When should your start up hire an accountant

In the very early days of a start-up, it is tempting to keep costs as low as possible. You might be thinking that an accountant is something you only need once you are making serious profit, have a finance team or are dealing with complex tax planning.

In reality, the question is not if you should hire an accountant, but when should your start up hire an accountant so you get maximum value for money.

For founder led, owner managed and fast growth limited companies across the UK, the right accountant can be the difference between smooth growth and constant firefighting. Agile Accountants see this every day in practice.

This guide walks through the key milestones where bringing in an accountant stops being a nice bonus and becomes a smart business decision.

Why start ups put off hiring an accountant

Before we look at timing, it helps to be honest about why many founders wait.

Common reasons founders delay hiring an accountant

• “We are not making enough money yet.”
• “It is just a simple business, I can manage for now.”
• “Software like Xero will do most of it for me.”
• “We will get an accountant next year when things are more settled.”

At the same time, research shows that more than a quarter of small business owners have little or no accounting knowledge.

When you mix low accounting confidence with complex UK tax and reporting rules, there is real risk. As soon as you incorporate a limited company, you take on legal responsibilities around record keeping, filing accounts and paying the right tax on time.

So yes, it is possible to wait. But it usually costs more in penalties, lost tax reliefs and messy clean up work later.

Key moments when your start up should hire an accountant

Here are the main trigger points where hiring an accountant stops being optional and becomes very sensible.

When you choose your business structure

The first decision many founders make is whether to trade as a sole trader, a partnership or a limited company.

Guidance for small businesses consistently points out that your choice of business structure is a key early decision, as it has an impact on tax, personal liability and future funding options.

An accountant can help you understand:

• How each structure affects your personal risk.
• The tax position now and in the future.
• Whether investors are likely to require a limited company.
• When it makes sense to incorporate if you start as a sole trader.

When you incorporate a limited company

The day you register a limited company with Companies House, your responsibilities step up. From that point, directors must keep proper company and accounting records, file confirmation statements, deliver accounts on time and ensure the company pays the correct tax.

You must keep accounting records that show and explain the company’s transactions, and HMRC generally expects these to be retained for at least six years from the end of the financial year they relate to.

Getting this wrong can lead to:

• Late filing penalties from Companies House.
• HMRC interest and penalties on late or incorrect tax.
• Extra stress when you finally bring in an accountant to sort it out.

Ideal timing: speak to an accountant around the point of incorporation or shortly after. They can:

• Register you correctly for Corporation Tax and other taxes.
• Set up your chart of accounts and bookkeeping system in Xero or similar.
• Put simple processes in place for records and expenses.
• Explain what you need to file and when.

When you hire your first employee or pay yourself a salary

As soon as your start up starts running payroll, more rules apply. You will need to:

• Register as an employer with HMRC.
• Operate PAYE and calculate income tax and National Insurance.
• Deal with pensions auto enrolment.

Many directors also start paying themselves a mix of salary and dividends. Getting that balance wrong can increase your tax bill or create problems with director loan accounts.

This is a classic moment where a start-up accountant adds value:

• Designing a tax efficient salary and dividends mix.
• Setting up payroll correctly and using appropriate software.
• Making sure you meet filing deadlines for RTI submissions and year end summaries.

If you are asking “Is it time to take on our first employee” it is also time to ask “When should our start up hire an accountant to help us do this properly”.

When you approach the VAT threshold or go international

If your VAT taxable turnover in the UK goes over the registration threshold within a 12 month period, you must register for VAT. Missing this can mean back dated VAT bills and penalties.

An accountant can help you to:

• Track your turnover and predict when you will hit the threshold.
• Decide whether voluntary early registration makes sense.
• Choose the right VAT scheme
• Deal with cross border VAT if you start selling overseas or using international platforms.

For many fast growth start-ups, this comes around quicker than expected, especially where revenue ramps up after funding or product market fit.

When you seek investment or funding

Investors and lenders are interested in clear, reliable numbers. They want to see:

• Clean historical accounts.
• Up to date management information.
• Realistic forecasts and cash flow projections.

While you can build a financial model yourself, having an accountant involved gives external parties more confidence that:

• The numbers make sense.
• Assumptions are reasonable.
• Your business understands its obligations and risks.

If you are preparing for a funding round, accelerator application or bank finance, that is a strong sign that now is the time to hire an accountant.

When cash flow starts to keep you awake

It is very common for start-ups to look profitable on paper, but still run out of cash. Rapid hiring, long customer payment terms, stock purchases or large tax bills can all create pressure.

An accountant can help you:

• Build 12 to 18 month cash flow forecasts.
• Map out expected tax and VAT payments.
• Test scenarios like new hires, funding rounds or price changes.
• Put in place basic credit control and payment terms policies.

If you find yourself checking the bank balance several times a day, that is your signal. Bringing in an accountant shifts you from firefighting to proactive planning.

What a good start up accountant actually does

Many founders think accountants only deal with year-end accounts and tax returns. For an ambitious start up, the role is much broader.

Core compliance support

• Year-end accounts for Companies House.
• Corporation Tax returns and computations.
• VAT registrations and quarterly returns.
• Payroll filings, P11D forms and related obligations.
• Director self-assessment tax returns where needed.

Advisory and support for growth

• Choosing and setting up accounting software, usually cloud tools such as Xero.
• Designing a simple monthly reporting pack with profit and loss, balance sheet and cash flow.
• Helping you understand margins, runway and breakeven points.
• Advising on the timing and structure of funding rounds, grants or R&D claims.
• Acting as a sounding board when you make big decisions.

At Agile Accountants we typically work with limited companies on a monthly basis, so you always have an adviser who understands your numbers, not just once a year at filing time.

Signs you have left it too late

If any of the following feel uncomfortably familiar, you probably waited longer than ideal to bring in an accountant:

• You are not sure when your company accounts are due.
• You have received penalties from Companies House or HMRC.
• Your bookkeeping is months behind or spread across spreadsheets and bank exports.
• You are unsure how much you can safely take out of the company.
• Investors or lenders are asking for reports you cannot easily produce.

The good news is that a proactive accountant can still help you fix all of this. But it is usually cheaper and less stressful to get help earlier.

How working with Agile Accountants supports start ups

Because Agile Accountants work with start-ups across the UK, we understand the typical journey from idea to established business.

For owner managed and fast growth limited companies we usually:

• Recommend and implement cloud bookkeeping tools such as Xero.
• Set up a chart of accounts tailored to your business model.
• Agree a monthly or quarterly reporting rhythm.
• Provide clear, plain English explanations without jargon.
• Combine end to end compliance with useful advisory support.

Rather than waiting for the year end, our clients get regular management information and space to ask questions throughout the year. That is particularly valuable in the early stages where every decision matters.

So when is the right time to hire an accountant

Let us bring this back to the original question: When should your start up hire an accountant?

You almost certainly need an accountant:

• When you are planning to incorporate, or have just incorporated, a limited company.
• Before you hire your first employee or start running payroll.
• When you are approaching the VAT threshold or trading internationally.
• When you are preparing for investment or funding.
• As soon as cash flow and tax start to feel confusing or risky.

For some micro businesses this might be a few months after launch. For fast growth start-ups, it can be almost immediate.

If you are based in Birmingham or anywhere in the UK and want an accountant who will work with you monthly, not just once a year, Agile Accountants are built for exactly that kind of relationship. The earlier we are involved, the more we can help you avoid costly mistakes, keep HMRC and Companies House happy, and focus on growing the business you actually set out to build.