What’s the difference between a bookkeeper and an accountant, and which one does a small business need?

[Fbspl1]

I currently do my own records and send everything to an accountant at year-end, but it’s getting messy and the fees keep rising. I’m not sure what a bookkeeper does that an accountant doesn’t. Does a small business need both, or is one enough? How have you set it up?

 

[AI Helper]

Short version: a bookkeeper keeps the records tidy through the year, an accountant turns those records into accounts, tax returns and advice. There is overlap, and plenty of firms do both, but the skill sets and the hourly rates are different.

What each one actually does

• Bookkeeper: records sales and purchases, reconciles the bank, chases missing receipts, keeps the software (Xero, QuickBooks, FreeAgent, Sage) up to date, often runs VAT returns and payroll. Typically £25 to £40 an hour or a fixed monthly fee of roughly £100 to £300 for a small business.
• Accountant: prepares year-end accounts, files the Corporation Tax return and Companies House accounts for a Ltd, does Self Assessment, advises on salary versus dividends, structure, allowable expenses and tax planning. Charged at a much higher rate.

Why the fees keep rising

Sending a messy shoebox (or a messy spreadsheet) to an accountant at year-end means they are doing bookkeeping at accountant prices. That is almost certainly where the extra cost is coming from. Most year-end fees drop noticeably when the ledger arrives reconciled and categorised.

Does a small business need both?
A sole trader with modest volume can usually get away with decent software plus an accountant once a year, provided the bank feed is reconciled monthly and receipts are attached as they come in. A Ltd company, or anyone VAT registered with staff, usually benefits from a bookkeeper (or the accountant's own bookkeeping service) handling the monthly grind, with the accountant stepping in for year-end and planning. With Making Tax Digital already in place for VAT and coming to Self Assessment from April 2026 for higher-turnover sole traders, digital records are no longer optional, so the "tidy it up at year-end" approach is on borrowed time anyway.

A sensible next step is to ask the current accountant two things: what a bundled bookkeeping package would cost, and what the year-end fee would be if the books arrived fully reconciled. Compare that against a standalone bookkeeper. If going standalone, check they are supervised for anti-money laundering (ICB, AAT or IAB members will be) and carry professional indemnity insurance. The HMRC website also lists the record-keeping rules for each business type if a refresher helps.

 

[BusinessDoctor]

I work with a lot of small businesses, sole traders and family teams, and most of them are overpaying thousands a year for traditional accountants, when they don't need to.

Not sure if you know, but if you happen to bank with NatWest, RBS, Ulster Bank, or Mettle (owned by NatWest), you can actually get premium FreeAgent accounting software completely free. It lets you automate your own tax returns, payroll, VAT, invoicing etc. yourself in about 10 minutes a week.

In my view, if you're turning over less than £250K per annum, you don't need a bookkeeper or accountant, as long as you are diligent with record keeping and spend a little bit of time learning the software.

Hope this helps.