At a glance
- There are many opportunities for accountants looking to set up on their own
- Regulatory, compliance, and financial requirements must be met
- Navigating all the steps correctly can lay a strong foundation for success
The opportunities can be great for accountants wanting to start their own practice. It’s the preferred choice for many, with a study of ONS figures by NimbleFins estimating that of approximately 40,275 VAT-registered UK accountancy firms, around 80% are made up of four or fewer employees.
However, there is a lot to consider before you get going, and the to-do list can seem overwhelming. We spoke to Paula Tomlinson, founder of On The Spot Accountants, about the first steps to set a practice up for success.
Decide your legal structure
To decide which option is right for you, you’ll need to understand the tax and regulatory obligations for each. A sole trader makes all business decisions and must complete Self Assessments annually. A limited company offers limited liability and pays Corporation Tax on profits, while in a partnership, two or more individuals share ownership, responsibilities, profits, and liabilities.
Tomlinson cautions that “going into business with anyone is a big step, so take care going into partnership or having a co-director-shareholder unless you already know them well and you’re clear on who is bringing what to the table. Either way, outside of spouses, a partnership agreement or shareholders agreement is likely to serve you well.”
In terms of tax, she says: “Sole trader, partnership and LLP income tax and national insurance currently looks pretty efficient compared to limited company tax and dividend tax, depending on profit levels and how much you’ll take out of the business to live on.”
Get the right qualifications
Prospective practice owners must be registered with the appropriate professional body, and will need a practising certificate (PC), official certification from professional accounting bodies like the IFA. To hold the IFA’s PC, firms must be an IFA member, and comply with its bye-laws, membership regulations and public practice regulations.
Professional indemnity insurance must be in place before you’re granted a PC, to protect your firm against clients claiming you’ve made a mistake or given poor advice.
Also required is some level of continuing professional development (CPD) to ensure you stay updated on skills and regulations through courses, webinars and training.
Don’t forget the admin
- Register with HMRC as an agent – “early, as it can take some time!”
- If handling client data, register with the ICO for a small annual fee
- Comply with the IFA’s guidance as your Anti Money Laundering (AML) Supervisor – AML rules require annual reviews of all clients
Write your business plan
Enterprise Nation’s StartUp Kit suggests ‘IMOFF’ as the headings for your business plan: Idea, Market, Operations, Financials and Friends. It notes that “your business plan will act as your map. It will guide the business from start to growth, with reference to milestones along the way”.
“Going into business with anyone is a big step, so take care going into partnership or having a co-director-shareholder unless you already know them well and you’re clear on who is bringing what to the table.”
Paula Tomlinson, Founder, On The Spot Accountants
The plan should outline how you’ll get started, your end goals, steps to bridge the gap, and include details of your existing resources, what you’ll need, and how you’ll fund them.
Before drafting, you must understand the best approach to deliver for a variety of target clients. “Do they need a team of employees, or a sole practitioner? Do they appreciate fixed fees (who doesn’t?)? Do they tend to prefer to pay monthly?” says Tomlinson.
A sole trader might, for example, need simple support with monthly billing for cashflow. A large GP practice, however, will likely require ongoing bookkeeping, tax, and year-round advisory services.
Digitise for success
No single software suits all practitioners. Experimentation is key to finding the right fit that works well and matches your clients’ needs.
With Making Tax Digital (MTD ITSA) around the corner, bridging or MTD-compliant software will be vital. Tomlinson says: “We all know bookkeeping tools like QuickBooks and Xero, but what about FreeAgent or Pandle, or many others, for smaller clients?”
Practice management software is important if you have employees. This could include anything from customer relationship management (CRM) to task management tools, to time tracking and workflow management.
There are many options, and Tomlinson recommends doing your research: “Ask other firms, friends, colleagues what they use and why, and carry out a few free trials.” Also consider how deeply you’ll engage with AI, and set clear rules for clients and staff.
“Choosing the right tech stack will streamline client communication and enhance customer experience,” says Samantha Skyring, Head of Group Learning & Development at TaxAssist Accountants.
“Gathering client information in a timely manner and sharing relevant business and tax information and guides will help your clients and secure your position as trusted adviser.”
Market to the clients you want
It’s helpful to be specific about the type of client you want to look after. This might be by client type, such as companies, landlords or high net worth (HNW) individuals, or by industry.
Find out where these target clients are located and market where they are. “For sole traders or small landlords you might find local Facebook groups very helpful, for HNWs, freelancers and Limited Companies, LinkedIn may work well,” says Tomlinson.
“Having a focus means you get known for delivering for these clients, you get better at providing that service and you don’t waste your marketing efforts in the wrong direction.”
More information on IFA’s business and management short courses here.
