Accountant Engagement Letter Template (UK)

Updated on 6 August 2026

An engagement letter is the document an accountant sends at the start of an appointment, and reissues when the relationship changes: it says which services are in scope, when each of them starts, who is responsible for what, and what the work costs. It is not legally compulsory for most accountancy work, but ICAEW guidance treats issuing one before work begins as ordinary good practice — because it is the record both sides rely on when there is a misunderstanding, and the thing whose absence is hardest to explain afterwards.

This is the full version, not a one-paragraph scope letter. Switch on each service you are providing and its own schedule appears, split into the client's responsibilities and yours; a Key Facts page records the tailoring for that specific client, such as the accounting framework and the date you need their records by; and a client response page closes it. Type into the highlighted blanks and download a clean Word or PDF file, with no sign-up and no watermark.

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Engagement Letter — Provision of Professional Services

Our reference:

Thank you for engaging us to provide professional services. This letter, the Key Facts and the service schedules below, together with our standard terms of business, set out the basis on which we will provide those services. Only the services described in the schedules below are within the scope of our instructions. If there is other work you would like us to carry out, or the Key Facts do not accurately describe what we have agreed, please tell us as soon as possible and we will issue an amended letter.

1. Our Professional Obligations

We act in accordance with the professional and ethical standards of our professional body, , and we accept instructions to act for you on that basis. Details of our registrations and of our professional indemnity insurance are available on request.

We are registered with HM Revenue & Customs as a tax adviser, as a business that is paid to interact with HMRC about a client's tax affairs must be, and our registration reference is . We will not be liable for any loss, cost or damage arising from our compliance with a statutory or regulatory obligation.

2. Client Due Diligence

Before we begin work we will verify your identity from independent, reliable sources and, where you are a company, limited liability partnership, partnership or charity, identify and verify the entity and any individual who exercises significant control over it. We will keep that verification current throughout the engagement, in line with our obligations under the Money Laundering Regulations 2017. If we cannot obtain satisfactory evidence we will not be able to act. These checks are ours to carry out and we cannot rely on any that a previous adviser may have done.

3. Period Covered and Earlier Years

The services start from and the first period covered is . We are not responsible for any earlier period. Matters relating to earlier periods remain with your previous adviser, , and this letter supersedes any previous engagement letter between us for the period it covers.

4. Key Facts for the Services We Are Providing

The service schedules below are standard for all our clients. This page records the details that are specific to you, and it should be read together with the schedules. Where a schedule refers to a date, a framework or a division of responsibility, the entry here is the one that applies.

OptionalAnnual accounts and accountant's report

Accounting framework:
Accounting records must reach us by:
Bookkeeping is carried out by:

OptionalCorporation tax, including iXBRL accounts

iXBRL tagging of the accounts is applied by:
Tax information must reach us by:

OptionalVAT returns

OptionalPayroll and real-time information

OptionalMaking Tax Digital for Income Tax quarterly updatesSwitch on for a sole trader or landlord within MTD for Income Tax.

Further services or notes:

5. Annual Accounts and Accountant's Report

Your responsibilities. You are responsible for preparing financial statements that give a true and fair view, for selecting suitable accounting policies and applying them consistently, for making reasonable and prudent judgments and estimates, and for considering whether the going-concern basis remains appropriate. You are responsible for keeping adequate accounting records as the Companies Act 2006 requires, for such internal control as you consider necessary to prevent material misstatement, and for safeguarding the assets of the entity and taking reasonable steps to prevent and detect fraud.

You have agreed to make available to us, as and when we need them, all accounting records and related financial information, including minutes of management and members' meetings, and to make full disclosure to us of all relevant information. You will approve and sign the financial statements, thereby acknowledging responsibility for them.

Our responsibilities. We will compile the annual financial statements for your approval from the accounting records you maintain and the information and explanations you give us, prepared under the framework stated in the Key Facts, and we will issue an accountant's report on them. Our work is not an audit carried out in accordance with auditing standards: we will not obtain evidence for entries in the records or the disclosures in the statements, we will not assess the estimates and judgments you have made, and accordingly our work provides no assurance that the records or the financial statements are free from material misstatement, whether caused by fraud, other irregularity or error.

