wondering if we actually NEED an accountant ...

[tracey.]

Hello
My son started self employment in April. Plumber, with no work involving other contractors, so no CS card needed. Sole trader, not VAT registered. He has appointed an accountant (without discussing with me, the more organised one out of the two of us). As yet, we havent signed the accountants contract, theres been a few emails between myself and the accountant re the setting up on their systems etc.

I am wondering how beneficial this will be as opposed to me doing his first self assessment. Ive not done one before but I am quite organised with keeping records etc. Ive asked on a facebook group and the majority of the replies were that an accountant would be beneficial as they know all the 'tips and secrets' we can write off to tax etc.

The price quoted from the accountant is quite vague, theyve suggested putting £50 a month aside.
Theres also some questions I feel i would like to be able to ask and if I am doing the accounts on my own, then I wouldnt have the benefit of the accountants knowledge. Such as ...the main client he has is an estate agent. They request a quote which must include all materials - once job done they get their invoice which doesnt have a breakdown of parts and materials is for instance he will fit a shower and charge them £400 but the shower unit cost £200. So the payment from this agent will be £400.
So...on my 'outgoings' sheet I enter the £200. On income spreadsheet I enter £400.

Theres two questions I have for this situation;

1 - its my understanding that this £400 will add to' turnover' - meaning a number of hefty priced materials on a few jobs could push towards VAT level. Is this a correct assumption?

2 - from last month, accounts have been opened at two different plumbing suppliers whereby for a month, he can order materials, equipment etc then pay at the end of the month . This is very useful in terms of cashflow as some of his clients (estate agents) have 30 day terms for payment although they sometimes pay sooner. Its also easier in terms of keeping the accounts spreadsheets tidy. Do you foresee this being a problem should anyone (HMRC) need to know what materials etc have been purchased for each job? Quite often he will buy items to have 'in stock' such as edging trim, fillers and occasionally if theres a special offer on a particular set of taps he might buy two sets for a job in the future.

So with the above two questions as examples, and my lack of experience this is why I am thinking it MIGHT be useful to keep the services of the accountant - its the cost thats bothering me.

Advice very welcome

 

[fisicx]

Use an accountant! They will save you far more than they cost.

You don't need a monthly fee. I pay once a year to do the accounts. My average savings are double the fee.

 

[Ozzy]

I've moved this thread to the Accounts & Finance section, you will get have a higher chance of some input from accountants here.

My thoughts are a little conflicted but I'll try;

Personally, I would endorse having an accountant if nothing more than having a specialist on hand to ask these questions and I'd expect to generally pay them a rate based on how much they work for me. Hourly rate if you will.

My wife and daughter have a different view. For the past five years, my wife has done our daughter's books and also filed her self-assessment for her without problems. However, the business has recently become more complex, and we're now interviewing accountants so that our daughter can choose who she wishes to work with.

On your specific questions;
1 - Yes that is correct.
2 - No, who your son's suppliers are is nothing to do with HMRC, just as long as all purchases are recorded correctly (cost of sales or balance sheet if he buys equipment needed to do his work, such as tools)

Saving around £50 a month to cover a future bill for an accountant cost does sound like sensible advice from that said accountant and does sound like they would be quite reasonably priced too.

 

[GLAbusiness]

Another vote for using an accountant. You might want to consider some accounting software (I use FreeAgent). If you do this in consultation with the accountant it may reduce the fees compared to providing spreadsheets.

Disclosure: I am not an accountant.

 

[Paul Kelly ICHYB]

Mixed response here, as well.

If you can, do your own book keeping - this is a time thing and accountants charge for their time! Initially, just keep a spreadsheet with costs and sales. If these start mounting up, look at using an accounts package.

At year end, use an accountant to check the numbers and ensure that you are utilising all of your potential savings - this is where they will become and asset to the business.

 

[fisicx]

Mixed response here, as well.

If you can, do your own book keeping - this is a time thing and accountants charge for their time! Initially, just keep a spreadsheet with costs and sales. If these start mounting up, look at using an accounts package.

At year end, use an accountant to check the numbers and ensure that you are utilising all of your potential savings - this is where they will become and asset to the business.

That's what I do. I drop off the books at year end and he does all the clever stuff. Every year he finds new ways to save me money.

 

[MyAccountantOnline]

Hello
My son started self employment in April. Plumber, with no work involving other contractors, so no CS card needed. Sole trader, not VAT registered. He has appointed an accountant (without discussing with me, the more organised one out of the two of us). As yet, we havent signed the accountants contract, theres been a few emails between myself and the accountant re the setting up on their systems etc.

I am wondering how beneficial this will be as opposed to me doing his first self assessment. Ive not done one before but I am quite organised with keeping records etc. Ive asked on a facebook group and the majority of the replies were that an accountant would be beneficial as they know all the 'tips and secrets' we can write off to tax etc.

The price quoted from the accountant is quite vague, theyve suggested putting £50 a month aside.
....

Advice very welcome

I’m an accountant who looks after accounts and tax for new and small businesses so I appreciate my response may be, or seem, bias.

