What does an accountant do? Services explained | AccountingStack

Many people hire an accountant without fully understanding what they actually do — or whether they need one at all. The word "accountant" covers a broad range of services, from basic number-crunching to sophisticated tax strategy. Some accountants do everything; others specialise. This guide breaks down the core services in plain English, so you can go into any conversation with an accountant knowing exactly what to ask for and what to expect.

The basics: record-keeping and bookkeeping

Before any accounts can be prepared or tax returns filed, someone needs to keep an accurate record of every penny coming in and going out of your business. This is bookkeeping, and it forms the foundation of everything else an accountant does.

Good bookkeeping involves tracking all income and expenses as they occur, reconciling your bank accounts against your records regularly, and maintaining a clear audit trail throughout the year. When done well, it means there are no nasty surprises at year-end and no scrambling to find receipts from 18 months ago.

Many accountancy practices offer bookkeeping as part of their service, particularly for smaller businesses. Others will expect you to maintain your own records using software such as Xero or QuickBooks and then pass them a clean set of books at year-end. Either arrangement can work well; the key is agreeing upfront who is responsible for what.

Annual accounts preparation

Preparing annual accounts is one of the most fundamental things an accountant does. The exact requirements depend on your business structure.

If you run a limited company, you are legally required to file statutory accounts at Companies House every year. These include a profit and loss account, a balance sheet, and accompanying notes. The accounts must follow recognised accounting standards and be filed within nine months of your financial year-end. Your accountant will prepare these, ensure they comply with the relevant standards, and submit them on your behalf.

If you are a sole trader or a partner in a partnership, you are not required to file accounts publicly, but you still need a set of accounts to complete your self-assessment tax return accurately. Your accountant will prepare a profit and loss statement showing your business income and allowable expenses, which then feeds directly into your tax calculation. An accurate set of accounts is the difference between paying the right amount of tax and paying too much, or too little and facing penalties later.

Tax returns and compliance

Tax compliance is at the heart of most accountancy practices, and it is often the main reason people seek out an accountant in the first place.

For individuals, sole traders, and partners, this means completing a self-assessment tax return each year and filing it with HMRC by 31 January. The return covers income from all sources, including employment, self-employment, rental income, dividends, and savings interest. Your accountant will gather the relevant information, calculate your tax liability, claim any reliefs or allowances you are entitled to, and submit the return on time.

For limited companies, there is also a corporation tax return (the CT600) to file with HMRC within twelve months of the financial year-end, along with payment of any tax due within nine months and one day. This is separate from the Companies House accounts filing and has its own deadlines.

A good accountant does more than simply fill in forms. They will check your records for anything that looks out of place, ensure you are not missing any allowable deductions, and make sure you meet every deadline. Missing tax deadlines carries automatic penalties, so having someone managing your compliance calendar is genuinely valuable. They can also act as your authorised agent with HMRC, handling correspondence and enquiries directly so you do not have to.

VAT returns and VAT advice

Once your taxable turnover exceeds the VAT registration threshold (£90,000 in the 2025/26 tax year), you must register for VAT and file quarterly VAT returns. Your accountant can handle the registration process and then take over responsibility for preparing and submitting each return on time through HMRC's Making Tax Digital (MTD) system.

Beyond the mechanics of filing, a good accountant can also advise you on which VAT scheme makes the most sense for your business. The standard (accruals) method works well for most businesses, but the flat rate scheme can be more tax-efficient for certain service businesses, and the cash accounting scheme can help businesses with slower-paying clients by letting you account for VAT only when you actually receive payment. Choosing the wrong scheme can cost you money year after year, so this is an area where professional advice pays for itself.

Your accountant can also help if you have questions about what is VAT-exempt, zero-rated, or subject to the standard 20% rate, which is particularly useful if your business sells a mix of goods or services.

Payroll administration

If you employ staff, or pay yourself a salary through your limited company, you need to run payroll. This involves calculating gross pay, deducting income tax and employee national insurance contributions, calculating employer national insurance contributions, and making the correct payments to both employees and HMRC.