We have a professional responsibility not to allow our name to be associated with financial statements we believe to be misleading. We are not required to search for such matters, but if we become aware that the statements may be misleading we will discuss it with you with a view to agreeing appropriate adjustments or disclosures. If those are not made, or we are not given appropriate information, we will withdraw from the engagement, and we will be entitled to invoice you for the time spent to that point.

Filing. Small companies may currently choose to file without a profit and loss account, and abridged accounts remain available where all shareholders approve their preparation. Unless you tell us otherwise, we will assume you wish to file the minimum the law allows. If financial information that includes or refers to our report is published electronically, you must tell us first, obtain our consent, and ensure it is presented properly; you are responsible for controls over electronically published information and for its integrity after publication.

To the fullest extent permitted by law we do not accept responsibility to anyone other than you for our work or our report. If you wish to give a copy of the financial statements to a third party you must seek our consent first, and where we give consent our report must remain attached to the statements shown to that third party.

OptionalClient is taking audit exemptionAdds the directors' audit-exemption responsibilities and the balance-sheet declaration.

6. Audit Exemption

You are responsible for determining whether the entity qualifies as small and is entitled to exemption from audit, and whether the exemption is unavailable for any reason — for example because the entity is a public company, an authorised insurance or banking company, an e-money issuer, an investment firm or a UCITS management company, carries on insurance market activity, is a special register body or employers' association, or is a member of an ineligible group. The relevant size limits, which changed on 6 April 2025, are turnover of no more than £15m and a balance sheet total of no more than £7.5m, with no more than 50 employees, meeting two of the three for two consecutive financial years.

Where exemption is taken, the Companies Act 2006 requires the directors to include a declaration on the balance sheet confirming that the entity is eligible, that the members have not required an audit, and that the directors acknowledge their obligations for accounting records and the preparation of financial statements. We will not check whether the entity is exempt, and we have no responsibility to report whether a shareholder has required an audit; if our work indicates that exemption may not be available we will tell you and, if appropriate, discuss appointing auditors.

7. Corporation Tax

Your responsibilities. The directors or officers are legally responsible for ensuring the company's tax return is correct and complete, for filing it by the due date, and for paying tax on time; failure to do so can lead to automatic penalties and interest. Legal responsibility for approving the return cannot be delegated, so you agree to check any return we prepare before approving it. You are no less responsible for errors in an unapproved return submitted on the basis of information you gave us than if you had confirmed your approval.

You agree to provide the approved financial statements, to make the return on the basis of full disclosure of all sources of income, charges, allowances and capital transactions, to give us the information we need in sufficient time for the return to be completed and filed by its due date, to authorise us to approach third parties for information where we consider it necessary, and to tell us about advances or loans made to directors, officers, shareholders or their associates during an accounting period and about any repayment or write-off afterwards. You will keep us informed of material changes in circumstances that could affect the company's tax liabilities, and if you are unsure whether a change is material, tell us and we will assess it.

Our responsibilities. Profit shown by financial statements prepared under generally accepted accounting principles may need adjustment to arrive at taxable profit. We will prepare the corporation tax computation and supporting schedules from the financial statements and the information you provide, and after obtaining the evidenced approval of a properly authorised officer we will submit the return, computation and accounts online to HMRC and, where relevant, to Companies House. Delivery must be in iXBRL format, and the Key Facts records whether we or you apply the tagging; where we apply it, we will use professional software to process standard tags without referring each one to you and will come back to you on non-standard or judgmental areas.

We will tell you how much tax to pay and when, advise on interest and penalty implications of late payment, initiate a repayment claim where tax has been overpaid, tell you if quarterly instalment payments are due and calculate them from the information you supply, and advise on claims and elections arising from the information you give us, including industry-specific deductions and research and development relief where relevant. Specialist claims may need a separate engagement.

It is our policy not to advise on arrangements we consider artificial or aggressive, and we will tell you if we think something you are considering falls into that category. Where specialist advice is needed we will seek your permission before engaging anyone else, and we will agree any additional fee for our own part in that process separately. We will confirm in writing any advice you intend to rely on.

