In one paragraph: an engagement letter has two halves. The standard terms (liability, complaints, money laundering, data protection, ending the engagement, governing law) should come from your professional body's template and your insurer, not be written from scratch. The service schedules are yours to write, and they're where scope creep is won or lost: for each service, say what you'll do and how often, the volume the fee is based on, what the client must send and by when, and what's not included. Then add the clause that matters most: anything not listed is priced before you start, and you don't start until the client agrees in writing.
Jump to: Free schedule builder · The parts of the letter · Scope lines that work · Exclusions by service · The clauses that stop scope creep · UK must-haves · US points · When to send a new one · Cover email · FAQ
Free builder: service schedules, fees and a cover email
Tick the services you've agreed, add the volumes and fees, and get a schedule for each service, a fee table with totals, the scope-creep clauses, a checklist of the standard terms to take from your template, and a cover email. Copy it into your own letter. Nothing you type leaves your browser.
This writes the service-specific parts only. Put them inside your professional body's engagement letter template, edit every line to match what you actually agreed, and have the standard terms checked against your template and your insurer's requirements. Deadlines shown are the usual ones; check them for each client.
The parts of an engagement letter, and who should write each one
| Part | What goes in it | Where it should come from |
|---|---|---|
| Parties and start | Your legal name and address, the client's legal name (and company number), the start date, and that this letter replaces any earlier one | You |
| Schedules of services | One per service: what you'll do and how often, the volume the fee assumes, what the client sends and by when, approvals, and what's not included | You (the builder above) |
| Fees | Fee per service, frequency, VAT, how and when it's paid, what's included in the fee, the annual review | You |
| Out-of-scope work, volume and late records | Quote before starting extras; review the fee when volume grows; what happens when records are late | You (wording below) |
| Responsibilities | The client is responsible for the accuracy of what they give you and for their own returns; bookkeeping isn't an audit | Template |
| Money laundering (UK) | Identity checks before you start, the duty to report suspicions, no "tipping off" | Template, plus your supervisor's guidance |
| Data protection | Your role under UK GDPR, privacy notice, where data is stored, retention, software and AI tools you use | Template, plus your privacy notice |
| Liability, insurance, complaints | Any limit on liability, your PI insurance, how to complain and where to escalate | Template and your insurer. Don't improvise these |
| Ending the engagement | Notice on both sides, unpaid fees, returning records, handover to a new adviser | Template |
| Law and signatures | Governing law and jurisdiction; signed and dated by both sides; a copy on file | Template |
The joint professional bodies (AAT, ACCA, ATT, CIOT and STEP) publish engagement letter templates for their members, and other bodies such as ICAEW and ICB have their own member resources. If you're a member, start there: those templates have the standard terms already, and your body may require you to use written terms. AAT's client care policy, for example, requires members in practice to issue a letter of engagement before starting work.
Scope lines that work: vague versus specific
The test for a scope line: could you and the client disagree about whether a piece of work is covered? If yes, rewrite it.
| Vague (invites scope creep) | Specific |
|---|---|
| Bookkeeping services | Record and categorise your business current account and credit card in Xero each month, and reconcile both to their statements by the 15th of the following month. Based on up to 150 transactions a month. |
| VAT returns | Prepare your quarterly VAT return from the reconciled books, send it for your approval at least 10 working days before the deadline, and submit it through MTD software once you've approved it in writing. |
| Payroll | Run a monthly payroll for up to 3 employees, send payslips, submit the Full Payment Submission to HMRC on or before payday, and tell you what to pay HMRC and when. |
| Ad hoc advice as required | Up to 30 minutes a month of emails and calls about the services in this letter. Anything more, or about anything else, is quoted first. |
| Client to provide records promptly | Bank statements, receipts and sales invoices for each month by the 7th of the following month, through the portal. |
The volume line is the one most letters miss. "Up to 150 transactions a month across 2 accounts" is what lets you say, nine months later, "you're now at 320 a month, so the fee needs to change", without an argument.
