Do I need accounting services as a contractor?

June 21, 2021

With over 170,000 independent registered contractors, the UK is a nation full of entrepreneurs establishing their own small businesses and limited companies. Unsurprisingly, too – running your own business is a great way to give yourself more freedom, have a better work-life balance, and achieve the dream of forging your own path.

If you're a contractor, it's likely you're already used to doing things yourself to keep your business ticking over. You've probably already toyed with the idea of keeping your own accounts. After all, how hard could it be?

In theory you can do your own accounts.  That said, the current DIY accounting software packages available are fraught with complex terminology that requires hours of upskilling.

You became a contractor to become your own boss, not to stay up all night dealing with tax forms and complicated paperwork. However, you may be reluctant about employing a traditional accountant, especially if you’re running on a tight budget. In this article, we’ll give you the low-down on using your own dedicated accountant, accounting solution or a combination of the two for your contracting business.

Should I hire an accountant?

Hiring an accountant will help you make sure that you don’t receive any fines or late fees when filing your taxes. They can also give you expert advice to make sure you’re not overpaying and run your business in a tax efficient way.

If you’re already confident about managing your books, then kudos to you! That said, unless you’re already well versed in tax law and know your corporation tax from your capital gains tax then you’ll find this a time consuming and difficult task to manage alone. By turning to a professional, a digital tool or a handy app that offers a blend of the two, you can leave the accounting and tax planning advice to the experts and focus your energy on your business and your customers. 

What can accounting services do for me?

If you’re thinking about hiring an accountant or paying for an accounting service, it’s helpful to look at a list of services that they will provide you and your limited company. It’s also a good idea to examine the pros and cons of hiring someone to check your books and give you tax advice. After all, you want to be sure you’re getting value for your money. 

Here’s a run-down of just some of the benefits you can expect by signing up to an accounting service:

Advice and peace of mind

If you’re unsure about what taxes you should be paying, your tax code, or how to fill in a Self Assessment form, then having a trusted professional on hand to ask for help is a real bonus. Contractors are covered by different tax laws compared to company employees and keeping track of all these rules and regulations yourself can be tricky. Having an expert to guide you means that you can focus on running your business while staying on the right side of the tax law.

If you’ve ever stressed about forgetting a deadline, you might benefit from hiring professional accounting help. Many accounting services now include software that automates tax payments, meaning you never have to worry about missing a payment again. Just sit back, relax, and let someone else take on the strain of accounting.

More cash in your pocket

A good accountant will make sure you don’t overspend on your taxes. A great accounting solution will do that, and also show you where you can save money. There are countless subtle ways that contractors can improve their tax efficiency. You can even get more of your money back through tax optimisation.

From government incentives, to expenses, to allowances, there are a wide range of tax-efficient strategies you can use to save on the tax you pay. The right accounting service will stay up to date with all the tax laws and keep you up to speed with all these clever strategies to keep more money in your pocket.

Time saver

If you don’t know if you need to register for VAT or how to prepare a tax return, these things can be time consuming to research. An accountant or service can take these tricky chores away from you, freeing you up to work on what you do best.

If you’ve ever had to chase a customer for payment, then you’ll know what a pain this can be. Chasing debtors is an annoying distraction, but you can’t afford to ignore the problem. A good accounting solution deals with this problem for you by setting up automated follow ups that make sure you get paid quicker.

Clear out your receipts

Yes, really. If you’ve got stacks of paper receipts and invoices piling up, then by signing up to an accounting service, you can do a Marie Kondo on your accounting paperwork. Instead of leaving those receipts to gather dust or clog up your desk, many accounting services will allow you to go digital and upload them to the cloud.

Plan for the future

An accountant can help you to grow your business, and they can also do wonders for your personal financial planning. If you want to apply for a mortgage or sort your pension, the right accounting service can point you in the right direction.

Still not sure?

Maybe you feel that hiring an accountant or paying for an accounting service isn’t an expense you can afford just now. However, this could be a false economy. One in six overpay their tax bill due to making a mistake on their HMRC forms. More than 1.8 million people were late filing their 2019/20 returns, almost double the amount of the previous year.

