Accountants for IT consultancies and software companies: the short answer
Last updated: 14 October 2026
IT consultancies and software companies face specific tax issues. They include R&D tax relief on development work, IR35 when you supply contractors or work as one, VAT on digital services sold abroad, and revenue recognition for subscriptions. Accotax provides fixed-fee accounts, tax returns and advice for IT companies, from one-person consultancies to software firms with staff.
For bookkeeping-led support, see our main tech company accounting page.
IT consultancy or software house?
| Business type | Key issues |
| IT consultancy (one person) | IR35, salary and dividends, expenses, the flat rate scheme |
| IT services with staff | Payroll, utilisation, contractor IR35 checks |
| Software or SaaS | R&D relief, deferred income, overseas VAT, investment |
R&D tax relief for software development
Developing new software that resolves technical uncertainty may qualify for R&D relief under the merged R&D scheme, or under enhanced support for R&D-intensive SMEs. Routine work, such as using existing tools without any technological advance, does not qualify. You must notify HMRC in advance if you are claiming for the first time or have not claimed in the last three years.
IR35 for IT contractors
If you work through your own limited company for a client, IR35 decides whether you are taxed like an employee. Medium and large clients make the decision for you. Small clients leave it to your company. See our contractor accountants page.
VAT on software and digital services
B2B sales to overseas businesses are usually outside the scope of UK VAT. B2C digital services sold to EU consumers may need the EU One Stop Shop. See VAT One Stop Shop.
Our services for IT companies
- Bookkeeping and month-end in Xero, with Stripe and other billing integrations
- Year-end accounts and corporation tax returns
- R&D claim support and advance notification
- Payroll, EMI share option schemes and director planning
Frequently asked questions
Can I claim my laptop and software?
Yes. Equipment usually qualifies for the Annual Investment Allowance, and subscriptions are allowable expenses.
Is SaaS revenue taxed when it is received?
Not always. Annual subscriptions paid upfront are usually spread across the service period in your accounts.
Should I use the VAT flat rate scheme?
If you spend little on goods, you may be a limited cost trader at 16.5%, which often makes the scheme poor value.
Do you work with tech startups?
Yes. See accountants for tech startups.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with accounts and tax for your IT company. See our tech company accounting service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.