Six key things to consider when choosing an accountant

Choosing an accountant is a key decision. Find the right one and they’ll make your life easier, while helping you to maximise your income and minimise your tax bills.

Some sole traders and small private landlords don’t use an accountant. They take a “DIY approach” to bookkeeping and completing their tax returns. Software makes this possible and it enables them to save money.

But for an easier life and peace of mind, many other sole traders and small private landlords do use accountants. Choosing an accountant is a key decision. Find the right accountant and they’ll make your life easier, while helping you to maximise your income and minimise your tax bills. Make a bad choice and you’ll earn less income and end up frustrated at the poor service you receive. So, before choosing an accountant, what key factors should you consider?  

1. Experience

You’re looking for a well-established accountant with years of experience of working for sole traders and landlords. If they’ve worked for sole traders in your sector, it can be hugely beneficial. They’ll be familiar with the unique challenges faced by sole traders in your sector, which should enable them to give you reliable practical advice. And although you’re likely to have to pay more for it, they or someone within their network should also be able to advise you on other important matters, such as growing your business or property portfolio, future investments, your pension, etc.  

Top tip! Seek recommendations from other landlords or sole traders in your sector. Ask them which accountants they use and whether they would recommend them. Also find out how much they pay and what services they get in return.

2. Qualifications

An accountant should of course have the necessary professional training and membership of relevant professional bodies. In the UK and Ireland, leading chartered accountancy bodies include the Association of Chartered Certified Accountants (ACCA), Chartered Accountants Ireland (CAI), the Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered Accountants of Scotland (ICAS).

Top tip! Qualifications and memberships will only tell you so much. The right accountant will also understand you, be committed to working hard for you and want to build up a strong professional relationship with you.

3. Services

You also need to find an accountant who can offer the services you require, now and into the future. While basic services such as bookkeeping and tax returns are essential, you might also gain from tax planning and business advisory services. If you run a business and it grows, consider whether the accountant can help to enable your growth and support you as your needs change over time.

When weighing up your options, get prospective accountants to explain what specific services they offer. Also find out about their culture and approach to customer service. You should be sure that they will respond quickly and satisfactorily to your requests for support, not leave you waiting ages for a reply.  

Top tip! Find out who your regular contact will be at prospective accountants and ask to meet them. This is the person with whom you’ll need to establish a good working relationship. Crucially, they need to be someone you can trust.

“When weighing up your options, get prospective accountants to explain what specific services they offer. Also find out about their culture and approach to customer service.” 

4. Reviews

Prospective accountants will probably tell you how wonderful they are and how much their existing clients love them. Their website might also contain glowing quotes from satisfied clients. But you need to do some of your own research. Look on social media and review platforms such as Trustpilot to see what clients are actually saying and what ratings they have given. You need to be able to trust your accountant, they need to demonstrate integrity and professionalism.

Top tip! Even the best accountants attract negative reviews – sometimes unfairly. As well as the glowing reviews, read the bad ones to see how the accountant has responded. It can reveal much about their customer service and explain bad reviews.

5. Value

Although, obviously, you’ll want to minimise your accountancy costs, going for the cheapest option can be unwise. Generally, you get what you pay for. You need to consider what value you will get, not necessarily what price you pay. An accountant who charges you slightly more might offer you greater quality. They could be much more reliable and give amore responsive, personalised service.  

Top tip! Accountants either charge a fixed monthly fee for specific services or a set fee for a specific task (eg complete a tax return), possibly an hourly fee for other work. Make sure you understand what you’ll pay and what you’ll get for your hard-earned cash. Transparency is essential, there should be no hidden costs. And be sure to claim back all accountancy fees as an allowable tax expense.

“Make sure you understand what you’ll pay and what you’ll get for your hard-earned cash. Transparency is essential, there should be no hidden costs.”

6. Software

As a sole trader or landlord, you realise the importance of keeping accurate, up-to-date financial figures, so you’re happy to use accounting software. But you just need accounting software that’s quick and easy to use, gives you basic functionality and gives you access via your smartphone if you’re out and about. You want something that enables you to manage and minimise your expenses, something that saves you time, effort and costs when completing your Self Assessment tax return.

Top tip! Ask prospective accountants what software they’ll expect you to use. Also ask them how quick and easy their preferred client accounting software is. If it comes with complex and unnecessary “bells and whistles”, ask for something simpler.

And finally…

Leave yourself enough time when searching for an accountant. Rushing your decision can lead to mistakes. Seek recommendations from other sole traders or landlords. Make time for a brief face-to-face meeting with accountants, to get a better idea of who will be working for you.

Have conversations with a few shortlisted accountants before making your decision. Be clear about how much you’ll pay and what services you’ll get. Speak to some of their other clients. Find out whether they think they’re getting good value for money. Choose an accountant that uses the right software for your practical needs, software that saves you time, effort, money and makes your life easier. Ultimately, you’re hiring an accountant for the same reasons.

• This blog was written for Coconut accounting software.

