An AAT licensed accountant is an AAT member who holds a practising licence allowing them to provide self employed accountancy or bookkeeping services to the public, but only for the specific services AAT has approved under one of four licence tiers. The licence comes with conditions on professional indemnity insurance, continuity cover, client money, CPD, anti money laundering supervision and practice assurance reviews.

What is an AAT licence?

The Association of Accounting Technicians licenses members in practice under its Licensing Regulations 2024, which came into force on 5 February 2024. AAT says all self employed members offering bookkeeping or accountancy services to clients must hold a valid licence, and that the licence entitles members to call themselves an AAT Licensed Accountant or AAT Licensed Bookkeeper, depending on the services they are approved to offer.

Regulation 6.1 says a member must not offer or provide, or hold themselves out as offering, self employed accountancy services unless they hold a valid licence or have an approved exemption. The regulations apply to associate, full and fellow members in public practice in the UK, the Channel Islands or the Isle of Man.

Who counts as being in practice?

The regulations define self employed accountancy services widely. A member needs a licence if they offer or provide services to the public as:

  • a sole practitioner;
  • a director of a limited company holding at least 5% of its shares;
  • a partner in any partnership, salaried or equity;
  • a designated or non designated member of an LLP; or
  • a principal in any other corporate entity holding at least 5% of its shares.

Shares held by anyone in the member’s household or family are treated as the member’s own, so splitting shares with a spouse does not avoid the 5% test. An employed member is not treated as self employed unless AAT finds there is no more senior accountant supervising them, or clients are led to believe the member is a principal (regulation 6.3).

What services does each licence tier allow?

Schedule 1 to the regulations sets out four tiers. Members are not automatically approved for every service in a tier; each service is approved individually on evidence of competence and experience, and a member may provide only the services for which they are licensed (regulation 6.4).

Tier Open to Services include
1 Full and fellow members Limited assurance engagements, independent examination, internal audit, forensic accounting, company secretarial services as a trust or company service provider, plus tiers 2 to 4
2 Full and fellow members Personal and business income tax, corporation tax, capital gains tax, inheritance tax, plus tiers 3 and 4
3 Full and fellow members Budgeting and forecasting, statutory accounts under the Companies Act, management accounting, plus tier 4
4 Full, fellow and associate members Bookkeeping, accounts for sole traders and partnerships only, computerised accounting systems, VAT, payroll

Licensed bookkeepers must stay within tier 4. A bookkeeper who starts preparing limited company accounts or a corporation tax return is working outside the licence, which can be treated as misconduct or lead to immediate termination.

What can an AAT licence not cover?

Statutory audit is outside the scheme. Section 1212 of the Companies Act 2006 makes an individual or firm eligible for appointment as a statutory auditor only if they are a member of a recognised supervisory body and eligible under its rules, and the GOV.UK guidance lists ACCA, ICAEW, ICAS and Chartered Accountants Ireland as the bodies to register with. AAT is not among them.

Independent examination of charity accounts is different. Section 145 of the Charities Act 2011 lists the Association of Accounting Technicians among the bodies whose members can act as examiner for charities above the higher income threshold in section 145(3), which is why independent examination sits in tier 1.

Who is exempt from holding a licence?

Under the Licence Exemption Policy, a member providing self employed services is exempt only if they:

  • are authorised and regulated for client services by ICAEW, ICAS, Chartered Accountants Ireland, ACCA, CIMA or AIA;
  • work only as a subcontractor to other accountancy or bookkeeping firms under a written agreement covering responsibilities, PII, data protection and anti money laundering arrangements; or
  • provide services AAT has agreed fall outside the licence tiers.

Exempt members must not describe themselves as licensed by AAT or advertise in connection with AAT, and must reconfirm eligibility each year. For the equivalent rules at other bodies, see ICAEW practising certificates.

What conditions come with the licence?

Regulation 8.1 makes these general conditions of every licence:

  • remaining fit and proper and renewing the licence and paying fees each year;
  • complying with the CPD Policy, recording CPD in practice management, anti money laundering and every approved service;
  • holding PII that meets the PII Policy and maintaining continuity of practice arrangements;
  • following the Client Care Policy, including engagement and disengagement letters and a complaints procedure, and the Clients’ Money Policy where relevant;
  • paying the ICO data protection fee;
  • having anti money laundering supervision in place at all times and submitting an annual firm return on request;
  • complying with the Practice Assurance Standards and submitting to practice assurance reviews, including any follow up at the member’s own cost;
  • complying with the Code of Professional Ethics; and
  • having at least one client for whom services are provided for remuneration.

The fine detail sits in separate policies. AAT’s PII page sets minimum cover at the higher of £50,000 or 2.5 times gross fee income for sole traders, and the higher of £100,000 or 2.5 times fee income for partnerships and companies, capped at a required maximum of £1,000,000 where fee income exceeds £400,000. Continuity cover must be agreed in writing with another practice of similar competence, although licence holders with six or fewer clients can go without it if clients agree and this is recorded in the engagement letter. Under the Clients’ Money Policy, client money must never go into the business account, a separate designated account is needed where more than £10,000 is expected to be held for over 30 days, and balances must be reconciled at least once every five weeks. The general position is explained in client money rules.

How does AAT supervise anti money laundering compliance?

AAT is listed in Schedule 1 to the Money Laundering Regulations 2017 as a professional body supervisor, and AAT says it is overseen by OPBAS. A licence applicant who does not want AAT as supervisor must give details of their registration with another supervisor. Terminating a licence can also remove AAT’s AML supervision of the firm (regulation 9.4). See AML supervision for accountants for how supervision works across bodies.

This is due to change. The FCA says it does not expect to begin taking on supervision of accountancy firms until autumn 2028, with a phased transition completing around 2030, and that nothing changes for firms yet. The background is in AML supervision reform.

What happens if a licensed member breaks the rules?

Regulation 9.1 lets AAT terminate or suspend a licence immediately, restrict it to services where the member has the knowledge and experience, impose conditions, or refer the member under the Disciplinary Regulations. A licence ends automatically if the member fails to renew, resigns or is expelled. Terminations and suspensions may be publicised. A member can usually apply to reinstate within 12 months; after that a fresh application is needed.

Illustration only

Sam, an AAT full member, holds a tier 4 licence and keeps books for 12 sole traders. A client incorporates and asks Sam to prepare the company’s statutory accounts and corporation tax return. Both services sit in tiers 3 and 2, so Sam must apply to AAT and be approved for them, with evidence of experience, before taking the work on. Sam then moves the practice into a limited company in which Sam’s spouse holds all the shares and Sam is a director holding none. Because shares held by family members are treated as Sam’s own, Sam still counts as being in public practice and needs the licence.

What mistakes come up most often?

  • Taking on work in a higher tier before AAT has approved the service.
  • Assuming a director with a small personal holding is outside licensing when family shares take the total over 5%.
  • Letting continuity arrangements lapse or relying on a nominee with a very different practice.
  • Failing to keep CPD records that cover anti money laundering and practice management as well as technical work.
  • Exempt members referring to AAT in their marketing.

Licensed members preparing tax returns must also follow Professional Conduct in Relation to Taxation, which AAT issues jointly with other bodies including the CIOT and ATT.

Solar Protect runs fee protection schemes for accountancy and bookkeeping practices. See how our accountant schemes work or read fee protection schemes for accountants.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.