OptionalInclude the tax-information confidentiality clause

8. Confidentiality of Tax Information

We will keep your tax information confidential and will not use or disclose it for any purpose other than the services in this letter — including marketing other services to you — without your consent, except where the law or a professional obligation requires disclosure.

OptionalSelf Assessment tax returns

OptionalPension auto-enrolment

OptionalBookkeeping

OptionalManagement accounts

OptionalConstruction Industry Scheme returns

OptionalCompanies House filings

OptionalIdentity-verification support for directors and PSCs

9. Fees and Billing

Fee basis:
Fee amount:
Other basis (if applicable):
Billing frequency:

Invoices are due within days of the invoice date. If you do not consider an invoiced fee to be fair and reasonable, tell us in writing within days of receiving it and we will work with you in good faith to resolve it. If work is needed beyond the services described in the schedules above, we will tell you before we do it and agree the additional fee.

Where an invoice is not paid by its due date we may charge interest on the overdue amount at the statutory rate under the Late Payment of Commercial Debts (Interest) Act 1998, running from the day after the due date until payment.

Any unused part of the retainer will be credited against future fees or refunded to you when the engagement ends.

10. Client Responsibilities and Ownership of Working Papers

You will give us accurate, complete and timely information and documentation reasonably necessary for the services, and tell us promptly of any change in circumstances that may affect them. As part of our normal procedures we may ask you to confirm in writing information or explanations you have given us orally.

All working papers, schedules, notes and files we prepare in carrying out the services remain our property. This does not affect your ownership of your own underlying financial records, or your right to the final deliverables of this engagement.

11. Confidentiality

Each of us will keep confidential the other's non-public information obtained in connection with this engagement, except where the law requires disclosure or the other has authorised it in writing.

12. Limitation of Liability

We will provide the services with reasonable care and skill. To the fullest extent permitted by law, we are not responsible for losses, penalties, surcharges, interest or additional tax liabilities arising because you or others gave us incorrect or incomplete information, failed to give us information, failed to act on our advice, or did not respond promptly to us or to a tax authority.

Subject to the paragraph below, our total liability to you for all claims connected with this engagement is limited to .

Nothing in this letter limits or excludes our liability for death or personal injury caused by negligence, for fraud or fraudulent misrepresentation, or for anything else that cannot lawfully be limited or excluded. You agree not to bring a claim connected with the services against any of our principals, directors, members or employees personally.

OptionalInclude a personal guarantee

13. Term and Termination

Either of us may end this engagement by giving days' written notice, and either of us may end it immediately for a material breach that is not put right within days of written notice of it. On termination you will pay all fees and expenses due for services performed up to that date, and we will normally issue a disengagement letter recording what we have completed, what remains outstanding and what passes to your next adviser.

14. Agreement of Terms

Please confirm your agreement to this letter, the Key Facts and the schedules by signing and returning the client response below. This letter and its schedules, together with our standard terms of business, constitute the whole agreement between us on their subject matter, and may be amended only in writing. Where this letter and our standard terms of business conflict, this letter prevails. It is governed by the law of England and Wales.

OptionalInclude a deemed-acceptance clauseTreats the start of work as acceptance if the client does not object. Not recommended for an individual client.

Client response. I confirm that I have read and understood this letter, the Key Facts and the service schedules, and that together with the standard terms of business they record our agreement for the work described. Signed by , , for and on behalf of .

For the Client

Date:

For the Accountant

Date:

A real engagement letter is a pack: cover letter, service schedules, Key Facts, terms

The letter most templates give you has a single "scope of services" paragraph, which is where the trouble starts. A practice providing annual accounts, corporation tax, VAT, payroll and bookkeeping to one client has five different sets of responsibilities running to five different deadlines, and a single paragraph cannot allocate them. What well-run practices send instead is a pack with four layers.