Could you turn your hobby into a successful business?

Musical types buy and sell vinyl, write songs or make instruments. Arty types paint, take photographs or make ceramic pots. Sporty types cycle, go fishing or canoeing. Some write stories or poetry, while many others knit or sew, bake cakes, make jam or grow plants. 

Most of us have hobbies. They make life more enjoyable because they’re fun and they can benefit our physical and mental health. But for some, they can also generate a welcome few extra quid.

Can I turn my hobby into a business?

Research carried out by insurer Hiscox in 2022 suggested that 23% of sole traders had turned their hobby into a business. Many people now run “side-hustle” businesses, often selling on such platforms as eBay, Etsy and Amazon after turning their hobbies into lucrative cash-spinners. 

But not everyone has what it takes to run a successful business, no matter how much they love doing something. And sometimes a hobby is best suited to a spare-time business. However, hobbies can be turned into successful full-time businesses, enabling people to jack in their jobs and earn a living from their hobby or passion. 

A less risky option might be to launch as a spare-time hobby business, and see how it goes before deciding whether to launch full time. Caution is also advised, because doing something for money can be a lot different to doing it purely because you love it.     

Caution is also advised, because doing something for money can be a lot different to doing it purely because you love it.     

How much can I earn from my hobby before paying tax?

UK tax authority HMRC allows you to earn up to £1,000 of tax-free income from a hobby business. This is called your Trading Allowance. So, if you’re earning less than that a year, you won’t have to register your hobby business or pay any tax. But if you earn taxable income of more than £1,000 in a tax year (6 April to 5 April), you’ll need to register so that you can pay tax.

If you earn money from more than one hobby, the total taxable income from them all cannot be more than £1,000, if you want to avoid having to register and pay tax on your income.

How do I register my hobby business for tax?  

• Most people who need to report hobby business income to HMRC register as a “sole trader”, which is basically where you run your own self-employed business. 

• As a sole trader, in law, you and your business are the same thing, so you’re personally liable for business debts. To avoid this, you can set up a limited company, but that requires more tax admin and cost.

• If you haven’t done it before, you must register for Self Assessment before 5 October in your business’s second tax year (6 April until 5 April), otherwise HMRC can fine you. 

• Visit government website GOV.UK to register for Self Assessment.

If you haven’t done it before, you must register for Self Assessment before 5 October in your business’s second tax year (6 April until 5 April), otherwise HMRC can fine you. 

How much tax will I pay on my hobby business income?

Once your hobby business trading income goes over £1,000, if you’re earning more than the Personal Allowance (£12,570 in the 2022/23 tax year), you pay Income Tax on your “net profits” (ie total sales minus allowable tax expenses), with tax allowances also accounted for.

The amount of tax you pay is determined by the Income Tax band your taxable income falls into. Your taxable income can include income you earn from other sources (eg share dividend payments, rental income, pension payments, etc). 

• You’ll pay the 20% basic rate of Income Tax if your annual total taxable income is £12,571-£50,270.

• You’ll pay the 40% higher rate of Income Tax if your annual total taxable income is £50,271-£125,140.

• You’ll pay the 45% additional rate of Income Tax if your annual total taxable income is more than £125,140 (2023/24 for all figures; Income Tax bands and rates are different in Scotland).

Do I pay National Insurance on hobby business income?

• If your hobby business income is more than £12,570 a year, Class 2 National Insurance contributions (NICs) of £3.45 a week are payable. If it’s £6,725-£12,570, you don’t need to pay Class 2 NICs, but you still receive the benefits that come from paying them. 

• Class 4 NICs of 9% are payable on profits of £12,570-£50,270, with 2% payable on profits above £50,270.

What tax expenses can my hobby business claim?

To reduce your tax bill, potentially, there are many tax expenses that your hobby business can claim, including:

• machinery and equipment

• stock or raw materials 

• packaging and print

• broadband and phone

• travel (ie fuel, parking, train or bus fares)

• premises (ie rent, heating, lighting, business rates, etc)

• postage and office stationery 

• marketing and advertising costs 

• bank charges, insurance

• professional membership fees

• wages and professional fees paid to others 

• safety clothes and business-branded workwear.

If you run your hobby business from your home, you’ll probably be able to claim for some of your heating, electricity and water costs, Council Tax, mortgage interest or rent, broadband and telephone use. Alternatively, you may be able to claim a flat rate.

You can only claim for genuine business costs. There can be severe consequences if you conceal taxable hobby business income or make fraudulent expenses claims. If you use something for business and personal reasons (a mobile phone being a classic example), you can only claim business use costs as an allowable tax expense.

There can be severe consequences if you conceal taxable hobby business income or make fraudulent expenses claims. If you use something for business and personal reasons, you can only claim business use costs as an allowable tax expense.

Will my hobby business need to register for VAT?

• If your sales that were subject to VAT in the past 12 months were more than £85,000 (the VAT threshold for 2023/24) or you expect them to be more than £85,000 in the next 30 days, you must register for VAT. That is more likely if your hobby business is full time and very successful. You register for VAT via government website GOV.UK.

