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Online accountants – who else needs an online accountant?

Online accountants – who else needs an online accountant?

There’s no doubt about it, the wholesale contractor accountancy marketplace is big business and everyone wants a piece of the action.

In recent months, a new wave of online accountants have been hitting the forums and contractor portals hard in the hope of gaining a foothold in what is already a fragmented market. Their message is clear – why pay £130 a month for the ‘old school’ contractor accountants when you can get the same, if not better service for a third of the price?

It’s a pretty compelling argument and their proposition is almost too good to be true.

Lets dig a little deeper.

Was is an online accountant?

An online accountant offers contractors an ‘end-to-end’ accounting service. This usually combines a bespoke web-based accountancy package that is backed up by a team of accountants and personal account managers. The idea here is that the contractor or freelancer is able to create invoices, manage their expenses and calculate a real-time view of their business. This then enables them to work out how much they can pay themselves (in PAYE salary, expenses and dividends) without having to produce in-year accounts or time-consuming reconciliations.

Obviously there is an element of work required by the end-user but certainly no more than you are asked to do when working through a traditional contractor accountant, and in some cases much less. The technology is also impressive. Real-time feeds into HMRC, Companies House and the government Gateway make online accountants the perfect choice for any time-precious contractor.

Of course, the more challenging aspects of accounting are managed by the online accountants who will submit VAT, corporation tax and personal self assessment returns on behalf of their clients. They will also handle the Companies House annual return and accounts as well as advising on complex issues such as IR35, family business tax, ESC 16 and the agency workers directive.

How much does an online accountant cost?

Most online accountants pitch their monthly fees around the £50-£60 mark. This includes all of the above services as well as unlimited telephone support and free company setup.

Why are online accountants so cheap?

One word – volume. Most high street accountants are happy with 100-200 clients and are therefore keen to maximise their return on investment for what is a relatively small client base. By making their business scalable, online accountants on the other hand are able to service more and more contractors without taking an enormous hit to their margins. This is why their fees are way cheaper than some of the more well-known contractor accountants.

Where can I find out more?

We have a selection of online accountants in our top 10 directory although companies such as Crunch and Boox are definitely worth a closer look. A quick search in Google will throw up at least another 20 providers at the time of writing so take the time to do your research. My guess is that this is just the start of a new and exciting time for the contractor accountancy marketplace……I shall watch with interest.

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