What Does an Accountant Do?
Most people picture an accountant as the person who fills in a tax return once a year and then disappears. That is a small slice of the job. A good accountant records what a business earns and spends, turns that into accounts that tell you how the business is really doing, works out the tax you legally owe, and helps you make decisions with money in mind. The tax return is the tip of the iceberg. The rest of the work, most of which the client never sees, is what keeps a business the right side of HMRC and pointed in a sensible direction.
At its simplest, an accountant makes sure the numbers are right and then helps you do something useful with them. That covers everything from the bookkeeping that records each transaction, through the year end accounts, to the tax planning that decides how you take money out of a company. Different accountants lean into different parts of that range, but the underlying job is the same: keep the record accurate, keep you compliant, and give you the information to make better calls.
The Core Jobs an Accountant Does
Strip away the jargon and the day job comes down to a handful of tasks that repeat through the year.
- Bookkeeping and record keeping. Recording every sale, purchase and payment so there is an accurate picture of what has happened. Many accountants either do this or supervise it, because everything else depends on the underlying records being right.
- Preparing accounts. Turning a year of transactions into a profit and loss account and a balance sheet. For a limited company these are the statutory accounts that go to Companies House. For a sole trader they underpin the tax return.
- Tax returns and tax calculations. Working out and filing the Self Assessment return for individuals and the sole self employed, or the corporation tax return (the CT600) for companies, and telling you what to pay and when.
- Payroll and VAT. Running the payroll so staff and directors get paid with the right tax deducted, and preparing VAT returns for businesses over the threshold.
- Advice. The part that actually saves money. Whether to trade as a sole trader or a limited company, how to take profit out of a company, whether a purchase should wait until after the year end, how much to set aside for the next tax bill.
The first four keep you compliant. The last one is where a good accountant earns their fee several times over, and it is the part cheap online filing services do not give you.
What an Accountant Does Day to Day
The rhythm of the work follows the tax calendar more than the working week. In a typical year an accountant is reconciling bank transactions and chasing missing paperwork most of the time, then the pace changes around the fixed deadlines: VAT returns every quarter, payroll every month, the Self Assessment rush before 31 January, the payments on account deadline in July, and company year ends scattered across the calendar depending on when each business was formed.
Underneath all of that sits a steady stream of smaller questions. Can I claim this? Should I register for VAT yet? How much can I take out of the company this month without a nasty surprise? A large part of the value is simply being on the end of an email when one of those questions comes up, before a decision is made rather than after. The worst tax bills we see are almost always the result of a decision taken without asking first.
Accountant vs Bookkeeper: What Is the Difference?
People use the two words as if they mean the same thing, and there is overlap, but they are not the same job. A bookkeeper records the day to day transactions, keeps the ledgers tidy, and often handles invoicing, VAT returns and payroll. An accountant takes those records, prepares the formal accounts, deals with tax and offers advice on top. Think of the bookkeeper as keeping the score during the game and the accountant as reading the match and telling you how to play the next one.
Plenty of small businesses use both, or use one firm that does both. The distinction matters mostly because you should not pay accountant rates for work a bookkeeper can do, and you should not expect tax planning from a bookkeeper whose remit stops at recording the numbers. Our own view is that the two work best joined up, because accounts built on messy bookkeeping cost more to fix at the year end than they would have cost to keep tidy along the way.
Do I Need an Accountant?
There is no law that says you must have one. A sole trader can file their own Self Assessment, and a company director can technically prepare their own accounts. The honest answer to "do I need an accountant" is that it depends on how complex your affairs are and what your time is worth.
You can probably manage without one if you are a sole trader with straightforward income, few expenses, and turnover well under the VAT threshold. HMRC's own guidance and free filing tools are enough for a simple case, and paying a professional to file a one page return may not earn its keep.
You almost certainly benefit from one once things get more involved: when you form a limited company, when you cross the VAT threshold, when you take on staff, when you buy property or equipment, or simply when the admin starts eating the time you should be spending earning. Limited company accounts and corporation tax returns are genuinely fiddly, and the penalties for getting them wrong are real. Most company directors reach the point where the fee costs less than the tax an accountant saves and the hours they hand back.
Do Self Employed People Need an Accountant?
This is the question we get asked most, and the answer is that it is a judgement call rather than a yes or no. A self employed person with a single income stream, modest expenses and no VAT can reasonably do their own return. The maths is not hard and the software is free.
The case for hiring one strengthens fast as soon as any of the following is true. You are unsure which expenses you can claim, so you are probably either overclaiming (a risk) or underclaiming (money left on the table). Your income varies enough that the payments on account system confuses you. You have more than one source of income. You are approaching the VAT threshold. Or you simply dread the 31 January deadline enough that it costs you sleep every winter.
We wrote a fuller piece on this for content creators and the self employed, because that group in particular tends to have messy, multi platform income that is easy to get wrong. The pattern holds more widely though: the more sources of income and the more expenses you have, the more an accountant tends to save relative to their fee. For a lot of self employed people the deciding factor is not the tax at all. It is getting the evening back that they would otherwise spend wrestling with a spreadsheet.
What Does an Accountant Cost, and Is It Worth It?
Fees vary with the work involved, so a simple sole trader return costs far less than full company accounts, payroll and quarterly VAT. As a rough guide, a self employed Self Assessment might run to a few hundred pounds a year, while a small limited company with the full package sits higher because there is more to do and more that can go wrong.
The question that matters is not the fee in isolation but the fee against what it returns. A good accountant should pay for themselves in three ways: the tax they save by claiming everything you are entitled to and structuring things sensibly, the penalties they help you avoid by hitting deadlines, and the hours they give you back to run your business. When we take on a new client who has been going it alone, we quite often find reliefs they missed or a company structure that was costing them money, and the first year's saving covers the fee. That is not always the case, and any honest accountant will tell you a very simple set of affairs may not need paying for. But for most growing businesses the sums work out in favour of getting help.
Our View
The real job of an accountant is not filing forms. Software can file forms. The job is judgement: knowing what the numbers mean, spotting the decision that will cost you money before you take it, and telling you the truth about your business even when it is not what you want to hear. That is the part that does not automate, and it is the part worth paying for.
Our honest opinion is that most people leave it too late. They call an accountant after the mistake, once the bill has landed or the deadline has passed, when the useful moment was months earlier when the decision was still open. The clients who get the most from us are the ones who pick up the phone before they act, not after. An accountant you only speak to once a year is an expensive filing service. An accountant you actually talk to is a genuine asset.
How IAK Can Help
We are a firm of accountants in North London, and between us we cover the whole range of what an accountant does. Our bookkeeping service keeps your records tidy through the year, our accounting team prepares your year end accounts and tax returns, and our tax planning service is where we do the thinking that actually saves you money. We also run payroll, handle VAT, and look after personal tax for directors and the self employed.
If you are not sure whether you need an accountant at all, that is a fair question and we will give you a straight answer rather than a sales pitch. Contact us for a free consultation and we will tell you honestly whether your affairs are simple enough to handle yourself or whether there is money and time to be saved by getting help.
Sources
- Set up as a sole trader, GOV.UK, on the record keeping and Self Assessment obligations of the self employed.
- Running a limited company, GOV.UK, on statutory accounts, the confirmation statement and corporation tax duties that a company accountant handles.
- Self Assessment tax returns, GOV.UK, on who must file, deadlines and payments on account.
- ICAEW: how to choose an accountant, on what to look for when appointing a qualified accountant and the value of a chartered qualification.