Accountants for Startups: UK Accounting Basics

Startup company accounting: what to set up in your first 30 days

If you do nothing else, do these five things:

• Open a separate business bank account and stop mixing payments.
• Pick bookkeeping software that pulls bank transactions automatically.
• Decide who categorises transactions weekly (you, a bookkeeper, or both).
• Build a simple folder system for invoices, receipts, and contracts.
• Start a basic cash forecast that looks 13 weeks ahead.

This setup reduces errors and makes tax work cheaper later.

Accounting in startups: choose the right structure early

A common fork is a sole trader vs a limited company.

A sole trader usually means:

• Simpler admin.
• You report profits on Self Assessment.
• You pay income tax based on bands (and National Insurance).

For England/Northern Ireland main rates, income tax bands and rates for 2025/26 include 20%, 40%, and 45%, with the higher-rate threshold at £50,270.

A limited company usually means:

• More admin (accounts, Corporation Tax, Companies House filings).
• Limited liability.
• Cleaner structure for investment and multiple founders.

Corporation Tax uses a 25% main rate and a 19% small profits rate (with Marginal Relief between £50k and £250k profit).

A practical rule: if you plan to raise funds, hire soon, or you want clearer separation between personal and business money, the limited company route often fits better.

Startup bookkeeping: your “weekly routine” that prevents chaos

Bookkeeping is not a once-a-year job. For most founders, weekly is the sweet spot.

Your weekly checklist:

• Match bank transactions to invoices and receipts.
• Categorise costs (software, marketing, contractors, travel).
• Flag anything unclear and fix it while you still remember.

Common mistakes that cause pain later:

• Using one “misc” category for everything.
• Losing supplier invoices (so you can’t claim costs).
• Treating transfers between accounts as “income.”

Startup bookkeeping software: what to require

Pick tools based on what you need to do every week.

Look for:

• Bank feeds and rules (so recurring costs are handled automatically).
• Easy invoicing with payment status.
• Receipt capture on mobile.
• VAT support if you register.
• Exports your accountant can use without rework.

If the tool cannot show a simple P&L and balance sheet at any time, it’s not helping you.

VAT registration: threshold, timing, and the price problem

In the UK, you must register if your taxable turnover goes over £90,000 in the last 12 months, or you expect to exceed it in the next 30 days.

But there’s a decision point before you hit that number.

Voluntary VAT registration can help if:

• You buy a lot with VAT on it (equipment, software, professional services).
• Your customers are VAT-registered businesses (they can reclaim VAT).

It can hurt if:

• You sell to consumers, and your prices are sensitive.
• You cannot raise prices, so VAT comes out of your margin.

A simple example:

• You sell a service for £1,000.
• If you must charge VAT and you keep the same “customer price,” your net revenue is effectively lower because the VAT portion is due to HMRC.

So check your customer mix before you register.

Bookkeeping services for startups: who does what (and when)

Most startups split the work across three roles.

• Founder/ops: approves bills, keeps contracts, and confirms what a cost is for.
• Bookkeeper: reconciles weekly, fixes categorisation, keeps ledgers tidy.
• Accountant: year-end accounts, Corporation Tax, higher-risk items (VAT setup, R&D, share schemes, SEIS/EIS support).

This division works because each person does what they are best at, and no one has to “guess” later.

Cash flow: the part that breaks healthy startups

Profit does not pay bills. Cash pays bills.

A basic 13-week cash forecast is enough for most early-stage teams:

• Start with today’s bank balance.
• Add expected receipts by week.
• Subtract fixed costs (salaries, rent, subscriptions).
• Subtract variable costs (ads, contractors, shipping).
• Update every week.

Two cash rules that help:

• Assume customers pay late until they prove otherwise.
• Keep a buffer (one month of costs is a minimum target; more is safer).

If you want one metric to watch daily, watch cash runway: how many weeks you can operate with current cash and realistic receipts.

Startup accounting services: compliance deadlines you cannot ignore

If you operate a limited company, you have separate deadlines for Companies House and HMRC.

The GOV.UK website overview is clear:

• File annual accounts with Companies House: 9 months after your financial year ends.
• Pay Corporation Tax: usually 9 months and 1 day after the accounting period ends.
• File the Company Tax Return: 12 months after the accounting period ends.