The cover letter lists the services and the date each one starts, states the ethical framework the firm works to, and makes clear that only the listed services are in scope. A detailed schedule for each service sets out the client's responsibilities and the firm's, separately, in enough detail that a dispute can be resolved by reading it. A Key Facts page records the variables for this client — the accounting framework, who does the bookkeeping, who applies the iXBRL tagging, the date the records have to arrive. And the standing terms of business carry everything that does not change from client to client.

This template builds the first three, with each service schedule behind its own switch, and expects your terms of business to sit alongside it. That split is what lets the letter stay readable while still being specific: a client taking two services gets a short document, and a client taking eight gets a complete one, without either of them reading clauses about services they are not buying.

Key Facts is the page that stops the arguments

The idea behind a Key Facts page is that the detailed schedules stay standard across every client, and one page records what is different about this one. It is a small piece of document design that solves a real problem: without it, tailoring gets done by editing the schedules, which means no two clients' letters are alike and nobody can tell which version they are looking at.

The facts worth recording are the ones that cause disputes. Which accounting framework the financial statements will be prepared under. The date the accounting records need to reach you — and it is worth saying plainly that a real engagement pack we reviewed carried "31 April" as that date, twice, in a document that had been issued to a client. Whether the firm or the client does the bookkeeping. Whether the firm or the client is responsible for applying the iXBRL tags to the accounts. Who submits and remits any return under deduction of tax.

Each of those is a field here rather than a sentence to edit, and the records deadline is a date field, so an impossible date cannot be typed into it.

Since 18 May 2026 the letter has to describe a registration regime that did not exist

Mandatory registration for tax advisers is now law. Part 7 and Schedules 20 to 22 of the Finance Act 2026 require a business that is paid to interact with HMRC about a client's tax affairs to be registered with HMRC and to hold an Agent Services Account. Registration opened from 18 May 2026 for advisers with no existing Agent Services Account, from 18 August 2026 for those holding Self Assessment or Corporation Tax agent accounts but no ASA, and from 18 November 2026 for firms providing only third-party payroll, with a further tranche for financial-services organisations. Firms that already hold an ASA are not asked to register again.

The penalties are real: interacting with HMRC while unregistered can attract £5,000, rising to £10,000 per contravention for repeat breaches, and sections 236 and 237 of the Finance Act 2026 provide for temporary and permanent ineligibility orders, with power for HMRC to publish the details of an adviser who is penalised or banned.

For an engagement letter this changes two things. The firm's own registration status becomes something worth stating to the client rather than assuming, and the old wording about agent authorisation codes and form 64-8 is no longer the whole story of how you come to act for someone with HMRC. Both are built into this template's professional-obligations and tax-services wording.

Two 2026 obligations most engagement letters have not caught up with

Making Tax Digital for Income Tax began on 6 April 2026 for sole traders and landlords with qualifying income over £50,000, measured on their 2024/25 Self Assessment figures — around 864,000 taxpayers — with the threshold dropping to £30,000 from April 2027 and £20,000 from April 2028. Those clients now owe quarterly updates through compatible software as well as an annual return. An engagement letter for a sole trader or landlord that only mentions the Self Assessment return has stopped describing the work, which is why quarterly updates are a separate service switch here with their own responsibilities and their own Key Facts row.

Companies House identity verification has been compulsory since 18 November 2025 under the Economic Crime and Corporate Transparency Act 2023. New directors, LLP members and people with significant control need a Companies House personal code, existing directors verify through their next confirmation statement, and verification runs either through GOV.UK One Login or through an authorised corporate service provider — which many accountancy firms now are. Somebody has to be responsible for getting a client's directors verified, and a letter that never mentions it has quietly assumed it is the client. This template makes that an explicit service switch, so the answer is written down either way.

The audit-exemption and filing figures in circulation are a year out of date

The company size thresholds changed on 6 April 2025. A small company now needs turnover of no more than £15m — up from £10.2m — and a balance sheet total of no more than £7.5m, up from £5.1m, with the 50-employee limit unchanged, meeting two of the three. The usual two-consecutive-years rule applies before a company's size classification changes, and the 2024 regulations that made the change include a transitional provision letting the new criteria be treated as having applied in the previous financial year as well. An accounts schedule that recites the old figures is describing a different set of clients.