Getting the right accounting solution in place is a small price to pay for the peace of mind and assurance you get from a blend of smart technology and having an expert on hand and ready to help.

I’m self-employed. Do I need an accountant?

An independent contractor is just one way of being self-employed. If you're an independent contractor, then you provide people and businesses your services on a contractual basis.

If you’re self-employed, freelancing or running a side-hustle, then you may consider going it alone when it comes to doing your books. In the short term that might work, but as you grow your business you may find you just don’t have the time. If you find Self Assessment forms confusing, hiring a professional may be what you need. There is no right or wrong answer – just what works for you.

If you’re a contractor, then there is no legal obligation for you to hire an accountant. However, many contractors do turn to an accountant to help them keep on top of their tax responsibilities.

Unless you have the right skills, you may find that doing your accounts yourself leads to unnecessary worry and chips away at your valuable time. If you look after your own accounts, you will be personally liable for any mistakes made. You’ll also need to take care of dozens of tasks, from calculating and paying your income tax to dealing with any queries HMRC send your way. 

Having a professional on board with specialist knowledge will minimise the risk of mistakes, and will take away the stress of staying compliant with the ever-changing tax laws. It also means that you can stay abreast of any potential tax savings and keep your hard-earned money in your pocket.

What to look for in an accounting service

Now you’ve decided to invest in an accounting solution, it helps to know what to look for. Here are some tips when choosing an accountant or accounting service:

Does their advice make sense?

When you ask for help, do they tell you what’s what in plain English? Or do their meetings leave you scratching your head, wondering what all the accounting jargon meant? Find a service that empowers you by demystifying accounting, making it as simple as possible.

Are they proactive?

Look for someone who will actively help you to save money, rather than just doing the bare minimum. A great service will advise you on the most tax-efficient ways to pay your salary and even get money back from HMRC legally and ethically.

Are they up to date?

Tax regulations change fast, and you need someone who can stay on top of that.

Are they available when you need them?

Some people need hand holding through their yearly Self Assessment. Others will need advice on-tap quickly. Make sure you find a service that will give you the level of support you need, when you need it. For instance, if you want immediate support with filing your taxes, it might be beneficial to use a service that responds via an in-app chat, instead of waiting for an old-school accountant to "get back to you" over the phone or through email.

Do they offer more than bookkeeping?

In the future you may need help with other services like tax re-structuring or budgeting. Plan for what your business will need, this year, next year and beyond.

Digital finance tools vs accountants

Some contractors and business owners turn to digital finance tools like QuickBooks to manage their finances and do their tax returns solo. But, great as these tools are, they don’t entirely replace the role of the accountant. A person with specialist knowledge can be invaluable, especially when you’re starting up your own limited company.

Having an accountant or accounting service to turn to means that you can be sure of tax compliance and rule out any errors on your paperwork. It also means you have someone to ask for guidance as and when you need it.

Turning to tech 

Our online accounting service offers a third option that gives you the best of both worlds: a hybrid model made up of smart, simple technology combined with human expertise.

24/7 support via our app means that we can give you help and advice whenever you need it. Automated invoice chasing means that you can focus on growing your business without worrying about tracking down debts. Smart tax filing and classification takes away the strain of working out what tax you owe. A blend of simple software and human support means we’ve got you covered in one simple solution. 

Summary

Even if you've never hired an accountant before, you will find that having an accounting solution is invaluable as a contractor. Signing up for one may be the best decision you make today.

Finding the right accountant or accounting solution needn't be a chore. As a contractor, having a dedicated service that includes automated tax software and specialist accounting knowledge will allow you to focus on the important day-to-day running of your business without getting swamped by your tax affairs. By keeping all your accounting needs in one place, you can save yourself valuable time and stress and keep an eye on your accounts, wherever you are.

Daniel Hogan

Daniel is a Deloitte-trained, fully qualified Chartered Accountant with experience in the finance software space. It was during his tenure managing a finance system in the UK that he grew dissatisfied with the lack of synergy and automation in the space, compelling him to co-found Ember.