Why contractors switch accountant (and why more should)
The most common reason a contractor switches accountant is a slow realisation that the person filing their accounts has never heard of a Status Determination Statement, does not know that the employer National Insurance rate changed to 15% from 6 April 2025, and is still quoting dividend tax rates that Finance Act 2026 made obsolete. The second most common reason is a price rise without a corresponding improvement in service. The third is a missed deadline that the contractor only discovered when a penalty notice arrived.
None of these are dramatic enough to feel urgent in the moment, which is why the decision to switch often gets deferred. The mechanics of switching are, in practice, straightforward. The goal of this guide is to make the process concrete enough that you can act on it rather than defer it for another year.
The switcher market is the warmest commercial market in contractor accountancy. A contractor who is already paying a monthly fee and who has already decided a specialist firm handles this better is not being sold something new; they are replacing something that is not working. Our guide to choosing a contractor accountant covers what to test in a new firm; this page covers how to make the move once you have decided.
Professional clearance: what it is and how it works
Professional clearance is a formal exchange between your outgoing and incoming accountant. When you instruct a new firm, they write to your old one asking two things: first, whether there is any professional reason they should not accept you as a client; and second, requesting the handover of relevant information about your affairs. This is an obligation under the professional ethics frameworks of the ICAEW and ACCA, and the old accountant is required to respond promptly and honestly.
The clearance letter is written by your new accountant, not by you. You authorise it by signing a letter of engagement with the new firm and confirming you consent to contact being made. You do not need to have a difficult conversation with your outgoing accountant beforehand, though doing so informally often speeds up the response.
What the clearance response covers
A complete professional clearance response will confirm whether there are any outstanding professional matters the new firm should be aware of, including any open HMRC enquiries, unresolved disputes, or known issues with the accounts. It will also trigger the transfer of your financial information: filed accounts, corporation tax computations, payroll records, and any SDS documentation that the old firm holds. Most responses arrive within one to two weeks.
Where fees are outstanding, your old accountant is entitled to retain original documents until payment, but they are not entitled to withhold copies of documents that are yours. If this becomes an obstacle, settle the outstanding balance as part of the switch: the cost of a clean handover almost always outweighs the friction of a dispute over a final invoice.
Authorising HMRC to recognise the new agent
Alongside professional clearance, your new accountant will ask you to sign a 64-8 form (or complete the online equivalent through your HMRC online services account). This authorises HMRC to deal with them on your behalf and cancels the previous agent's access. HMRC will not act on correspondence from your new accountant until the 64-8 is in place. Processing typically takes a few days for an online submission; a paper 64-8 can take longer. Your new accountant will usually handle the submission as part of onboarding.
What to gather before you switch
The quality of a handover depends almost entirely on what information the new accountant receives. Gathering the following before your first substantive meeting reduces the back-and-forth and lets the new firm give accurate advice from the outset rather than working from fragments.
Company and tax records
Collect your last two years of corporation tax returns (CT600s) and the accompanying company accounts. If you do not have copies, ask your current accountant for them now: these are your documents, filed on your behalf, and you are entitled to copies unconditionally. Alongside the returns, gather the corporation tax computations (the working behind the CT600) if available. Two years is the minimum; three is better, because it covers the look-back period most relevant to an HMRC enquiry and gives the new firm context on how profits and distributions have moved.
Payroll and dividend records
Your P60 for the last completed tax year, any P11D submitted for benefits in kind, and the payroll software login (or payroll records exported from it) are all essential. Equally important, and frequently incomplete, are dividend vouchers and the board minutes authorising each dividend. Every dividend declared by a PSC director should be supported by a board minute and a dividend voucher showing the date, the amount per share, and the shareholder. If your current accountant has not maintained these, the new firm will need to reconstruct them, and gaps create a risk of HMRC treating distributions as loans to a participator under CTA 2010 s.455 rather than dividends. The s.455 charge runs at 35.75% on loans made on or after 6 April 2026, applied nine months and one day after the period-end, so the reconstruction is worth doing properly.
IR35 and SDS documents
Print or export every Status Determination Statement you have received from an end client. An SDS issued under Chapter 10 of ITEPA 2003 names its conclusion (inside or outside IR35) and the reasons for it; it is the document that governs whether the fee-payer is operating PAYE on your payments. Your new accountant needs to know what determinations are in force, which engagements they cover, and whether any were challenged through the 45-day client-led disagreement process under ITEPA s.61T. If you have not retained the SDS documents, contact each client or agency now and ask for copies; they are required to have issued them and should hold the records.
