An accountant’s engagement letter is the written agreement that sets out who the client is, exactly which services you will provide, what the client must do, how fees work and the terms of business. UK professional bodies expect one before work starts, and every new service or change of terms should be covered by an updated letter or schedule.
In short: a UK accountant’s engagement letter should identify the parties, schedule each service separately, state the client’s responsibilities, set out fees and billing, and attach terms of business covering liability, AML, data protection, complaints and termination. Issue it before work starts and get the client’s signed acceptance.
Key points
- ACCA’s Code of Ethics and Conduct requires an engagement letter before work starts, or as soon as practicable after, and evidence that the client accepted it.
- HMRC’s standard for agents expects terms of engagement to be agreed and accepted before an agent acts.
- Use one core engagement letter plus a schedule per service. The professional bodies now publish separate schedules for MTD for Income Tax and for ACSP identity verification work.
- This article is practical guidance and does not give legal advice. Use your professional body’s current templates and take legal advice on liability clauses.
Why an engagement letter matters
An engagement letter (or letter of engagement) is the contract between your practice and the client that defines the scope of your responsibilities. Its main job is to prevent disputes about what you agreed to do.
ACCA’s Code of Ethics and Conduct, section B9, says a professional accountant shall send the client a letter of engagement setting out the terms before any work is undertaken or, if that is not possible, as soon as practicable after the engagement begins. It must set out the actual services, the fees or basis of fees, and the client’s acceptance must be evidenced. A new letter is needed when new work is taken on or terms change (ACCA Rulebook, Code of Ethics and Conduct).
ICAEW publishes a full engagement letter helpsheet with sample wording, which it describes as best practice guidance that does not constitute a professional standard (ICAEW, engagement letters and privacy notices). The CIOT and ATT, with AAT and ACCA, publish joint engagement letter guidance and proforma templates, most recently updated on 3 March 2026 (CIOT, engagement letters).
HMRC’s standard for agents asks agents to make terms of engagement clear and simple, covering how the agent is paid, how any tax repayment reaches the client, the rights of both sides to end the arrangement, and a reasonable cancellation period, and to agree the terms before acting (HMRC, the standard for agents, section 4.3.3).
What to include: the core sections
| Section | What it covers | Where the expectation comes from |
|---|---|---|
| Parties | Legal name of each client entity, the individuals covered (for example directors or a couple), and your firm | ICAEW helpsheet Part 1 |
| Scope schedules | One schedule per service, saying what you will do and significant matters you will not do | ACCA Code B9; ICAEW Part 2 |
| Client responsibilities | Records, deadlines for information, accuracy, approving returns before submission | ICAEW Part 2 schedules |
| Fees and billing | Fixed fee or basis of charging, billing frequency, payment terms, extra work | ACCA Code B9; HMRC standard 4.3.3 |
| Tax repayments | How repayments reach the client, any deductions, and that a nomination can be withdrawn | HMRC standard 4.3.3 |
| Anti-money laundering | Identification and verification, ongoing monitoring and reporting duties | ICAEW terms of business; Money Laundering Regulations 2017 (see our AML requirements guide) |
| Data protection | Your role as controller, privacy notice, use of subcontractors and any international transfers | ICAEW Part 4 and Part 5 |
| Limitation of liability | Any cap, and who may rely on your work | ACCA Code B9 (subject to the law on unfair terms) |
| Complaints | Your internal complaints process and escalation to your professional body | ACCA Code B9 recommends including it |
| Termination and cancellation | Notice, cancellation period, what happens to records and authorisations | HMRC standard 4.3.3 |
| Acceptance | Signature and date for each client entity | ACCA Code B9 requires evidence of acceptance |
Scope by service: what each schedule should pin down
Vague scope causes most fee disputes. For each service, write down the output, the frequency, the information deadline and what is excluded.
| Service | Points to state clearly |
|---|---|
| Self Assessment | Which income sources, which tax years, information deadline, client approval before filing, payments on account |
| MTD for Income Tax | Who keeps digital records, which software, quarterly update preparation and submission, the year-end final declaration, information cut-off for each quarter |
| CGT 60-day returns | How quickly the client must tell you about a UK residential property disposal, and what happens if they tell you late |
| Statutory accounts | Period, framework, filing with Companies House, director approval |
| Corporation Tax | CT600 preparation, payment reminders, enquiries handled separately |
| Payroll | Pay frequency, RTI submissions, auto-enrolment duties, who holds employee data |
| Bookkeeping and VAT | Frequency, bank feeds, VAT return approval, MTD for VAT software |
| Company secretarial and ACSP work | Confirmation statements, registers, and whether you verify identities for Companies House as an ACSP |
The ICAEW helpsheet includes separate schedules for CGT 60-day returns (E-A), personal tax in MTD for Income Tax (E-B), and acting as an ACSP with or without identity verification services (U A and U B).