Put these into a calendar on the day you incorporate.

Companies House admin is changing: identity verification matters

If you’re forming or running a company, pay attention to identity verification.

From 18 November 2025, identity verification becomes a legal requirement, with a 12-month transition period tied to confirmation statements and role timings.

This affects directors and people with significant control (PSCs). If you ignore it, your company can get blocked from filings, and you risk offences.

Also note fee changes:

• The current Companies House incorporation fee is £50 online (standard limited company).
• Companies House announced the digital incorporation fee will change to £100 from 1 February 2026.

So budget for admin, not just taxes.

Reliefs and allowances: what to track from day one

You do not need complex tax planning to benefit from reliefs. You do need evidence.

Two areas to understand early:

• Annual Investment Allowance (AIA): You can deduct the full value of most qualifying plant and machinery up to £1 million from profits before tax.
  Keep: invoices, payment proof, and the business use rationale.
• R&D tax relief: many product and software teams may qualify, but rules are detailed and claims need a clear narrative and cost breakdown. One current reference point is that the merged R&D Expenditure Credit for periods starting on/after 1 April 2024 is described as a 20% above-the-line credit, with net benefit depending on profit/loss position.
• Keep: technical notes, experiments, time records, contractor agreements, and a short explanation of the uncertainties you worked through.

If you cannot explain the work in plain English, you will struggle to defend the claim later.

Startup business accountant: when DIY stops being sensible

You can run lean early. But there are clear trigger points to bring in a startup business accountant or a reliable startup accountant.

Bring help in when:

• You incorporate (accounts + Corporation Tax + Companies House filings).
• You register for VAT or start importing/exporting.
• You hire staff (PAYE, pensions, reporting).
• You raise money (investors want credible numbers and a clean cap table support).

A simple staged approach:

• Early stage: DIY bookkeeping + quarterly check-in with an accountant.
• Growing stage: bookkeeper weekly + accountant monthly.
• Scale stage: internal finance ops + accountant for review and complex tax.

You’re paying for fewer mistakes, clearer decisions, and less founder time lost to admin.

What to look for in a startup business accountant

Do not pick based on price alone.

Ask about:

• Experience with your business model (SaaS, marketplace, agency, e-commerce).
• How they handle bookkeeping handover and monthly reporting.
• Who you actually speak to week-to-week.
• Clear scope: what’s included, what’s extra, and typical timelines.

And keep it simple: you need a person or company that can explain the numbers without resorting to jargon.

FAQs for Accountants for Startups: UK Accounting Basics

What are the first accounting steps I should take for my new UK startup?

In your first month, you should open a dedicated business bank account, select bookkeeping software like Xero or QuickBooks, create a simple system for filing receipts, and start a 13-week cash flow forecast. This foundation makes managing your finances much easier.

Should I register as a sole trader or a limited company?

A sole trader structure is simpler for tax and admin. However, a limited company provides limited liability, which protects your personal assets. It is also the preferred structure if you plan to seek investment or hire employees. Consider your long-term goals before deciding.

How often should I do my bookkeeping?

You should get into the habit of doing your bookkeeping weekly. This prevents tasks from piling up and ensures your financial records are always up to date. A weekly check-in helps you spot issues early and remember what specific transactions were for.

When do I need to register for VAT in the UK?

You are legally required to register for VAT once your taxable turnover for the previous 12 months exceeds £90,000. You can also register voluntarily, which can be beneficial if your customers are other VAT-registered businesses, as they can reclaim the VAT.

What's the difference between a bookkeeper and an accountant?

A bookkeeper typically handles the day-to-day recording of financial transactions, like categorising expenses and reconciling bank accounts. An accountant focuses on higher-level tasks, such as preparing year-end accounts, filing tax returns, and providing strategic financial advice. Many resources from Online Business Startup can help you understand which you need.

Why is cash flow so important for a startup?

Cash flow is the lifeblood of your business. A company can be profitable on paper but fail if it runs out of cash to pay its bills, salaries, and suppliers. Monitoring your cash flow helps you make informed decisions and ensures you have enough money to operate.