Filing is the opposite trap: the change everyone expects has not happened yet. Abridged and filleted filing remains available, and small companies can still file without a profit and loss account. The Economic Crime and Corporate Transparency Act 2023 reforms that end this were paused in January 2026 and have now been confirmed for April 2028 — abridged filing removed, small companies and micro-entities required to file a profit and loss account with an opt-out from publishing it on the public register, and iXBRL filing through commercial software only, with web and paper filing closed. Plenty of guidance still says 2027.

So this template's accounts schedule states the current filing options as the position today, and the guide dates the coming change rather than asserting it has already arrived. That combination — right about now, right about next — is what a client is actually paying for.

A liability cap that lives in another document is not a cap

The most common structural defect across accountancy client agreements is a limitation of liability in the terms of business that caps the firm's exposure "as set out in the engagement letter" — paired with an engagement letter, generated from a different template, that contains no figure. The firm believes it has a cap. Nothing caps it. And because it reads as handled, nobody checks.

This template puts the cap in the letter, as a stated fixed sum, a multiple of the fees for the engagement, or the fees actually paid. Two limits are written in rather than left to be discovered: liability for death or personal injury caused by negligence and liability for fraud cannot be excluded, and a cap has to be reasonable to be relied on — the Unfair Contract Terms Act 1977 reasonableness test applies to exclusions in written standard terms with a business client, and the fairness regime in Part 2 of the Consumer Rights Act 2015 applies to terms used with an individual.

Two smaller clauses get the same treatment. Interest on late fees is charged under the Late Payment of Commercial Debts (Interest) Act 1998 only where both parties act in the course of a business, so the template asks whether the client is in business before it writes the clause. And a deemed-acceptance clause — treating the start of work as acceptance of the terms unless the client objects within a stated period — is available for business clients but switched off for individuals, where it is the kind of term the consumer fairness rules are aimed at.

Client due diligence, and the things a retainer clause must not say

Accountancy service providers are relevant persons under the Money Laundering Regulations 2017, so client due diligence has to be completed before the business relationship starts, not once the work is under way, and kept current throughout. What it involves differs by client: for an individual it is typically identity and address verified from independent sources, and for a company or LLP it is identifying the entity and verifying anyone who holds significant control over it, commonly cross-checked against the persons-with-significant-control register at Companies House. It is also not something you can inherit — where a client is arriving from another firm, the incoming practice's due diligence is its own responsibility and cannot be satisfied by asking the predecessor whether they did it.

A retainer clause, if you use one, has to say one thing about unused funds: either they are credited toward future fees or refunded when the engagement ends, or they are non-refundable. A clause that promises both in different sentences is not a compromise but an unenforceable contradiction, and it will be resolved by someone other than you, on facts you did not choose. This template makes you pick, and prints only the option you picked.

