Do I fire my accountant?

[Foxpants]

Opinions gratefully received.....

I run my business through a limited company. My accountant charges me £4.5k per year to submit VAT returns, corporation tax etc.

I have just had my tax return for the year. My tax bill is around 4x what I was expecting (and what it was last year) - equivalent to around 2 months salary I have to find by end of Jan. No warning, no help from the accountant.

AIBU to suggest that for what I'm paying them I should have had a bit of notice (seems to be related to dividend tax credit change)? Also, has anyone tried running their business without an accountant using accounting software? How easy/time consuming is it?

Many thanks for your thoughts....

I'm assuming the tax bill you refer to is your personal return and not the company's tax bill? If so i'd say yes they should have made you aware that tax on dividend income has increased quite considerably, and it sounds to me as though you are saying that is why your tax bill is so high.

Yes I'd expect some forewarning as to the tax implications of new legislation. My boss spends quite a bit on his tax accountant but there are no surprises at all.

I would think that doing it yourself is dependent on your turnover and accounting basis/business base.

Thank you. Yes, it's on my personal taxation and it has come as a complete shock. I was dimly aware of dividend tax going up, but not the massive effect it would have on my tax bill. The accountant must have known about the change for about 18 months, I think.

Think the accountant may get fired out of necessity - can't afford his bills any more!

How easy/time consuming is it?

Not at all "easy" and very time consuming. It's certainly possible and lots of people do it, but you have to learn a lot, do a lot of googling, etc. You'd have to learn how to prepare accounts in the format required by law. You'd also have to learn corporation tax rules and how to prepare a corporation tax return. Unless you are good with numbers and have plenty of time, don't go there. If you're not happy with the accountant, just move to another - there's thousands out there.

Do you mean that only £5000 of dividends are now tax free? You must have known that. You don't have usually have a salary if you have dividends (well you do but very small and at or below the tax threshold). You need to reduce your dividend drawings in order to pay less tax.

It goes down to £3000 next year. So be prepared for more tax.

Hi - it's that you used to get a dividend tax credit - 10% - for the corporation tax you'd paid and that has gone. I kind of knew it, but hadn't quite calculated the impact.

I used to be an accountant and can't quite shake the view that all I do is take lots of time to gather data and then pass it on to the accountants, which I wonder could be achieved with the right software. But may be I just need to find the right accountant!

£4.5k is a lot of money for an accountant.

I’ve just started out so I went with Nixon Williams last year and pay £115 a month. I went with them, who were more expensive than some friends were paying, as they set up everything for me, Corporate and Personal.

They’ve been incredibly helpful with my noddy questions. I also got 3 months free.

I used to be an accountant many moons ago but there’s no way I could spend the time and effort keeping up with the many tax changes each year. I’d much rather get a lovely mail explaining what it means to me.

Yes fire your accountant. I pay about £1.5k per year to a ltd company specialist accountancy place that does everything remotely. Crisp Accountancy or accountants or something. Can't even remember where they are based but they've been excellent. Chase me when needed. Very efficient and good account managers.

Fantastic - thank you. It's great to get some perspective on costs...I will definitely fire them!

ZigZagandDustin - is it 'Crisp Contractor' you are using?

£4.5k is a lot of money for an accountant.

It may be expensive or it may be cheap. Depends on the size/complexity of the business. But the biggest factor is whether you do your own book-keeping, and if so, whether it's complete, accurate and reconciled. An accountant can easily spend 2 or 3 times the time if they have to correct or create the basic book-keeping records, and that inevitably doubles or trebles their fees.

But yes, assuming you're a "contractor" style of one-person business, doing your own reasonable standard of book-keeping, fees of around £1,500 are more the average.

kazzy the fact that OP is considering doing her own accounts via accounting software made me assume they are a single person business rather than Karen Brady asking the question!

In that case yes £4.5k is a lot of money

I've found Xero quite easy to use (although there are other very similar accounts software available, quikbooks, free agent etc) is there a reason you don't want yo use accounts software?

I use xero to reconcile the bank statements and to do the vat returns myself, the accountant also has access to Xero and uses it to do the accounts audit, end of year accounts etc. The money we used to spend on the accountant 'bookkeeping' and reconciling the accounts etc on our behalf is now spent on proper tax and financial planning.

Considering g how much you are paying the accountant it doesn't like they are working particularly well for you. Perhaps have a look at others to see wha they can offer you.

Also, has anyone tried running their business without an accountant using accounting software?

Before you jump out of the frying pan into the fire, are you aware of Making Tax Digital (MTD) and its implications. MTD is to company accounts what RTI is to wages (reporting to Govt over the internet using specialist software).
HMRC keep putting off the implementation date, but work on the assumption that it will go through eventually.

Foxpants, that's it I'm sure. There can't be many. I found them doing a google search for cheap accountants 2 yrs ago. They not only were cheaper but also found me about £5k in savings last year. I've found them lovely to deal with and very on the ball.

I suppose it depends where you’re based and the complexity of the business, but £4.5k seems excessive to me - certainly much mire than we would charge even for our most labour intensive clients.

I would have thought your accountant could have suggested something to reduce your personal tax, if at all possible. If you have a directors loan account with the company owing you something, you could offset some of th dividends as repayment of the loan?

Thank you - this is more helpful than my accountant has been in five years! It's a basic, contractor style business. Just me. Sounds like I've been paying way over the odds.

It's a basic, contractor style business. Just me. Sounds like I've been paying way over the odds.

Assuming you've been doing at least your basic book-keeping yourself, then you certainly could have got a lot cheaper. Most "contractor" accountants work with online software, so you can enter your expenses/invoices into a portal, and your accountant can work with that for the accounts, vat, payroll etc, which is a much more efficient method of working and takes away a lot of duplicated time & effort. Just be aware that accountants don't have to be qualified nor regulated, so unless you get a personal recommendation, you'd be best choosing one who is a regulated member of a chartered accountancy body - they're usually about the same price as the unqualified/unregulated firms anyway, sometimes even cheaper.

Yes, sounds like you’ve been massively overpaying. We work in an expensive part of the country, although our services are at the cheaper end of the scale, and for your type of business your annual accounts and personal tax return would get you change of £1k.

Excuse my nativity but is there some sort of onbudsman or regulating body you can report him to? It seems he's behaved bordering on negligence to charge you a massive fee and keep you in the dark in this way.

We work in an expensive part of the country, although our services are at the cheaper end of the scale, and for your type of business your annual accounts and personal tax return would get you change of £1k.

But OP says they also do the VAT returns and payroll, and we don't know whether the OP even does their own book-keeping. £1k for accounts and tax return is pretty average. £1.5k for accounts, tax return, VAT and payroll, is about average. But book-keeping (if client doesn't do it themselves) can add a lot more.

Excuse my nativity but is there some sort of onbudsman or regulating body you can report him to? It seems he's behaved bordering on negligence to charge you a massive fee and keep you in the dark in this way.

Size of fee is irrelevant. The only important factor is what is in the letter of engagement, i.e. what services were agreed to be provided. Only the OP can confirm whether the letter of engagement was just compliance services, i.e. preparing/submitting accounts and tax returns etc, which is the normal/default. Planning etc is usually a chargeable extra, so did the OP actually pay for planning/advisory services on top of the basic preparation/submission services.

In the same way that you wouldn't expect a garage to tell you of a problem with your engine when you book it in for changing a tyre, just "buying" one service from an accountant doesn't make them liable to give you advice on everything that may be relevant in all your financial affairs.