In brief
- Members of professional bodies such as ICAEW and ACCA generally need a practising certificate to offer accountancy services to the public, and each body sets its own requirements.
- Every accountancy service provider needs anti-money laundering supervision, either from a professional body or from HMRC, before it starts trading.
- Professional indemnity insurance is compulsory for many practising members, and engagement letters set the terms of every client relationship.
- Building from scratch is slower but cheaper; buying a fee block brings income from day one but needs funding and careful integration.
- Cash flow is seasonal, with work concentrated before 31 January, so plan for the months before fees are billed and collected.
Do you need a practising certificate?
In the UK, the word accountant is not a protected title, but the major professional bodies require members who offer accountancy services to the public to hold a practising certificate or licence. ICAEW publishes guidance on practising certificates, and ACCA sets out its practising certificate requirements, which include a period of supervised experience. Other bodies, including AAT, CIMA, CIOT and ATT, set their own requirements for members in practice.
Requirements typically cover relevant experience, continuing professional development, PII, anti-money laundering arrangements and, for sole practitioners, arrangements for someone to take over the practice if you are unable to work. Certain work carries further requirements: statutory audit needs registered auditor status, and insolvency work needs a separate licence.
Check your own body’s rules early, because the experience requirement in particular can affect when you are able to start.
Choosing your structure and your market
Most new practices start as a sole trader or a limited company, and some founders form a partnership or LLP with a colleague. The choice affects tax, personal liability, how the practice is perceived by clients and how a lender will assess it. Professional bodies have their own rules on firm registration and on who may own and manage a practice, so check them before forming a company.
Equally important is deciding who you will serve. Practices that focus on a sector, such as contractors, medical professionals, property landlords or owner-managed businesses, often find it easier to market themselves, price consistently and build a recurring client base. A clear focus also helps when buying fees later, because you know which client books will fit.
Pricing deserves early thought. Fixed monthly fees for a defined package of services are now common and make income more predictable. Time-based billing for ad hoc work still has a place, but a practice built on recurring monthly fees is usually easier to forecast, to fund and, eventually, to sell.
Anti-money laundering supervision
Under the Money Laundering Regulations, accountancy service providers must be supervised for anti-money laundering purposes. GOV.UK guidance on who needs to register explains that a business supervised by a professional body does not need to register with HMRC, while accountancy service providers not supervised by a professional body must register with HMRC, and that a business must not trade without registering.
Supervision brings obligations: a firm-wide risk assessment, written policies and procedures, client due diligence, staff training and record keeping. Build these into your systems from the start.
The government has confirmed plans to move anti-money laundering supervision of professional services firms to the Financial Conduct Authority. The change depends on legislation and a transition plan, so check the current position with your professional body when you set up.
Professional indemnity insurance
ICAEW states that PII is compulsory for members who hold a practising certificate and engage in public practice, and other bodies set their own requirements, including minimum levels of cover and run-off when a practice ceases. Insurers will ask about the services you plan to offer, your experience and your risk management.
The premium is an annual cost that usually falls at the start of cover, before fees are flowing. It can be spread through professional indemnity finance, and our PII premium finance guide explains how.
Engagement letters and the professional basics
An engagement letter sets out the scope of work, responsibilities, fees and limits of liability for each client, and professional bodies expect them to be in place. Many bodies provide templates. Alongside engagement letters, a new practice needs client identification procedures, professional clearance when taking over clients from another accountant, a complaints procedure, data protection arrangements and a clear approach to fees.
Getting these right from the first client avoids difficult conversations later and makes the practice easier to value and to fund, because lenders and buyers both look for documented, recurring client relationships.
Software and systems
A modern practice runs on cloud accounting, tax and practice management software. Choose a stack that handles bookkeeping, payroll, accounts production, tax returns, time and fee tracking and secure client communication. Making Tax Digital is changing how many clients keep records, which affects both the software you need and the services you can offer.
Subscriptions add up, as do hardware, cyber security and training. Hardware and set-up costs can be spread with equipment and technology finance so that launch capital is kept for running costs.