The pack, section by section

Cover letter and scope boundary: Names the services being provided and the date each starts, states the ethical framework the firm works to, and makes clear that only the listed services are in scope — so extra work is a conversation about an amended letter rather than an assumption.
Predecessor boundary: States that the firm is not responsible for earlier periods and that those remain with the previous adviser. Without it, a new client's historic problem arrives on your desk by default.
Our professional obligations and HMRC registration: Your professional body, where your registrations and insurance details can be found, and your registration with HMRC as a tax adviser under the Finance Act 2026 regime — which is now part of the answer to "on what authority do you deal with HMRC for me?"
Client due diligence: The identity checks carried out before the relationship starts, covering an individual client's identity and address and, for a company, LLP, partnership or charity, the entity and anyone exercising significant control over it, consistent with the Money Laundering Regulations 2017.
Key Facts: One page recording what is specific to this client: accounting framework, the date records must reach you, who does the bookkeeping, who applies the iXBRL tags, the VAT scheme and return frequency, the payroll cycle, and who handles quarterly updates under Making Tax Digital. The schedules stay standard; this page carries the tailoring.
Annual accounts schedule (optional): Splits directors' responsibilities — keeping adequate accounting records, approving the accounts, determining audit-exemption eligibility — from the firm's, and states plainly that the work is not an audit and provides no assurance. Includes the current small-company thresholds and the filing options as they stand today.
Corporation tax schedule (optional): Covers the mandatory iXBRL format, who applies the tags, the officers' non-delegable responsibility for approving the return, information deadlines, instalment payments, and claims and elections. Includes the firm's position on avoidance arrangements it will not advise on.
VAT, payroll and pensions schedules (optional): The rolling-deadline services, where handover and cut-off errors are most expensive. Each has its own responsibilities split and its own Key Facts row for scheme, frequency and cut-off.
Self Assessment and Making Tax Digital schedules (optional): The annual return, and — separately — quarterly updates for clients within Making Tax Digital for Income Tax, which began on 6 April 2026 above £50,000 of qualifying income. Keeping them separate is what makes it clear who is doing the quarterly work.
Bookkeeping, management accounts and CIS schedules (optional): The services most often assumed rather than agreed. The bookkeeping schedule matters most, because "the firm will write up the records so far as they are incomplete" and "the client maintains all accounting records" are very different engagements.
Companies House filings and identity verification (optional): Confirmation statements and officer or registered-office changes, plus whether the firm assists with the identity verification that has been compulsory for directors and people with significant control since 18 November 2025.
Fees, billing and interest: Fee basis, billing frequency, payment period and a window to query an invoice — with statutory late-payment interest for business clients and a stated contractual rate for individuals, because the 1998 Act only reaches parties each acting in the course of a business.
Retainer (optional): If used, states one rule for unused funds: credited or refunded, or non-refundable. The template prints only the option you choose, so the contradiction that appears in many letters cannot be drafted by accident.
Limitation of liability: A cap stated here as a figure or a formula, with the carve-outs that cannot be excluded written in — rather than a cross-reference to a cap that lives in another document and often does not exist.
Personal guarantee (optional): If you want recourse against the individual who instructs you when a company does not pay, take a guarantee they sign. A term merely asserting that you may pursue them does not make them liable for the company's debt.
Agreement of terms and client response: How the letter is accepted, the optional deemed-acceptance clause for business clients, supersession of any earlier engagement letter, and a signature page confirming the client has read the letter, the Key Facts and the schedules.

Requirements checklist

Confirm the current position for your own firm and your client's circumstances before relying on any of these.