If someone is trading via a limited company, I do think an accountant is essential, for a sole trader not essential but probably beneficial/wise. If someone who is self-employed has the time and inclination to deal with their own accounts and tax, they will probably be able to do so. Will they claim all tax relief due and ensure they pay no more in tax than is absolutely necessary – probably not. I do see clients who've tried to DIY make very costly mistakes due to lack of knowledge.

A good accountant (and they aren’t all good) will ensure your sons accounts and tax affairs are dealt with properly and on time, and ensure he pays no more in tax than he has to.

It concerns me a little that you say you’ve not signed any contracts yet with the accountant – all qualified accountants are required to issue a letter of engagement to a new client and obtain proof of their ID and undertake various checks before they can act for them.

Bear in mind keeping good accounting records (which is very good practice) ie bookkeeping isn’t the same as dealing with the accounts and tax returns. To do that properly accountants take many years to gain the necessary qualifications and experience.

Setting aside about £50 per month for a decent accountant is reasonable - you’ll struggle to get a good accountant for less than that, but you will find accountants who will agree a fixed fee with you.

I see you mention spreadsheets, in my opinion they are not good for bookkeeping – they are time consuming to use and prone to errors. You can get very good free software, two that spring to mind are VT cashbook and, depending on which bank your son uses, FreeAgent. Using proper software should also help minimise accountancy fees.

 

[MyAccountantOnline]

...
Theres also some questions I feel i would like to be able to ask and if I am doing the accounts on my own, then I wouldnt have the benefit of the accountants knowledge. Such as ...the main client he has is an estate agent. They request a quote which must include all materials - once job done they get their invoice which doesnt have a breakdown of parts and materials is for instance he will fit a shower and charge them £400 but the shower unit cost £200. So the payment from this agent will be £400.
So...on my 'outgoings' sheet I enter the £200. On income spreadsheet I enter £400.

Theres two questions I have for this situation;

1 - its my understanding that this £400 will add to' turnover' - meaning a number of hefty priced materials on a few jobs could push towards VAT level. Is this a correct assumption?

2 - from last month, accounts have been opened at two different plumbing suppliers whereby for a month, he can order materials, equipment etc then pay at the end of the month . This is very useful in terms of cashflow as some of his clients (estate agents) have 30 day terms for payment although they sometimes pay sooner. Its also easier in terms of keeping the accounts spreadsheets tidy. Do you foresee this being a problem should anyone (HMRC) need to know what materials etc have been purchased for each job? Quite often he will buy items to have 'in stock' such as edging trim, fillers and occasionally if theres a special offer on a particular set of taps he might buy two sets for a job in the future.

So with the above two questions as examples, and my lack of experience this is why I am thinking it MIGHT be useful to keep the services of the accountant - its the cost thats bothering me.

Advice very welcome

1. Yes that's correct - if he's dealing with VAT registered businesses why not register for VAT now?

2. Not at all if you record all transactions properly.

 

[MyAccountantOnline]

Mixed response here, as well.

If you can, do your own book keeping - this is a time thing and accountants charge for their time! Initially, just keep a spreadsheet with costs and sales. If these start mounting up, look at using an accounts package.

At year end, use an accountant to check the numbers and ensure that you are utilising all of your potential savings - this is where they will become and asset to the business.

I get what you say but as an accountant I truly dont think I've ever seen a clients spreadsheet which has saved me time. Spreadsheets are horrid for bookkeeping, prone to errors. I'd rather work from bank statements than clients spreadsheets.

 

[Bobbo]

1. Yes that's correct - if he's dealing with VAT registered businesses why not register for VAT now?

I'd guess that while OP / OP's son may view their main client as being the estate agent, technically the main client(s) are the landlords of the various (presumably residential) properties that the estate agent manages, so the ultimate customer(s) are in fact not VAT registered.

 

[JEREMY HAWKE]

Use an accountant unless the business is very small but find one that he gets along with as this is important if he expands his business and a good relationship with them is vital long term

 

[MyAccountantOnline]

I'd guess that while OP / OP's son may view their main client as being the estate agent, technically the main client(s) are the landlords of the various (presumably residential) properties that the estate agent manages, so the ultimate customer(s) are in fact not VAT registered.

It will depend on the OP's customers but definitely something to consider - sometimes people don't realise they can make a voluntary VAT registration and that it can be beneficial.

 

[JEREMY HAWKE]

It will depend on the OP's customers but definitely something to consider - sometimes people don't realise they can make a voluntary VAT registration and that it can be beneficial.

That's good "unknown" advice

An ad hoc owner driver here may only turn over 70K but with vehicle purchase/repairs and fuel being a very high percentage of costs They are all registered and benefit from the reclaimed vat

 

[Paul Kelly ICHYB]

That's good "unknown" advice

Agreed, but simple calculations will need to be done to work out the best route.

Remember, if the seller does not change their gross pricing, there will be a negative effect on margin/profit. However, prices will not need to go up by 20%.

