To calculate an accounting fee, start with an hourly rate that covers your costs and target profit, estimate the hours each service takes for the client, and multiply. Then adjust for complexity, risk and the value of the work, and divide the annual total by 12 to set a fixed monthly fee.
This guide walks through that method step by step, with worked examples for a fictional sole trader and a fictional limited company, so you can see every line of the maths and apply it to your own clients.
Step 1: work out your own hourly rate
Your hourly rate is the foundation, so it should come from your own numbers rather than what you think other firms charge. A simple way to set it:
- Add up your annual costs for the person doing the work: salary or drawings, software, insurance, premises, professional body fees and a share of overheads.
- Add the profit you want the practice to make on top.
- Estimate realistic chargeable hours for a year, after holidays, training, admin and time that never gets billed.
- Divide the total by the chargeable hours.
For example, a fictional practice that needs £60,000 to cover costs, wants £15,000 profit and expects 1,000 chargeable hours works it out as (£60,000 + £15,000) ÷ 1,000 = £75 an hour. That is the rate used in the examples below. Use your own figures, not this one.
Chargeable hours are where most rates go wrong. If you are not sure how much of your week is genuinely billable, track it for a month before you set the rate.
Step 2: list every service and estimate the time
Break the engagement into the individual services you will provide. For each, estimate the hours for this particular client, including the time spent chasing records, answering questions and reviewing work, not just preparing the figures.
Your own time records from previous years are the best evidence. If you are pricing a new client, use the closest similar client you already act for and adjust up or down.
Worked example: a sole trader
A fictional sole trader, a self-employed electrician with tidy records, needs year-end accounts, a Self Assessment return and quarterly updates. At £75 an hour:
| Service | Hours | Maths | Annual fee |
|---|---|---|---|
| Year-end accounts | 5 | 5 × £75 | £375.00 |
| Self Assessment return | 1.5 | 1.5 × £75 | £112.50 |
| Quarterly updates (4 × 1 hour) | 4 | 4 × £75 | £300.00 |
| Queries, chasing and admin | 1.5 | 1.5 × £75 | £112.50 |
| Total | 12 | 12 × £75 | £900.00 |
Divided by 12, that is £900 ÷ 12 = £75 a month.
If quarterly work is new to you, our guide to pricing quarterly MTD for Income Tax work goes into more detail on estimating it.
Worked example: a limited company
A fictional limited company, a two-director design agency that is VAT registered and runs a director-only payroll, needs this work. Again at £75 an hour:
| Service | Hours | Maths | Annual fee |
|---|---|---|---|
| Statutory accounts | 8 | 8 × £75 | £600.00 |
| Corporation tax computation and CT600 | 3 | 3 × £75 | £225.00 |
| Confirmation statement | 0.5 | 0.5 × £75 | £37.50 |
| VAT returns (4 × 1.5 hours) | 6 | 6 × £75 | £450.00 |
| Monthly payroll (12 × 0.5 hours) | 6 | 6 × £75 | £450.00 |
| Directors’ Self Assessment returns (2 × 1.5 hours) | 3 | 3 × £75 | £225.00 |
| Queries, advice calls and admin | 3 | 3 × £75 | £225.00 |
| Total | 29.5 | 29.5 × £75 | £2,212.50 |
Divided by 12, that is £2,212.50 ÷ 12 = £184.38 a month.
To run these numbers for your own clients, use our free accounting fee calculator. Enter your hourly rate and the time each service takes, and it gives you the annual and monthly figures.
Step 3: adjust for risk, complexity and value
The time-based figure is a floor, not the final fee. Before you quote, ask what could make this client take longer or matter more:
- Record quality: late, incomplete or disorganised records add hours you did not estimate.
- Scope creep: clients who call often or send ad hoc questions use time that is easy to forget.
- Complexity: multiple income sources, property, foreign income or group structures carry more risk.
- Value to the client: planning that saves the client money, or fast turnaround they rely on, is worth more than the hours behind it.
One straightforward approach is a contingency percentage. If the fictional practice adds 15% to the limited company fee for scope creep and complexity, the maths is £2,212.50 × 1.15 = £2,544.38. Rounded to £2,550, that is £2,550 ÷ 12 = £212.50 a month.
If your practice is VAT registered, remember VAT is added on top. At the standard rate of 20%, £212.50 becomes £212.50 × 1.2 = £255.00 a month. Be clear in every quote whether figures include VAT.
Step 4: move towards value and fixed monthly fees
Hourly maths tells you what the work costs you. Value pricing asks what it is worth to the client. A practical approach is to use both: time to set the minimum, value to decide where above it the fee should sit.
Offer packages, not line items
Clients find it easier to choose between two or three packages than to approve a list of hourly charges. For example, a basic package covering compliance only, a middle package adding quarterly check-ins, and a higher package with planning meetings and priority responses. Price each from the time-based floor upwards.
Switch to a fixed monthly fee
A fixed monthly fee, collected by direct debit, spreads the cost for the client and smooths cash flow for you. To make it work:
- define exactly what is included, and what will be charged separately;
- put the fee and scope in writing in the engagement letter;
- review the fee each year against the time actually spent.
If you are an ICAEW member, its fee information helpsheet explains the requirement to give clients the basis of your fees in writing, normally in the engagement letter, and to provide a fee breakdown if a client asks for one.
Fee calculation checklist
- Hourly rate calculated from your own costs, profit target and chargeable hours.
- Every service listed separately, with hours estimated for this client.
- Time for queries, chasing and admin included.
- Contingency or value adjustment added and recorded.
- Annual fee divided into a monthly figure.
- VAT position stated clearly.
- Scope and fee confirmed in the engagement letter.
- Actual time tracked so next year’s fee is based on evidence.
Frequently asked questions
Should I charge by the hour or a fixed fee?
You can use both. Use hourly maths to work out the fee, then quote it as a fixed annual or monthly amount. Clients get certainty, and you keep the protection of knowing the fee covers your time.
How do I know how long each service will take?
Use your time records from similar clients. If you do not track time yet, start now, even for a few months, so your next round of quotes is based on evidence rather than guesswork.
What if the client’s records turn out worse than expected?
Set out in the engagement letter what the fee assumes, such as records supplied complete and on time, and how extra work will be charged. That gives you a fair basis for an additional fee.
How often should I review fees?
At least once a year, ideally before engagement letters are renewed, comparing the fee with the time actually spent.
How Engager helps
Engager’s value-based pricing tool helps you build fees from your services and turn them into proposals, followed by letters of engagement signed with built-in e-signatures.
Time tracking, including a Chrome extension for timers, helps you see how long each client really takes, so your next fee review starts from real numbers.
Not using Engager yet? Start a free 28-day trial, with no card details required, or book a demo.