Will my hobby business need to keep tax records? 

If you need to register your hobby business and pay tax, you must maintain accurate, up-to-date records of your sales and costs, with exact figures and dates, so that you can complete your Self Assessment tax return and evidence your income and costs should HMRC ask you. HMRC can fine you if your records are not accurate, complete and legible. Also keep receipts and invoices for things you claim as tax expenses. 

How do I report my hobby business income to HMRC?  

You complete a Self Assessment tax return each year, the main SA100 tax return and the SA103 supplementary page, summarising your hobby business income, as well as all expenses and allowances you claim. 

You can file your Self tax return any time after the tax year finishes on 5 April, although the annual deadline for filing your Self Assessment tax return online is midnight on 31 January. A £100 fine is payable immediately if you miss the filing deadline. 

After HMRC receives your tax return, it will tell you how much tax you owe. The deadlines for paying your tax bill are usually: 31 January for any tax you owe for the previous tax year (known as a “balancing payment”) and your first “payment on account”; then 31 July for your second payment on account.

• This blog was produced for GoSimpleTax, award-winning software that makes completing a Self Assessment tax return much easier, quicker and cheaper when compared to using an accountant.

The business benefits of blogging and how to do it

You’ve probably never heard of Justin Hall, but he’s widely credited as producing the first blog website (Links.net), created while he was a college student in 1994.

It would be three years before Jorn Barger (editor of influential early blog website Robot Wisdom) coined the term “weblog”, which he used to describe the process of “logging the web” while “surfing” online. Barger is credited as the man who invented blogging as we know it. 

In 1998, the first blog appeared on a mainstream news website in the USA, and one year later, programmer Peter Merholz shortened weblog to blog, the term now commonly used. Growth in popularity was rapid. According to WenDesignerDepot.com, worldwide, there were only 23 blog websites in 1999. Just seven years later – there were more than 50m. There are now thought to be more than 440m.

Inbound links can really make a big difference to your search engine rankings and producing high quality, appealing blogs can encourage others to link to your website.

Business benefits

Probably the key benefit that blogging can bring is it can boost your search engine rankings. But using the right keywords in sufficient density, on-page optimisation (ie writing your website page in a way that allows search engines to easily understand what it’s is about) and other SEO tactics will only get you so far.

You also want links to your site from other, relevant, trusted websites, because Google also ranks pages according to how authoritative it believes them to be. Inbound links can really make a big difference to your search engine rankings and producing high quality, appealing blogs can encourage others to link to your website.

Raise your profile

You don’t have to confine your blogs to your own website, you can make them available to others. If your blogs are published on the right websites, it can seriously help to raise your business’s profile (online and offline), while including links can also drive traffic back to your website. 

Being seen to have insightful or thought-provoking opinions as an expert on either small-business topics or those relevant to your trade or sector can enhance your personal and professional credibility. This can lead to other media opportunities, which can also raise the profile of you and your business. 

Blogs can also be a good way to reach out and start conversations, which can help you to develop trust and stronger customer relationships.

Blogging can give a voice to your brand, giving others a better idea of what your brand values (ie what your business stands for). Blogs can also be a good way to reach out and start conversations, which can help you to develop trust and stronger customer relationships. This can ultimately create leads and drive sales. And one of the big benefits of blog marketing is it’s no cost or low cost (you can pay others to write blogs for your business). 

Don’t bore readers

Before starting to blog, be crystal clear about your audience. Who are they, what needs do they have and what value can your blog offer them?

Avoid writing about boring subjects – they turn people off. Pick interesting things to write about. If there’s no avoiding a boring topic – at least write about it in an interesting way. Short blogs are best (600-700 words); favour short sentences and paragraphs that are free of jargon and spelling errors. Use subheadings to split up the copy and draw readers in. 

Your blogs should be optimised for Google, of course. Keep the tone warm and accessible, but professional throughout. Show readers that you know what you’re talking about and let your personality shine through. Don’t pack your blogs with sales messages (they also turn people off).

Offer genuine value 

Pick an irresistible title (asking questions is a proven tactic). From the off, engage readers with your words. Inform them. Provide them with a solution or useful knowledge. If suitable – entertain them or make them smile. Make them think. 

Give them genuine value, because it encourages people to “know, like and trust” your brand. Before offering a contentious opinion, consider how it could be received (and how this could affect your business). Some subjects are best avoided, however passionate you feel about them.

Make sure, when published, readers can easily share your blog via email or social media platforms. Welcome feedback and engage in conversations.

Make sure, when published, readers can easily share your blog via email or social media platforms. Welcome feedback and engage in conversations. Tell readers how to contact your business if appropriate. You could even use the opportunity to get them to sign up to receive a regular email from your business. For best results, blog regularly and track response/results to see which blogs work best and when. Above all, enjoy it. Like business – blogging should be fun.

• This blog was written for Manage My Website