You need an accountant. You have two pricing options: a fixed monthly fee or an hourly rate. Which one gives you better value?

The answer depends on your business type, how much contact you need, and how predictable your finances are. But for most UK businesses, the fixed fee model wins on cost, clarity, and peace of mind. Let us show you why.

What Is Fixed Fee Accounting?

Fixed fee accounting means you pay a set amount each month or quarter. That fee covers a defined scope of work: your annual accounts, corporation tax return, self assessment, VAT returns, payroll, and ongoing advice. You know what you pay and what you get. No surprises.

At Holloway Davies, our ICAEW qualified team works on fixed fees for almost all clients. A limited company director in Leeds paying £195 per month knows their annual compliance costs are £2,340. A freelance consultant in Bristol on £145 per month can budget exactly £1,740 for the year. That predictability matters when you are managing cash flow.

What Is Hourly Billing?

Hourly billing charges you for every minute an accountant spends on your affairs. You get an invoice based on time logged: calls, emails, preparing returns, answering questions, even the time spent reading your emails. Rates for a qualified accountant typically range from £100 to £250 per hour depending on location, specialism, and firm size.

A sole trader in Birmingham might pay £150 per hour. A quick query about VAT registration could take 15 minutes and cost £37.50. A full year of bookkeeping, accounts, and tax return preparation might take 10 to 15 hours: £1,500 to £2,250. But you never know the final bill until it arrives.

Fixed Fee vs Hourly Accountant: The Core Differences

Let us put the two models side by side on the factors that actually matter to a business owner.

Cost Predictability

Fixed fee: you know your monthly cost. It does not change when you ask a question or need extra support. You can budget accurately and avoid surprises.

Hourly: you only know the cost after the work is done. A complex query, a HMRC enquiry, or a simple misunderstanding can all add time and cost. Your bill varies month to month.

Scope of Work

Fixed fee: the scope is defined upfront. Your agreement lists what is included: annual accounts, tax returns, VAT, payroll, and a set number of consultations. Anything outside scope is agreed separately, but most day to day needs are covered.

Hourly: every piece of work is billable. A five minute phone call to check a figure? That is 0.1 hours on the invoice. An email chain about dividend calculations? That is time logged against your account.

Incentives

Fixed fee: your accountant is incentivised to work efficiently and keep your affairs simple. The faster they complete your work, the better their margin. That alignment benefits you. They want to help you avoid problems, not bill you for fixing them.

Hourly: your accountant is incentivised to take more time. There is no direct conflict of interest with a reputable firm, but the model rewards complexity and extended contact. A slower process generates more revenue for them.

Advice and Proactive Support

Fixed fee: you can call or email with questions without worrying about the meter running. That encourages you to ask about tax planning, investment decisions, and structure changes before you act. Proactive advice becomes part of the relationship.

Hourly: you hesitate before picking up the phone. Every call costs money. That hesitation means you might make a decision without advice, or you might delay asking until a small issue becomes a costly problem.

Real Cost Comparison: Fixed Fee vs Hourly

Let us run the numbers for three common business types.

Example 1: Limited Company Director, Single Director, No Employees

Annual compliance: year end accounts, corporation tax return (CT600), confirmation statement, personal tax return (SA100), dividend paperwork. No VAT, no payroll.

Fixed fee: £145 per month = £1,740 per year.

Hourly estimate: 12 hours at £150 per hour = £1,800. But that assumes no extra queries. Add two phone calls and an email chain, and you are at 14 hours and £2,100.

Example 2: Limited Company, Two Directors, Quarterly VAT, Monthly Payroll

Annual compliance plus VAT returns, payroll, two personal tax returns, bookkeeping support.

Fixed fee: £295 per month = £3,540 per year.

Hourly estimate: 25 hours at £175 per hour = £4,375. VAT queries, payroll adjustments, and director dividend planning push that closer to 30 hours and £5,250.

Example 3: Sole Trader, Turnover £60,000, No VAT, Simple Accounts

Annual self assessment return (SA103), bookkeeping support, one or two advisory calls.

Fixed fee: £85 per month = £1,020 per year.

Hourly estimate: 8 hours at £120 per hour = £960. But if you have questions during the year, or if HMRC sends a query, you add time. 10 hours = £1,200.

The fixed fee is competitive on price and superior on predictability. The hourly model can work out cheaper only if you have zero queries and zero complexity. How many businesses have zero queries?

When Hourly Billing Might Make Sense

Fixed fee is not right for everyone. Hourly billing can work in specific situations.