Exclusions to list, by service
List the predictable asks for that client type, not every possible service. These are the ones that cause most disputes:
| Service | Commonly excluded (say so) |
|---|---|
| Bookkeeping | Catch-up work for periods before the start date; chasing the client's customers (credit control); paying suppliers; stock counts; management accounts or forecasts unless listed |
| VAT (UK) | Registration, deregistration and scheme changes; HMRC compliance checks and disputes; advice on unusual transactions, land and property, or overseas sales; errors in returns you didn't prepare |
| Sales tax (US) | Nexus studies and new state registrations; voluntary disclosure agreements; state audits and notices; taxability research for new products |
| Payroll | HR and employment-law advice; holiday, statutory or redundancy pay beyond the software's standard calculations; benefits in kind and P11Ds (UK); pension auto-enrolment duties unless listed (UK); benefit plans and 1099s (US) |
| Year end | Statutory accounts and tax returns (if the client's accountant does them); tax planning; how the owner should pay themselves |
| Anything | Mortgage, lender or visa references; work for the owner personally rather than the business; anything needing an authorisation you don't have (audit, investment advice, legal advice) |
The clauses that stop scope creep
Use your own words, but keep the substance. The first one is the most important clause in the letter.
Work that isn't in this letter
"If you ask us to do something that isn't listed in the schedules above, we'll tell you it's extra and give you a price or an estimate before we start. We won't start until you've agreed it in writing (an email is fine)."
If your business grows
"The bookkeeping fee is based on the volume in the schedule. If your transactions are above that for 3 months in a row, we'll tell you and agree a new fee before the next month's work."
If records arrive late
"We need your records by the 7th of each month to do the work on time. If they arrive late or incomplete, we'll do the work as soon as we reasonably can, but we can't promise to meet a filing deadline. Any penalties or interest caused by late records are yours to pay." Only add a rush fee if you'll actually charge it. Stopping work just before a filing deadline because of unpaid fees can harm the client, so check your professional body's guidance before writing a "we'll stop work" clause.
Questions included in the fee
"The fee includes up to 30 minutes a month of emails and calls about the services above." A number makes "just a quick question" visible without making you sound difficult.
UK must-haves: money laundering, data protection, authority to act
- Money laundering supervision. Professional bookkeeping is an accountancy service under the Money Laundering Regulations 2017, so you must be supervised by HMRC or by a professional body that's an anti-money laundering supervisor (such as AAT, ICB or the Institute of Accountants and Bookkeepers). Trading while not registered is a criminal offence. Name your supervisor in the letter. gov.uk: accountancy service provider registration
- Checks before you start. Customer due diligence (identity, and for companies the beneficial owners) is done before the business relationship starts. The letter should say you'll ask for it, that you must report suspicions, and that you can't tell the client if you do.
- Keeping those records. Customer due diligence records must be kept for 5 years after the business relationship ends, then deleted unless another reason applies. MLR 2017, regulation 40
- Data protection. The ICO's guidance gives an accountant acting for a client as an example of a controller (not a processor) for the personal data in the accounts, because of your professional obligations. Say so, link your privacy notice, and list the software you store data in. ICO: controllers and processors
- AI tools. If you use ChatGPT, Gemini, Claude or AI features in your software on client data, say so and how you limit it (no identifiers, business plans that don't train on data).
- Authority to act with HMRC. If you'll deal with HMRC for VAT, payroll or Self Assessment, say which taxes you're authorised for and that the client must authorise you as their agent.
- Professional clearance. When taking over from another adviser, say you'll contact them for handover information, and when leaving, that you'll pass records on to the new adviser.
US points
- Say it isn't an audit. Make clear that bookkeeping isn't an audit, review or compilation and gives no assurance on the figures. CPA firms preparing financial statements follow the AICPA's standards for those engagements, which set their own engagement letter requirements.
- Authority with the IRS. If you'll talk to the IRS or a state agency for the client, the letter should mention the authorization you'll need: Form 8821 to receive tax information, or Form 2848 for representation (only certain professionals can represent).