Building from scratch or buying a fee block
There are two broad routes to a client base. Building from scratch costs less up front, but income grows slowly and the practice may take several years to reach a sustainable size. Buying a block of fees from a retiring practitioner brings recurring income and clients from day one, in exchange for a purchase price, due diligence and the work of retaining the clients through a handover.
Many practitioners combine the two: they launch, build a core of clients and then acquire a fee block once their systems and capacity are ready. Fee blocks are often priced by reference to recurring fees, with part of the price deferred and adjusted for client retention. Our fee block finance guide explains pricing, retention clauses and due diligence, and fee block finance sets out how purchases are typically funded.
Once the practice is established, our page on accountancy practice loans covers the funding accountancy firms commonly use as they grow, from fee block purchases to partner buy-ins and tax bills.
Costs and first-year cash flow
The main start-up costs are usually practising certificate and professional body fees, PII, software and IT, premises or a home office set-up, marketing, and the founder’s living costs until fees are collected. If you plan to employ staff, salaries quickly become the largest item. Leave room for the costs that are easy to miss: professional body subscriptions, AML supervision fees, data protection registration, insurance beyond PII such as cyber cover, and the time it takes to win the first clients.
Accountancy cash flow is seasonal. Much personal tax work is concentrated in the months before the 31 January self-assessment deadline, and fees are often billed and collected after the work is done. A new practice can therefore be at its busiest when cash is tightest. Partners’ own tax payments in January and July add to the pressure in later years.
Monthly fee arrangements, billed by direct debit, smooth income and are increasingly common. A month-by-month forecast for the first year, showing when work is done, billed and paid, is the best way to see the gap and size any funding.
Funding the start
Start-up funding for an accountancy practice usually covers some combination of the following:
- Working capital for the months before fees build, and for the seasonal peak. See new practice finance and practice working capital.
- Fee block finance to buy recurring fees, at launch or once the practice is established.
- PII premium finance to spread the first premium.
- Equipment and technology finance for hardware and set-up.
Without a trading record, lenders look closely at the founder’s experience, any clients expected to follow, the business plan and forecast, and the personal contribution. A fee block purchase can make the case stronger because the income being bought has a history. Our guide to preparing a practice finance application sets out what lenders typically ask for.
We arrange funding for accountancy practices across the whole of the market, with access to 300+ lenders. We help structure the plan, search the market for lenders who understand recurring-fee businesses and manage the process. Finance is subject to status, lender criteria and approval. Where the borrower is a sole trader or a small partnership, finance of £25,000 or less can be regulated consumer credit, and we will say at the outset if that applies. See our work with accountants and accountancy practices, our starting a practice hub, or make an enquiry.
Common questions
Do I need a practising certificate to start an accountancy practice?
If you are a member of a body such as ICAEW or ACCA and will offer accountancy services to the public, you will generally need one. Each body sets its own requirements, so check yours early.
Who supervises a new accountancy practice for anti-money laundering?
Your professional body, if it is a recognised supervisor, or HMRC if you are not supervised by a professional body. You must not trade without supervision. See GOV.UK guidance.
Is professional indemnity insurance compulsory for accountants?
For many practising members, yes. ICAEW states that PII is compulsory for members who hold a practising certificate and engage in public practice. Other bodies set their own rules.
Should I build a client base or buy a fee block?
Building is cheaper but slower; buying brings recurring income from day one but needs funding and careful client retention. Many practices do both. See our fee block finance guide.
Can I get finance to start an accountancy practice?
Yes, subject to status, lender criteria and approval. Lenders look at your experience, business plan, forecast and personal contribution, and the market is narrower without trading history. See new practice finance.
Why is cash flow tight in an accountancy practice’s first year?
Work is concentrated before the 31 January deadline, but fees are often billed and collected afterwards. Costs continue all year, so a new practice can be busiest when cash is lowest.
Official sources
This guide is for general information only and should not be treated as legal, tax, accounting or financial advice. Funding availability and lender requirements depend on individual circumstances.
