Fixed-fee vs hourly billing

1. Pricing models

UK accountancy has shifted meaningfully in the last decade from predominantly hourly billing to predominantly fixed-fee engagements for owner-managed businesses. The shift is incomplete. Many long-established regional firms still run on hourly rates, and larger advisory work (due diligence, litigation support, complex tax planning) remains hourly almost universally.

For a typical limited company buying ongoing year-round accounting, the pricing model matters almost as much as the firm's technical competence. The wrong model produces surprise invoices, hesitation to ask questions because every phone call costs, and a mismatch between what you need and what your accountant is paid to do.

2. Hourly billing: pros and drawbacks

Hourly billing prices time. Typically £80-£150/hour for senior associates and £200-£400/hour for partners in regional UK firms. The model is transparent in one sense (every minute is recorded on a timesheet) and opaque in another (you do not know the total cost until the work is done).

The pro: for genuinely variable work (a messy year-end catch-up, a complex tax enquiry, a restructuring project) hourly is fair to both sides. A fixed fee for unknowable work is either an over-charge to the client or a loss to the firm.

The risk: hourly pricing creates awkward incentives. Efficient technology investment by the firm reduces their revenue. Phone calls to clarify points become billable events. Junior staff can be pushed onto work because the blended rate looks better. For ongoing compliance and advisory work, hourly rarely aligns incentives.

3. Fixed fees: what they should include

A fixed fee is predictable and budget-friendly, but the value depends entirely on what is included. A £200-a-month fixed fee that only covers year-end accounts and a Corporation Tax return is no cheaper than the same firm's hourly equivalent, just spread across the year.

A well-constructed fixed-fee package for a limited company typically bundles:

• Statutory accounts preparation and filing at Companies House.
• CT600 Corporation Tax return preparation and filing.
• Confirmation statement filing.
• Director's Self Assessment (usually for the primary director).
• Payroll. RTI submissions for a defined number of employees, typically director-only or up to a handful of staff.
• Quarterly VAT returns if VAT-registered.
• Bookkeeping. Sometimes bundled, often a separate line item.
• Management accounts. Regular reporting where the written fee includes it.
• Ad-hoc queries. A firm clear about what the fee covers will generally not clock-watch normal email and phone exchanges.

The single biggest differentiator between a cheap fixed fee and a meaningful one is whether management accounts are included. A firm producing regular P&L and cashflow summaries is doing fundamentally different work from a firm just closing books once a year.

4. Value-based and percentage pricing

A minority of UK firms price as a percentage of turnover (typically 1-2%) or on a "value-priced" basis that attempts to charge based on the tax saved or the decision supported. Both approaches exist; neither is mainstream.

Percentage-of-turnover pricing tends to penalise high-turnover low-margin businesses unfairly, and rewards firms for the size of the client rather than the complexity of the work. Value pricing sounds principled but is hard to quantify before the work starts; it is mainly a fit for one-off advisory projects (EIS structuring, M&A prep) rather than ongoing engagements.

5. Comparing quotes like for like

Two fixed-fee quotes for "limited company accounts" are almost never for the same list of work. Before comparing numbers, write down what you need and ask each firm to price against that list. Common gaps between quotes that look similar:

• Bookkeeping included or excluded. Some "fixed fee" packages assume you do your own bookkeeping and hand over a clean Xero file. Others include it.
• Number of payroll employees. Director-only payroll is very different from a 15-employee operation.
• Number of director Self Assessments. Multi-director companies often see extra £150-£300 per additional return.
• Software licence cost. Is the Xero/FreeAgent/QuickBooks subscription bundled or billed separately?
• Management reporting schedule. Monthly vs quarterly vs none.
• Tax planning sessions. Explicit advisory meetings annually, quarterly, or never.

6. Extra work

Even a well-written fixed fee may run into extra work: an HMRC enquiry, a company restructuring, an R&D claim, a share scheme implementation, due diligence support for a funding round. Reputable firms will quote for this work separately, in advance, in writing. Poor firms either quietly charge it within the fee (and underdeliver) or surprise the client with an ad-hoc invoice. Ask upfront how extra work is handled.

7. Pricing red flags

• "We'll sort out the fee at year-end." Ask for the fee and the work covered in writing before anything starts.
• A fee well below the market. The work has a floor cost; if the fee is below it, either the work covered is narrower than you think or the firm is taking shortcuts.
• Refusal to issue an engagement letter with the fee in writing. This is a regulatory requirement for chartered firms.
• Hourly phone-call charges layered onto a monthly fee. Either the fee covers access or it doesn't; double-charging is a trust problem.
• Fee rises that consistently outpace inflation with no extra work included. Review annually; the market is competitive and lock-in should be earned.

For a fixed-fee quote with a full written proposal (covering management accounts, payroll, VAT, and director Self Assessment) see our services page. If fee surprises are the trigger for a move, how we handle the switch covers the full handover sequence.