- Tax return information. If you also prepare returns, using or disclosing return information for anything beyond preparing the return needs the client's written consent under Internal Revenue Code section 7216.
- State rules. Sales tax on bookkeeping services, privacy laws and limits on liability clauses vary by state. Check yours, and your insurer's requirements.
When to send a new letter
- Before any new service starts (VAT registration, payroll, management reports). A new service is a new schedule.
- When the fee basis changes, or at the annual fee review if anything has changed.
- When the client's entity changes: a sole trader incorporating is a new client and needs new checks and a new letter.
- When your standard terms change (a new template edition from your body, a new insurer requirement).
- At least once a year, review each letter against what you're actually doing. Work you do that isn't in the letter is work you're not being paid for.
The cover email
Clients don't read engagement letters. A short cover email that picks out the three parts that matter does more for the relationship than any clause.
Subject: Your engagement letter from Ledger Lane Hi Sam, Attached is our engagement letter. It sets out what we'll do for you from 1 November 2026. Three parts matter most: 1. What's included: monthly bookkeeping, VAT returns. Anything else is quoted before we start, so there are no surprise bills. 2. What we need from you: your records by the 7th of each month. That's what lets us hit your deadlines. 3. The fee: £180 a month plus VAT, reviewed each April. Please read it, and if it all looks right, sign and return it. If anything isn't what we discussed, reply and we'll fix it before you sign. Thanks, Priya
Have ChatGPT, Gemini or Claude draft and review engagement letters for you. Bookkeeper Skills Pro includes engagement-letter: describe the client ("Ltd company, 2 directors, 200 transactions a month, VAT quarterly, payroll for 4, they keep asking for cash-flow forecasts") and it writes the schedules, exclusions, fee table and cover email. Paste an existing letter and it gives you a gap table, rewrites the vague scope lines and lists the exclusions to add. Pro also has client onboarding, month-end close, year-end packs and fee reviews.
The free client-explainer skill writes the plain-English emails when a client asks why something isn't included. Set-up takes about 3 minutes, no coding.
FAQ
What should a bookkeeping engagement letter include?
Who you are and your professional body, the start date, one schedule per service (what you'll do, the volume it's based on, what the client must send and by when, and what's not included), the fees and how out-of-scope work is priced, and the standard terms: anti-money laundering checks, data protection, responsibilities, liability, complaints, record retention, ending the engagement and governing law. Take the standard terms from your professional body's template and write the schedules yourself.
Do bookkeepers legally need an engagement letter in the UK?
There's no general law requiring one, but AAT's client care policy requires its members in practice to issue a letter of engagement before starting work, and other bodies expect written terms too. Whatever your membership, a signed letter is your evidence of what was agreed if there's a fee dispute or an insurance claim. You also have to do the money laundering checks before you start, and the letter is the natural place to explain them.
How do I stop scope creep with an engagement letter?
List exactly what you'll do for each service, the volume the fee assumes (for example up to 150 transactions a month across 2 accounts), and the predictable things that aren't included. Then add one clause: anything not listed is quoted before you start, and you don't start until the client agrees in writing. That clause, used every time, is what stops the 'quick favour' turning into unpaid hours.
How often should I update a client's engagement letter?
Whenever the services, the fee basis or your standard terms change, and review each letter at least once a year (many practices do it with the annual fee review). A new service needs a new schedule signed before you start it.
Can I use an AI tool to write my engagement letter?
For the service schedules, fee table and cover email, yes, and it's quick: give it the services and volumes, not the client's identifiers. Don't let it invent legal terms such as liability caps or governing law: take those from your professional body's template and check them with your insurer.
This page is general information written by an AI agent and checked against gov.uk (accountancy service provider registration for money laundering supervision, updated 16 March 2023), legislation.gov.uk (Money Laundering Regulations 2017, regulation 40), the ICO's guidance on controllers and processors, and AAT's client care policy on 27 October 2026. It is not legal advice and doesn't replace your professional body's template or your insurer's requirements. If you spot an error, please open an issue.