |
| Director plus spouse, VAT registered | £150 - £250 | Above plus VAT returns, P11D, basic advice |
| Multiple directors, employees, CIS, or property | £250 - £450 | Above plus CIS returns, management accounts, planning |
| R&D claimant or complex group structure | £400 - £800+ | R&D claim preparation, group relief, associated company analysis |
Some firms charge a fixed monthly fee. Others charge an annual fee payable in monthly instalments. Both are common. Avoid firms that charge per hour for routine compliance work, it creates uncertainty and disincentivises them from being efficient.
What Is Not Included
Most monthly packages exclude:
- HMRC enquiry defence (typically charged separately or via insurance)
- Company formation (one-off fee, usually £50-£150)
- Business valuations or exit planning
- Forensic accounting or litigation support
- Tax investigation insurance (usually £50-£100 per year)
Always ask for a full list of what is included and what is charged extra. Get it in writing before you sign up.
Limited Company Accountant for Contractors and IR35
Contractors operating through a limited company face unique challenges. IR35 is the biggest. If you are inside IR35, your company pays deemed employment taxes on your fees, and the tax advantage of being a limited company largely disappears. If you are outside IR35, you retain the full benefit of Corporation Tax rates and dividend treatment.
How Your Accountant Should Help
Your limited company accountant should:
- Advise on your IR35 status based on your working practices, not just your contract
- Help you prepare for an HMRC IR35 enquiry
- Calculate your deemed payment if you are caught inside IR35
- Advise on the 5% allowance for administrative expenses (if applicable)
- Structure your pay to minimise tax within the rules
If your accountant tells you that a signed contract alone determines your IR35 status, find a new accountant. The contract matters, but HMRC looks at the reality of how you work.
Real Example: Contractor in Manchester
James operates through his limited company, James Consulting Ltd. He works through an agency for a large client in MediaCity, Manchester. His contract is outside IR35. His accountant reviews his working practices annually, no substitution clause in practice, no right of supervision, no integration into the client's business. His accountant also ensures his contract is reviewed by a specialist IR35 solicitor every two years.
James pays himself a salary of £12,570 (the NI primary threshold) and takes the rest as dividends. For 2025/26, his Corporation Tax on profits up to £50,000 is 19%. His dividend tax is 8.75% on dividends above the £500 allowance. His effective tax rate on extracted profits is around 25%, significantly lower than the 40%+ he would pay as an employee or sole trader.
His accountant charges £180 per month including FreeAgent software, year-end accounts, CT600, personal tax return, and payroll. James considers it the best money he spends.
Limited Company Accountant for Growing Businesses
As your business grows, your accounting needs become more complex. You may take on employees, register for VAT, move premises, or start exporting. Your accountant should grow with you.
Management Accounts and KPIs
Annual accounts are history. Management accounts are the steering wheel. A good limited company accountant prepares monthly or quarterly management accounts that show your actual performance against budget. They highlight trends in gross margin, debtor days, and cash burn.
If your accountant only talks to you once a year at year-end, you are not getting the full service.
VAT and Making Tax Digital
From April 2026, Making Tax Digital for Income Tax (MTD ITSA) becomes mandatory for sole traders and landlords with income above £50,000. For limited companies, MTD for Corporation Tax is on the horizon, though the start date has not been confirmed. Your accountant should already be using MTD-compatible software and should have a plan for when digital reporting becomes mandatory for your company.
If you are VAT registered, MTD for VAT is already mandatory. Your accountant should handle your VAT returns digitally, using bridging software if necessary.
R&D Tax Credits
If your company undertakes qualifying R&D, and this is broader than most directors think, you may be entitled to R&D tax credits. The rules changed from 1 April 2024. The merged scheme applies to most companies. The Enhanced R&D Intensive Scheme (ERIS) is available for loss-making SME-intensive companies.
Your accountant should be able to assess whether your activities qualify, prepare the claim, and submit it to HMRC. If they cannot, or if they outsource it to a third party without telling you, ask why.
We cover this in detail on our R&D tax credits page.
How to Switch Limited Company Accountants
Switching accountants is simpler than most directors think. You are not locked in. Your company's records belong to you, not your accountant.
The Process
- Find your new accountant first. Agree terms, sign a letter of engagement, and let them handle the switch.
- Your new accountant requests a professional clearance letter. This is a standard letter from your new firm to your old firm, asking them to confirm there are no reasons they should not take you on. Your old accountant must respond within a reasonable time.
- Your new accountant requests your records. This includes trial balances, nominal ledgers, fixed asset registers, and any open HMRC correspondence. Your old accountant must provide these. They may charge a reasonable fee for extracting and transferring data.
- Your new accountant notifies HMRC and Companies House of the change in your agent details.
The whole process usually takes two to four weeks. Most of that is waiting for the old accountant to release the records.
When to Switch
Common reasons to switch include:
- Your accountant never returns your calls
- Your accountant does not understand your industry
- Your accountant has not mentioned MTD or R&D credits
- Your fees have gone up without explanation
- Your business has outgrown your accountant's expertise
Do not stay with a poor accountant out of inertia. The cost of bad advice far exceeds the inconvenience of switching.
Action Checklist: Choosing Your Limited Company Accountant
Use this checklist when evaluating a new accountant. Tick each item off before you sign the engagement letter.
- Check their qualification. Are they ICAEW, ACCA, or AAT? Verify on the professional body's register.
- Ask about their client base. Do they work with businesses like yours? Ask for examples.
- Get a fixed fee in writing. What is included? What is excluded? How often does it increase?
- Ask about software. Which platform do they use? Is it included in the fee?
- Understand their communication policy. How quickly do they respond? Who is your point of contact?
- Ask about tax planning. Do they proactively suggest ways to reduce your tax bill, or do they just file returns?
- Check their complaints procedure. Every regulated firm must have one. Ask to see it.
- Read the engagement letter carefully. It sets out your rights and obligations. Do not sign it if you do not understand it.
If you are ready to start the conversation, contact us. We work with limited companies across the UK, from Camden to Cardiff, from the Northern Quarter in Manchester to the Quayside in Newcastle.
You can also read more about the fundamentals of running a limited company on our fundamentals page, or explore our full range of services.