 

[JEREMY HAWKE]

Agreed, but simple calculations will need to be done to work out the best route.

Remember, if the seller does not change their gross pricing, there will be a negative effect on margin/profit. However, prices will not need to go up by 20%.

No the prices excluding vat dont need to change but it will have a negative effect on private customers but everybody else will probably be registered so he wont be pricing himself of the local market
Plumbers charge what they want now Its like Loads Of Money from the 1980s

 

[MyAccountantOnline]

Agreed, but simple calculations will need to be done to work out the best route.

...

Or try the new VAT Registration Estimator tool - which I have tried and didnt feel was very clear for someone not familiar with VAT

 

[Paul Kelly ICHYB]

No the prices dont need to change but it will have a negative effect on private customers but everybody else will probably be registered so he wont be pricing himself of the local market

So, if they add 20% to the current price, it has gone up by 20% gross. Not every business thinks in terms of net - many think in terms of cashflow and totals paid.

You adjust your prices or your margin suffer!

 

[Newchodge]

I have 2 suggestions.

Do your own book keeping. But do it on proper accounting software, which guides you to doing it properly. I use Quickfile, which works for me, and is free until you reach a certain number of transactions. Effectively a long free trial period.

Don't sign a contract with an accountant now, especially one who will not give you an estimate - I understand why - their price will be dependent onthe quality of your book-keeping. When you reach year end look for an accountant to file self assessment, based on your professional book keeping. before they do so, work it out yourself and see how far out you would have been.

Then, for the next year you will have a better idea whether you need an accountant.

 

[tracey.]

Thank you for your replies, extremely useful! Will discuss but yep, it looks like the accountant and some book keeping software is the way forward.

 

[MyAccountantOnline]

....When you reach year end look for an accountant to file self assessment, based on your professional book keeping. before they do so, work it out yourself and see how far out you would have been.

Then, for the next year you will have a better idea whether you need an accountant.

I dont agree - a new business will very often gain the most by getting an accountant at the onset. Maximising tax savings is best done by an accountant from day 1 appointing an accountant 12 months later so often means wasted tax saving oppurtunities. I've seen it so often where people try to save accountancy fees.

 

[MyAccountantOnline]

Thank you for your replies, extremely useful! Will discuss but yep, it looks like the accountant and some book keeping software is the way forward.

If you like Excel you may find VT cashbook easiest to use. Here's a link for you - https://www.vtsoftware.co.uk/cashbook/

 

[NickZ]

Use an accountant! They will save you far more than they cost.

far to blanket wide throw don't you think? Micro companies with turn over less than 50.000 Pound a year don't pay taxes so far I know. Could also be at 25k, I'm not too sure.

 

[Newchodge]

far to blanket wide throw don't you think? Micro companies with turn over less than 50.000 Pound a year don't pay taxes so far I know. Could also be at 25k, I'm not too sure.

No, you're not sure at all, given the OP is a sole trader. And the rest of your post is just not true.

 

[fisicx]

Micro companies with turn over less than 50.000 Pound a year don't pay taxes so far I know. Could also be at 25k, I'm not too sure.

Please check your facts before making wild statements.

Corporation Tax rates and allowances

www.gov.uk

 

[NickZ]

Please check your facts before making wild statements.

What happened then to thresholds?

www.accaglobal.com/uk/en/technical-activities/uk-tech/in-practice/2024/April/Increasing-UK-company-size-thresholds.html

 

[StevensOnln1]

What happened then to thresholds?

www.accaglobal.com/uk/en/technical-activities/uk-tech/in-practice/2024/April/Increasing-UK-company-size-thresholds.html

That page is about reporting requirements for different size companies. It doesn't mention anything about tax.

 

[Paul Kelly ICHYB]

Self employed or company, if you make a profit, you will pay tax.

 

[Ziggy2024]

I dont agree - a new business will very often gain the most by getting an accountant at the onset. Maximising tax savings is best done by an accountant from day 1 appointing an accountant 12 months later so often means wasted tax saving oppurtunities. I've seen it so often where people try to save accountancy fees.

100% agree. It's also worth mentioning that the tax landscape changes very, very quickly. At the moment MTDITSA is an impending change which will mean quarterly reporting instead of annually. Accountants have to keep up with these changes, it's always worth having one available to keep you up to date and avoid unnecessary stress dealing with HMRC.

 

[fisicx]

What happened then to thresholds?

Did you even read the gov.uk page?

If you are a registered company you will pay tax. How much tax depends on how good your accountant.

 

[Argentum Tax]

If you are a registered company you will pay tax. How much tax depends on how good your accountant.

Well it depends on other factors too. Not entirely on how good is the accountant.

For instance it depends, to a significant extent, on the amount of profits.

 

[Ozzy]

For instance it depends, to a significant extent, on the amount of profits.

And if been trading for more than one year, and if you have had previous losses, whether you are offsetting.

 

[Lisa Thomas]

Perhaps consider you doing your son's bookkeeping and using an accountant to do his accounts.

Is he going to pay you for all your time helping with this?