A written engagement letter is expected on accepting an appointment
It is not compulsory for every piece of non-regulated work, but ICAEW guidance treats providing a suitably worded engagement letter before starting work as best practice, and recommends reviewing its terms regularly rather than assuming an old letter still covers a relationship whose scope has changed.
ICAEW — engagement letters
Be registered with HMRC as a tax adviser before interacting with HMRC for a client
Part 7 and Schedules 20 to 22 of the Finance Act 2026 make registration mandatory for a business paid to interact with HMRC about a client's tax affairs, phased from 18 May 2026, 18 August 2026 and 18 November 2026 depending on the agent accounts already held. Unregistered contact can attract a £5,000 penalty rising to £10,000 per contravention, plus temporary or permanent ineligibility orders under sections 236 and 237 of that Act.
Finance Act 2026, Part 7
Complete client due diligence before the business relationship starts
Accountancy service providers are relevant persons under the Money Laundering Regulations 2017 and must identify and verify each client from independent, reliable sources before establishing the relationship, keeping that due diligence current — with beneficial-ownership checks where the client is an entity rather than an individual. Due diligence cannot be inherited from an outgoing firm.
Money Laundering Regulations 2017, regulation 27
Use the small-company thresholds that applied from 6 April 2025
Turnover of no more than £15m (previously £10.2m), a balance sheet total of no more than £7.5m (previously £5.1m) and no more than 50 employees, meeting two of the three. A company must meet or fail the criteria for two consecutive financial years before its classification changes, and the 2024 regulations include a transitional provision allowing the new criteria to be treated as having applied in the preceding year.
Companies Act 2006 — explanatory material on company size
Allocate responsibility for Making Tax Digital quarterly updates
Making Tax Digital for Income Tax started on 6 April 2026 for qualifying income above £50,000 based on 2024/25 Self Assessment figures, extending to £30,000 from April 2027 and £20,000 from April 2028. Affected clients owe quarterly updates through compatible software in addition to the annual return, so the letter needs to say who prepares and submits them.
ICAEW TAXguide 04/25 — Making Tax Digital for income tax
Say who deals with Companies House identity verification
Identity verification became compulsory on 18 November 2025 under the Economic Crime and Corporate Transparency Act 2023. New directors, LLP members and people with significant control need a Companies House personal code, and existing directors verify through their next confirmation statement. Verification runs through GOV.UK One Login or an authorised corporate service provider.
Taylor Wessing — identity verification from 18 November 2025
Describe filing options as they are now, and date the change that is coming
Abridged and filleted filing remains available today. The Economic Crime and Corporate Transparency Act 2023 accounts reforms were paused in January 2026 and confirmed for April 2028: abridged filing removed, small companies and micro-entities filing a profit and loss account with an opt-out from publication, and iXBRL filing via commercial software only, with web and paper filing closed.
GOV.UK — accounts filing changes from April 2028
Only charge statutory late-payment interest where both parties are in business
The Late Payment of Commercial Debts (Interest) Act 1998 implies statutory interest at 8% above the Bank of England base rate only where the purchaser and the supplier are each acting in the course of a business. Against an individual client, any interest right must be a stated contractual term instead.
Penningtons — statutory interest under the 1998 Act
Keep liability limits within what the law allows
Liability for death or personal injury caused by negligence, and for fraud, cannot be excluded or limited. Exclusions in written standard terms with a business client are subject to the reasonableness test in the Unfair Contract Terms Act 1977, and terms used with an individual client to the fairness regime in Part 2 of the Consumer Rights Act 2015 — which is also why a deemed-acceptance clause is switched off for individuals here.
Consumer Rights Act 2015, Part 2

How to use this template

Fill in the firm, the client and the letter date. Practice name and address, your professional body, your HMRC tax-adviser registration reference, and the client's name, address and contact.
Switch on each service you are providing. Annual accounts, corporation tax, VAT, payroll, pensions, Self Assessment, Making Tax Digital quarterly updates, bookkeeping, management accounts, CIS, Companies House filings and identity-verification support are separate switches. Each one adds its own schedule; anything left off does not appear.
Complete the Key Facts for those services. Accounting framework, the date records must reach you, who does the bookkeeping and the iXBRL tagging, the VAT scheme and frequency, the payroll cycle, and who handles quarterly updates.
Say whether the client is in business. This decides whether the late-payment interest clause uses the statutory rate or a contractual one, and whether the deemed-acceptance clause is available.
Set fees, retainer and liability cap. Fee basis and amount, billing frequency, payment and query periods, whether you use a retainer and what happens to unused funds, and the liability cap as a fixed sum, a multiple of fees, or fees paid.
Attach your terms of business. The letter refers to standing terms rather than repeating them. If you do not have a set, build one and issue the two together.
Sign, send and keep the response. Download as Word to keep editing or PDF to send, and keep the signed client response — it is what evidences that the client agreed the Key Facts as well as the terms.

Frequently asked questions

Is an engagement letter a legal requirement in the UK?

Not for most non-regulated accountancy work — no statute compels one. ICAEW guidance nonetheless treats providing a suitably worded engagement letter before work begins as best practice, and recommends reviewing it as the relationship changes. A firm with no engagement letter is the exception the guidance is written to correct, not a defensible default, and in practice it is also the document that decides who was responsible when something is missed.

What is a Key Facts page, and do I need one?

It is a single page that records what is specific to this client — accounting framework, the date records must reach you, who does the bookkeeping, who applies the iXBRL tags — so the detailed service schedules can stay identical for every client. You do not have to use one, but the alternative is tailoring by editing the schedules, which means no two clients' letters match and nobody can tell which version is in force. It is also where deadline errors get caught: a real engagement pack we reviewed carried "31 April" as its records deadline, twice.

Does mandatory HMRC registration affect what my engagement letter says?