Updating the engagement letter for MTD and Companies House identity verification
MTD for Income Tax. GOV.UK confirms that people with qualifying income over £50,000 in 2024 to 2025 should have started using MTD for Income Tax from 6 April 2026, those over £30,000 in 2025 to 2026 must start from 6 April 2027, and those over £20,000 in 2026 to 2027 from 6 April 2028 (GOV.UK, find out if and when you need to use MTD for Income Tax).
A traditional Self Assessment schedule describes one annual return. An MTD client sends information every quarter, so the engagement letter needs quarterly deadlines, record-keeping duties and the final declaration. The joint professional bodies published an MTD for Income Tax schedule in June 2025 and updated it in March 2026. Our MTD for ITSA guide covers the wider changes, and our MTD client onboarding checklist shows where the new schedule fits in the sign-up process.
Companies House identity verification. Identity verification became mandatory from 18 November 2025, and existing directors provide their personal code with the company’s next confirmation statement (GOV.UK, when you need to verify your identity for Companies House). If your firm verifies identities as an ACSP, or only files on clients’ behalf, say which in a separate schedule to the engagement letter. Our Companies House identity verification checklist covers the ACSP rules and the client chasing behind that schedule.
Engagement letter template: an original outline for accountants
This is an original outline to structure your own engagement letter. Replace bracketed text, and draw clause wording from your professional body’s current templates.
1. Introduction. Thank you for appointing [Firm]. This letter and the attached schedules and terms of business set out the basis on which we will act for [client entity or entities] from [date].
2. Who we act for. [Each entity and individual, with company number or UTR]. Each person named signs below.
3. Services. We will provide the services in the attached schedules: [Schedule A Self Assessment; Schedule B MTD for Income Tax; Schedule C payroll]. Any work not listed is outside this engagement and will be agreed separately.
4. Your responsibilities. You will keep complete records, give us information by [the dates in each schedule], tell us promptly about changes in your circumstances, and approve each return before we submit it.
5. Our responsibilities. We will carry out the scheduled work with reasonable care and skill and tell you about deadlines that affect you.
6. Fees. [Fixed fee or basis], billed [monthly or annually], payable within [period]. Extra work will be quoted before we start.
7. Tax repayments. [How repayments are paid, any deductions, and your right to withdraw a nomination.]
8. Identity checks and money laundering. We must verify your identity and keep it up to date, and we may be required to report suspicions without telling you.
9. Your data. How we use your information is in our privacy notice. We may use subcontractors, [including providers outside the UK], under written terms.
10. Liability. [Any limitation, prepared with professional or legal advice.]
11. Complaints. [Internal process and contact, and your right to refer to our professional body.]
12. Ending the engagement. Either party may end it by [notice]. You may cancel within [period] of signing.
13. Acceptance. Please sign and return this letter. Signed for [entity], name, capacity, date.
E-signature and filing workflow for accounting client onboarding
- Pick the schedules that match the agreed services and fee.
- Prepare the engagement letter from your master template in your practice management system.
- Have a partner or manager approve scope and fee.
- Send for e-signature (for example through SignWell) to every signatory.
- Chase unsigned letters on a fixed cycle and hold chargeable work until signed.
- File the signed copy and the signing record on the client file.
- Set a review date and reissue when services, fees or terms change.
For a client moving from another firm, send the professional clearance letter alongside the engagement letter. See where this fits in our client onboarding checklist for UK accounting firms, and set up billing to match the letter through our billing support.
FAQs
Do accountants need an engagement letter?
Members of professional bodies effectively do. ACCA’s Code of Ethics and Conduct requires a letter of engagement before work starts, or as soon as practicable after, with evidence that the client accepted it. HMRC’s standard for agents expects terms to be agreed and accepted before an agent acts. ICAEW publishes sample wording as best practice guidance.
What should a letter of engagement for accounting services include?
It should name the client entities and your firm, list each service in a separate schedule with exclusions, set out the client’s responsibilities and information deadlines, explain fees and billing, and attach terms of business covering anti-money laundering, data protection, liability, complaints and termination. It should end with a signed acceptance for each entity.
Do I need a new engagement letter for MTD client onboarding?
In most cases, yes. A Self Assessment schedule covers one annual return, while MTD for Income Tax involves quarterly updates, digital record keeping and a final declaration. ACCA’s code requires a new engagement letter when new work is undertaken or terms change. The joint professional bodies and ICAEW both publish MTD for Income Tax schedules.
How often should engagement letters be updated?
Reissue an engagement letter whenever services, fees or terms change, and when legislation changes what you do, such as MTD for Income Tax or Companies House identity verification. Many practices also review all letters on a fixed cycle. Keep the signed copy and the date of each version so you can show which terms applied.
Can an engagement letter be signed electronically?
Yes, practices routinely use e-signature tools to send letters and keep a signing record. What matters for your professional body is evidence that the client accepted the terms, so keep the completed document and the audit trail together on the client file. Take advice if a particular document has formal execution requirements.
Next step
Our client onboarding service for accountants prepares engagement letters from your templates, sends them for e-signature, chases signatures and files the signed copies, while your practice sets scope and fees. Book a consultation to talk it through.