Since the introduction of Real Time Information (RTI) reporting, employers are required to submit a Full Payment Submission (FPS) to HMRC on or before every payday, rather than once a year. Getting this wrong, even by a day, can trigger penalties.

At year-end, your accountant will produce P60s for all employees and handle any P11D filings for benefits in kind (such as private medical insurance or company cars). They will also manage your auto-enrolment pension obligations, ensuring the correct minimum contributions are being made and that your scheme is properly administered. For most small business owners, outsourcing payroll to their accountant is far less stressful than trying to manage it in-house.

Tax planning and advisory work

Compliance work keeps you legal; tax planning keeps you efficient. This is arguably where a skilled accountant earns their fee many times over.

For limited company directors, one of the most common planning opportunities is the salary and dividend split. Rather than taking a large salary (which attracts both income tax and national insurance), many directors pay themselves a small salary up to the national insurance threshold and draw the rest as dividends, which are taxed at lower rates. Getting this split right for your specific circumstances can make a meaningful difference to your net take-home pay each year.

Timing income and expenditure strategically is another valuable tool. If you are approaching a higher tax band, your accountant might recommend deferring a large invoice until after your year-end, or bringing forward a significant capital purchase to reduce this year's taxable profits.

Other planning areas include Research and Development (R&D) tax credits for businesses carrying out qualifying innovative work, capital allowances on plant and equipment (including the Annual Investment Allowance), and business structure advice — for example, whether it makes sense for a sole trader to incorporate as a limited company given their level of profit and personal circumstances.

Tax law changes frequently. A good accountant stays current with Budget announcements and HMRC guidance and proactively flags opportunities or risks that apply to your situation, rather than waiting for you to ask.

Company secretarial services

Limited companies have ongoing obligations at Companies House beyond the annual accounts filing. Each year, you must file a confirmation statement (formerly the annual return), confirming that the information Companies House holds about your company, including its registered address, directors, shareholders, and share capital, is accurate and up to date.

If your company structure changes, such as a new director being appointed, a director resigning, shares being issued or transferred, or the registered office moving, these changes must be notified to Companies House promptly. Your accountant can handle all of these filings and maintain your statutory registers, ensuring your company remains fully compliant with its legal obligations under the Companies Act 2006.

Business advisory and management accounts

Annual accounts tell you what happened last year. Management accounts tell you what is happening now, which is far more useful for running a business.

Many accountants produce monthly or quarterly management accounts for their clients: a simplified profit and loss account, balance sheet, and cash flow summary that gives owners a real-time view of their financial position. This makes it much easier to spot problems early, understand which parts of the business are profitable, and make informed decisions about hiring, investment, or pricing.

Cash flow forecasting is a related service: projecting your expected income and outgoings over the coming months so you can see potential shortfalls in advance and plan around them. For growing businesses in particular, running out of cash is a common cause of failure even when the underlying business is profitable, so this kind of forward visibility is genuinely important.

What an accountant doesn't do

It is worth being clear about the boundaries of what an accountant can offer. Accountants are not solicitors and cannot give legal advice on contracts, employment disputes, or litigation. For legal matters, you need a qualified solicitor or barrister.

Accountants are also not Independent Financial Advisers (IFAs). While an accountant can explain the tax implications of different pension or investment options, they cannot recommend specific financial products or advise on investment portfolios unless they hold a separate FCA authorisation. For investment and retirement planning advice, you need a regulated financial adviser. Similarly, accountants do not advise on insurance products; that requires an insurance broker or adviser.

Do you need all of these services?

Not every business needs the full range. Most small businesses and sole traders start with the essentials: annual accounts, a self-assessment or corporation tax return, and VAT returns if applicable. As businesses grow, payroll, management accounts, and tax planning advice typically become more important.

Some accountants bundle services into a fixed monthly fee; others charge separately for each piece of work. Either model can work well depending on your needs and cash flow preferences. The important thing is to be clear about exactly what is included and what will be charged additionally.

If you are not sure which services you need, the best starting point is a conversation with an accountant who works with businesses like yours. Most offer a free initial consultation.

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