Yes, in two places. Your own registration status is now worth stating, because since 18 May 2026 a business paid to interact with HMRC about a client's tax affairs must be registered with HMRC and hold an Agent Services Account under Part 7 of the Finance Act 2026. And the old wording about agent authorisation codes and form 64-8 no longer describes the whole basis on which you come to act. Penalties for unregistered contact start at £5,000 and rise to £10,000 per contravention, with ineligibility orders available.

My client is a sole trader — do I need a separate schedule for Making Tax Digital?

If they are within it, yes, and this template keeps it separate from the Self Assessment schedule for that reason. Making Tax Digital for Income Tax started on 6 April 2026 for qualifying income above £50,000 measured on 2024/25 figures, dropping to £30,000 from April 2027 and £20,000 from April 2028. Those clients owe quarterly updates through compatible software as well as the annual return, and the letter should say who prepares and submits them rather than leaving it to be assumed.

Whose job is it to get the directors verified at Companies House?

Whoever the engagement letter says — which is exactly why it should say. Identity verification has been compulsory since 18 November 2025: new directors, LLP members and people with significant control need a Companies House personal code, and existing directors verify through their next confirmation statement. Verification runs through GOV.UK One Login or an authorised corporate service provider, and many accountancy firms are now authorised. This template makes it a service switch so the answer is recorded either way.

What are the current small-company and audit-exemption thresholds?

From 6 April 2025, turnover of no more than £15m (previously £10.2m), a balance sheet total of no more than £7.5m (previously £5.1m), and no more than 50 employees, meeting two of the three. A company must meet or fail the criteria for two consecutive financial years before its classification changes, though the 2024 regulations allow the new criteria to be treated as having applied in the preceding year. Determining eligibility remains the directors' responsibility, which is what the accounts schedule says.

Can small companies still file abridged accounts?

Yes, for now — and this is a point where a lot of guidance is wrong. The Economic Crime and Corporate Transparency Act 2023 reforms that remove abridged filing and require small companies and micro-entities to file a profit and loss account were paused in January 2026 and have been confirmed for April 2028, not 2027. From then, filing will be through commercial software in iXBRL only, with web and paper filing closed, and there will be an opt-out from publishing the profit and loss account on the public register.

Should the liability cap go in the engagement letter or the terms of business?

It needs to be stated somewhere as an actual figure, and the letter is the reliable place. The commonest defect in accountancy client agreements is terms of business that cap liability "as set out in the engagement letter" alongside a letter containing no cap at all — the firm believes it is protected and nothing protects it. Remember what cannot be capped: liability for death or personal injury caused by negligence, and for fraud. And a cap has to be reasonable to be relied on.

Can I charge interest on late fees at 8% over base for every client?

No. The Late Payment of Commercial Debts (Interest) Act 1998 gives that right only where the purchaser and the supplier are each acting in the course of a business, so it does not reach a private individual who asked you to prepare a tax return. This template asks whether the client is in business and prints statutory interest or a stated contractual rate accordingly — and uses the same answer to decide whether the deemed-acceptance clause is available, since that is a term the consumer fairness rules are aimed at.

Should my retainer be refundable?

That is your choice, and the only wrong answer is both. State either that unused funds are credited toward future fees or refunded when the engagement ends, or that the retainer is non-refundable. A clause promising both in different sentences is an unenforceable contradiction rather than a compromise, and it will be resolved by someone else on facts you did not choose. This template prints only the option you select.

Who owns the accountant's working papers?

The accountant, as a matter of standard professional practice, even though the papers relate to the client's own financial records. The client is entitled to their own underlying records and to the firm's final deliverables — the completed accounts and filed returns — not to the firm's internal schedules and notes. The distinction matters most at handover, which is why it belongs both here and in a disengagement letter.

Related templates

Contract for Services Template (UK)

Disclaimer

This template and guide are provided for general information only and do not constitute legal, regulatory or professional-standards advice. Anti-money-laundering, tax-agent registration, filing, confidentiality and data-protection requirements are fact-specific and change over time. Confirm the current ICAEW, ACCA or HMRC requirements that apply to your firm, and consult a licensed accountant or solicitor, before relying on this document.