One off projects. You need a single piece of work: a tax return for a past year, a capital gains calculation, a company valuation. You do not want an ongoing relationship. Hourly billing is appropriate here.

Very simple affairs. You are a sole trader with one source of income, no employees, no VAT, no property. Your annual return takes three hours. You never need advice. Hourly billing at £120 per hour costs £360. A fixed fee would be higher.

Large complex groups. A group of companies with multiple subsidiaries, international operations, and frequent transactions may find hourly billing more flexible. The scope of work changes constantly. A fixed fee would need constant renegotiation.

For the vast majority of UK small businesses, limited companies, and contractors, none of these exceptions apply. You have ongoing compliance needs. You have questions. You want a relationship, not a transaction.

Hidden Costs of Hourly Billing

The hourly rate you see is not the full cost. Consider these factors.

  • Minimum billing increments. Many firms bill in 6 minute or 15 minute blocks. A 2 minute call still costs 0.1 hours or 0.25 hours.
  • Different rates for different staff. A partner at £250 per hour, a manager at £175, an assistant at £95. You do not choose who does the work. You pay their rate.
  • Disbursements on top. Postage, printing, Companies House filing fees, HMRC correspondence handling. Some firms add these to hourly bills.
  • No cap on unexpected work. HMRC opens a compliance check. Your accountant spends 8 hours responding. That is £1,200 to £2,000 on top of your expected bill.

Fixed fee accounting typically includes disbursements and handles HMRC queries within the agreed scope. No hidden extras.

What to Look for in a Fixed Fee Agreement

Not all fixed fee arrangements are the same. A poorly structured agreement can leave you paying for services you do not need or missing cover for things you assume are included.

Check the scope carefully. What is included? Annual accounts, corporation tax, personal tax, VAT, payroll, bookkeeping, management accounts? What is excluded? Tax investigations, share valuations, exit planning, complex restructuring?

Check the review process. Does the fee stay the same for 12 months? When does it change? A good firm reviews fees annually based on your changing circumstances, not on a whim.

Check the communication channels. Is email support included? Phone calls? How many? Some fixed fee agreements cap contact at a certain number of queries per month. Make sure the cap matches your likely usage.

Check the software. Is the cost of your accounting software included? Firms like ours often bundle Xero or FreeAgent within the fixed fee. That saves you a separate subscription of £20 to £50 per month.

Fixed Fee vs Hourly: Which Model Do Accountants Prefer?

Most modern accountancy firms have moved to fixed fees. The old model of hourly billing came from a time when accounting was purely compliance: prepare the accounts, file the return, send the bill. The work was predictable and repeatable.

Today, business owners expect more. They want advice, planning, and proactive support. They want to pick up the phone without worrying about cost. Fixed fee accounting makes that relationship possible. Hourly billing makes every interaction a transaction.

As ICAEW qualified accountants, we moved to fixed fees over a decade ago. Our clients tell us the single biggest benefit is being able to call without hesitation. A quick check on dividend timing, a question about a new contract, a conversation about pension contributions. All covered. No meter running.

Making the Switch: From Hourly to Fixed Fee

If you are currently on an hourly arrangement and want to move to fixed fee, the process is straightforward.

Contact a few firms and ask for a fixed fee proposal. Be clear about your business structure, your turnover, your payroll and VAT needs, and your typical level of contact. A good firm will give you a fixed monthly figure for the full year.

You will need to authorise the transfer of your records from your current accountant. This is standard. Your new accountant handles the professional clearance and takes over from your last completed year end.

Timing matters. The best time to switch is just after your year end or after your tax return is filed. That avoids splitting work between two firms and keeps your compliance timeline clean.

We handle switches regularly at Holloway Davies. Most transfers take two to three weeks from instruction to full handover. Your first fixed fee starts from the month we take over.

Summary: Which Model Wins?

For the typical UK business owner, fixed fee accounting delivers better value than hourly billing. You get predictable costs, unlimited advice, aligned incentives, and no hidden extras. The hourly model only wins for one off projects or extremely simple affairs with zero need for ongoing support.

If you run a limited company, work as a contractor through your own Ltd, operate as a sole trader, or run a partnership, fixed fee is almost certainly the right choice. It gives you the relationship you need to run your business with confidence.

If your turnover crossed the VAT threshold in the last 30 days, register inside the 30 day window. And if you are reviewing your accounting arrangements, ask for a fixed fee proposal from three firms. Compare the scope, not just the headline number.

We are happy to give you a fixed fee quote for your business. Contact us to discuss your situation. No obligation, just a clear proposal based on your actual needs.