Also note which engagements, if any, fall under Chapter 8 rather than Chapter 10. Chapter 8 applies where the end client is a small company (meeting two or more of the Companies Act 2006 s.382 conditions: turnover not more than £15m, balance sheet not more than £7.5m, not more than 50 employees, for financial years beginning on or after 6 April 2025). Under Chapter 8, the PSC self-assesses its own status and, if inside IR35, computes a deemed employment payment at year-end with a 5% administrative expenses allowance. The new accountant needs to know which regime applies before they can advise on anything downstream. For a full explanation of how the two chapters operate, see our guide to what IR35 is and how it works.
VAT, accounting software and Companies House
If you are VAT-registered, provide your last four VAT returns, your VAT registration number, and access to your VAT online account. If you are on the Flat Rate Scheme, your new accountant will want to confirm whether you are classified as a limited-cost trader (spending less than 2% of turnover or less than £1,000 a year on goods), since the 16.5% limited-cost-trader rate makes the FRS unattractive for most labour-only contractors. Confirm the position so the new firm can model whether the FRS remains worthwhile or whether de-registering from it is appropriate.
Pass on your accounting software credentials (QuickBooks, Xero, FreeAgent or equivalent). Most software allows you to add and remove accountant access without changing your own login. Provide your Companies House authentication code, which the new accountant needs to file confirmation statements and make any changes to the company record.
Pension records
Employer pension contributions from the PSC are the single most tax-efficient extraction route available to a PSC director: deductible against corporation tax, free of both employer and employee NIC, and not subject to income tax on the director when paid in. The annual allowance for 2026/27 is £60,000, and unused allowance from the previous three tax years can be carried forward (current year used first). Bring the last three years of pension contribution records so the new accountant can calculate the available carry-forward. If you have flexibly accessed any defined-contribution pension, tell them: the money purchase annual allowance (MPAA, £10,000 for 2026/27) then replaces the standard allowance for further defined-contribution contributions, and carry-forward is lost on that element. For a detailed treatment of the pension planning side, see our guide to employer pension contributions for contractors.
Timing around your company year-end
Timing matters because your year-end is the natural seam in your accounts. The cleanest switch is in the first quarter after your company year-end, once the corporation tax return for the completed year has been filed. The old accountant's work is done, there is no in-flight computation to hand over mid-stream, and the new accountant enters at a blank-page starting point for the new year. Corporation tax returns are due nine months after the period-end, so if your year-end is 31 March, the return is due by 31 December and filing usually completes well before that. A switch in April, May, or June sits neatly after the filing and well before the next deadline pressure builds.
Switching near year-end
Switching in the two months before your year-end or during a live VAT quarter is possible but requires clarity on who handles the in-flight work. The usual approach is to agree explicitly with both firms: either the old accountant completes the year and the new one takes over from the next period, or the new accountant takes the work in progress with a fee adjustment to the old firm for the partial-year work. Both options work; ambiguity does not. Put the split in writing with both parties before the switch completes.
One specific timing consideration for contractors who receive significant dividend income: if you take dividends at or near the higher-rate threshold (£50,270 for 2026/27), the extraction planning for the year needs to be done before the year-end, not reconstructed after. A new accountant who inherits a completed year has less flexibility than one who can model the salary, dividend and pension split in advance. Where possible, switch with at least one full quarter to run in the current year so the new firm can actually act on the planning opportunities rather than simply report on what happened.
Making Tax Digital: does it affect your switch timing?
Most PSC contractors are outside Making Tax Digital for Income Tax (MTD for IT). MTD for IT applies to sole traders and landlords with qualifying income above the thresholds (£50,000 from 6 April 2026, £30,000 from 6 April 2027, £20,000 from 6 April 2028); a PSC director's salary and dividends are not qualifying income for MTD purposes, and the company itself files corporation tax rather than self-assessment, so it is outside MTD for IT entirely. If you have a sole-trader strand of income above the relevant threshold, however, that strand is in scope and requires digital record-keeping and quarterly updates. Tell your new accountant about any sole-trader income during onboarding, not as an afterthought at year-end.
What a good specialist asks that a generalist does not
The questions a new accountant asks in the first meeting tell you almost everything about whether they are a genuine contractor specialist. A generalist will ask for your year-end date, your bookkeeping software, and whether you have any outstanding returns. A specialist will ask these and then continue.
The IR35 question set
A specialist asks, for each active engagement: is this under Chapter 8 or Chapter 10? Has an SDS been issued, and if so what did it conclude? Have the working practices been reviewed against the status tests recently, or have there been material changes to the engagement since the last review? Is there a genuine, documented right of substitution, and has it ever been used or offered? The answers change the advice materially. A Chapter 10 inside determination closes off the salary and dividend extraction route for that income and makes pension contributions the primary planning lever. A Chapter 8 engagement where the PSC self-assesses carries different risks and different planning opportunities.
