Do Sole Traders Need An Accountant?
Overview
There is no legal requirement for sole traders to hire an accountant, and in many cases they are encouraged to manage their own finances. Doing so comes with its own challenges, unique to sole traders, that suit some business owners more than others. Learn what these challenges are, which obligations must be met, and at which point it is wise to seek support.
Self-management challenges
Managing business finances as a sole trader presents unique challenges because business transactions are often handled through everyday spending accounts. Calculating tax when allowable expenses fluctuate, remembering to set aside a tax budget, and identifying allowable expenses amongst day-to-day spending all depend on the account holder’s financial discipline. A good starting point is to open a new bank account to handle business transactions.
Self-management obligations
Whether self-managing or using an accountant, sole traders have three core financial obligations:
Ongoing record keeping
Keep accurate records of income and expenses to support Self Assessment and Making Tax Digital
Annual Self Assessment Tax Return
Report income, expenses and profits to HMRC each year, before paying tax
Quarterly Making Tax Digital updates*
Use HMRC-compatible accounting software to submit quarterly updates
*MTD applies to sole traders and landlords whose combined qualifying income from self-employment and property exceeds HMRC’s thresholds: From April 2026: over £50,000; From April 2027: over £30,000; From April 2028: over £20,000.
Using an accountant
When a sole trader faces new obligations, growth or financial complexity, accountants become more useful. Here are four common scenarios:
Accountants help individuals to understand what income must be reported, identify allowable expenses, guide them on how to register correctly with HMRC, avoid missed deadlines and understand payments on account
When annual profits exceed £50,000, incorporating represents tax benefits that accountants know how to navigate
Sole traders must register for VAT once their taxable turnover exceeds the £90,000 threshold. VAT introduces complex reporting rules that accountants understand
Accountants know how to handle the complex tax calculations that come with additional income from rent or second employment
Common Questions
Basic Self Assessment preparation usually costs £150 to £400, while ongoing accounting support typically ranges from £50 to £150 per month
Not separating personal and business transactions; using manual spreadsheets for Making Tax Digital – HMRC requires software that connects to their systems; treating bookkeeping as a year-end task when it is ongoing
From 6 April 2026, many UK sole traders and landlords must keep digital records, use compatible software, and submit quarterly updates plus a final declaration under Making Tax Digital for Income Tax
Earning over £100,000 can make your tax position more complex because your Personal Allowance begins to reduce once your income exceeds this threshold. Read our full guide here