The specialist also asks whether you have received a blanket inside determination covering your engagement without individual assessment. A client issuing a blanket inside determination across a category of roles without assessing each engagement individually is very likely failing the reasonable-care requirement under ITEPA s.61NA, which can invalidate the SDS and move the liability to the client. The 45-day client-led disagreement process under ITEPA s.61T exists for exactly this situation, and a specialist can help you use it. A generalist will not know the process exists. For more on SDS mechanics and how to challenge a determination, see our guide to Status Determination Statements and the disagreement process.
The extraction planning question set
For 2026/27, a specialist asks: what salary are you currently taking, and why? Have you modelled it against the Employment Allowance position? (The Employment Allowance, worth £10,500 for 2026/27, is unavailable to a company whose only employee is a single director.) What dividend level are you targeting, and has it been modelled for the updated rates? Finance Act 2026 section 4 raised the dividend ordinary rate from 8.75% to 10.75% and the upper rate from 33.75% to 35.75% from 6 April 2026, with the dividend allowance remaining at £500. An accountant still quoting the 8.75% or 33.75% rates for 2026/27 advice is producing miscalculated tax bills. The incorporation advantage narrowed again in 2026/27, which makes employer pension contributions relatively more attractive than they were a year ago.
The full salary and dividend framework is covered in our guide to the tax position for a PSC limited company contractor. What matters for a switch is that your new accountant raises this unprompted. If they do not ask about the Employment Allowance, salary level, and dividend rates within the first conversation, they are not running extraction planning; they are reacting to whatever you tell them.
The pension contribution question
A specialist asks how much your PSC has paid into pension in the last three years and whether you have flexibly accessed any pension pot. These are not standard questions for a generalist client; they are the central planning questions for a contractor whose main tax-efficiency lever is the employer pension contribution. If the new firm does not ask, raise it yourself and judge the answer. The annual allowance of £60,000 for 2026/27 and three years of carry-forward mean a contractor in a high-income year can make a very large one-off employer contribution; the new accountant should be modelling this, not treating pension as an afterthought.
The MSC question
A specialist will want to know whether your previous accountant provided services in a way that could attract scrutiny under the Managed Service Company legislation (ITEPA 2003 Chapter 9). The MSC rules are separate from IR35 and do not depend on a status test: where a company is an MSC, all payments to the worker are employment income subject to PAYE and NIC, and unpaid PAYE can be transferred as a personal debt to the worker under s.688A. The accountancy-services carve-out in ITEPA s.61B(3) protects an accountant who genuinely advises; it does not protect one who effectively runs the company, controls the finances, or sells a standardised packaged product. The Churchill Knight and Boox test cases are listed for First-tier Tribunal hearings in June 2026 and November 2026 and remain undecided at the time of writing, which means the risk factors are live. A new specialist will ask whether your previous arrangement showed any of the warning signs and will confirm their own model sits clearly on the advice side of the line.
What the new accountant inherits
Switching accountant does not reset your tax history. The new firm inherits whatever position your old one created. This is mostly benign: filed returns, declared dividends, an established PAYE scheme. It can be less benign if the previous accountant made errors, left dividend records incomplete, or failed to claim available reliefs. The first job of a new specialist is to review the last two years and identify anything that needs correcting or claiming before a deadline passes.
An open HMRC enquiry does not pause during a switch. The new firm takes over conduct of the enquiry by filing a 64-8 and writing to HMRC to introduce themselves, but any existing timelines and information requests continue. If an enquiry is open when you switch, flag it at the very first conversation: the new accountant needs to review the correspondence history before responding to anything. Where the enquiry relates to IR35, a specialist firm is almost always better placed to handle it than the generalist who opened the position.
If your old accountant held any original documents (signed engagement letters, original HMRC correspondence, physical records), request their return as part of the handover. Copies are always your entitlement; originals are yours if they are yours. Do not leave original documents with a firm you are no longer instructing.
The cost of staying with the wrong accountant
The monthly fee difference between a generalist and a contractor specialist is usually modest. The cost difference in outcomes is not modest. A specialist who catches a dividend extraction error, models a pension contribution correctly for the year, or successfully challenges a blanket inside-IR35 determination can recover a multiple of their annual fee in a single year. A generalist who misses the Finance Act 2026 dividend rate change produces miscalculated self-assessment returns and a gap between what was planned and what was paid.
The decision to switch is also a decision about what you want your accountant to do. If the answer is file the annual return and send a payment reminder, a generalist is adequate. If the answer is model the salary-dividend-pension split for the current year, support an SDS challenge, advise on the carry-forward position, and flag when an inside-IR35 engagement is better structured through an umbrella than a PSC, that requires a specialist. The switching process is straightforward. The planning benefit starts from the first properly structured conversation.
To take the first step, visit our contractor accountancy services page to see what a specialist engagement covers, or get in touch to discuss your current position before you formally instruct anyone.