Setting up an accountancy firm in the UK means putting several permissions in place in the right order: professional body authorisation if you belong to one, approved anti money laundering supervision, professional indemnity insurance, and, from 2026, registration with HMRC as a tax adviser before you deal with HMRC for any client. Each step depends on the one before, so a firm that starts trading first and tidies up later can find itself unable to file returns for its first clients.

Do you need a qualification or a practising certificate?

The law does not require a qualification to offer general accountancy, bookkeeping or tax services; ICAEW’s consumer guidance notes that anyone can legally call themselves an accountant. What the law reserves are particular kinds of work, such as statutory audit and insolvency appointments, which need specific authorisation.

Professional body members are a different matter. ICAEW says that members whose activities amount to engaging in public practice will usually need a practising certificate, professional indemnity insurance and to come within Practice Assurance, and that a member needs two years’ relevant post qualification experience to obtain a certificate. A member not entitled to one cannot enter public practice while a member. ACCA and AAT run equivalent schemes: an ACCA practising certificate and an AAT licence. The detail is in practising certificates and AAT licensed accountants. Audit, investment business, insolvency and probate each need a further registration or licence, and ICAEW warns that these applications take time.

In what order should the steps happen?

The dependencies between regimes dictate a sequence. A sensible order is:

  1. Decide the legal structure (sole practice, partnership, LLP or company) and who will own and manage it, because every owner and manager will need AML approval.
  2. Apply for the practising certificate or licence, if you are a member of a body.
  3. Secure AML supervision and approval of beneficial owners, officers and managers.
  4. Put professional indemnity insurance in place before the first engagement.
  5. Register with HMRC as a tax adviser by applying for an agent services account.
  6. Register as a Companies House authorised agent if you will verify identities for clients.
  7. Pay the ICO data protection fee and set up engagement letters, client money arrangements and AML procedures.

How does AML supervision work for a new firm?

A firm providing accountancy services to clients is an “external accountant” under regulation 11 of the Money Laundering Regulations 2017. Under regulation 7, a member firm is supervised by its professional body; otherwise HMRC is the supervisor. ACCA, for example, automatically supervises sole practitioners holding its practising certificate, and supervises a firm where ACCA certificate holders together have majority control. Mixed ownership firms need to check which body supervises them.

Regulation 26 says no one may be a beneficial owner, officer or manager of an accountancy firm, or practise as a sole practitioner, without the supervisor’s approval. From the first client the firm needs a documented firm wide risk assessment, policies and procedures, customer due diligence and a nominated officer. ICAEW points out that a sole practitioner will be the money laundering reporting officer.

What insurance does a new practice need?

For ICAEW firms, the Professional Indemnity Insurance Regulations effective from 1 October 2026 set the minimum. A firm must take reasonable steps to meet claims and must hold qualifying insurance with a participating insurer. The standard minimum limit is £2 million for any single claim and in the aggregate, but a firm with gross fee income under £800,000 needs only two and a half times its gross fee income, with a minimum of £250,000. Qualifying insurance must give retroactive cover for work in the previous six years, or from the start of the practice if sooner. ICAEW stresses these are minimums and that cover should reflect the risk profile of the clients. AAT likewise requires all licence holders to carry PII covering their services. More detail is in professional indemnity insurance for accountants.

Illustration only. A new ICAEW sole practice expects first year fees of £60,000. Two and a half times that is £150,000, below the £250,000 floor, so the regulatory minimum limit is £250,000. Whether that is enough depends on the work: a single negligent tax planning error can exceed it.

What must be in place before you deal with HMRC?

Under the Finance Act 2026, a business paid to interact with HMRC about clients’ tax affairs must be registered as a tax adviser, which is done by applying for an agent services account. HMRC’s guidance tells anyone new to the market to register now. The application needs a business Government Gateway login, the firm’s tax references, details of relevant individuals and proof of AML supervision. HMRC will reject an application if AML supervision has been applied for but not yet approved, so step 3 must be complete before step 5.

The firm and its relevant individuals must also meet HMRC’s registration conditions: no overdue returns or unpaid tax outside a Time to Pay arrangement, no relevant unspent fraud or tax convictions, no director disqualification and no insolvency. Where a business has fewer than six officers, all of them are relevant individuals, so a founder’s own late Self Assessment return can block the firm’s registration. See mandatory registration of tax advisers and the agent services account. Once registered, the firm is expected to act consistently with the HMRC standard for agents.

What about Companies House?

Companies House requires agents who verify clients’ identities for it to register as Authorised Corporate Service Providers, and says that in future all agents filing for clients will need to register. Registration requires AML supervision. An authorised agent must tell Companies House of changes to its information within 14 days and keep records of identity checks for 7 years; failing these duties is an offence and can lead to suspension.

What systems are needed from day one?

  • Engagement letters. HMRC’s standard for agents expects terms to be agreed before acting, covering fees and how any repayment will reach the client. See engagement letters for accountants.
  • Professional clearance. When taking over clients from another adviser, write to the previous adviser before acting, and expect them to pass on information the client is entitled to, as the standard for agents requires.
  • Client money. ICAEW requires client money to be kept in a separate client account with trust status, and a sole practitioner must appoint an alternate.
  • Data protection. Under the Data Protection (Charges and Information) Regulations 2018, organisations including sole traders that use personal information must pay the ICO data protection fee unless exempt.
  • Bribery. ICAEW reminds new firms with staff or subcontractors that having appropriate procedures to prevent bribery is a defence under the Bribery Act 2010.

What mistakes do new practices make?

  • Taking on clients and filing returns before AML supervision and HMRC registration are in place.
  • Bringing in a business partner or investor without getting them approved as a beneficial owner.
  • Buying the cheapest PII without checking the insurer is a participating insurer for their professional body.
  • Forgetting that the founder’s own tax affairs are checked by HMRC.
  • Describing the firm as “chartered accountants” without meeting the body’s eligibility rules.
  • Copying a former employer’s engagement letters, which may name the wrong supervisor or complaints route.

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

Sources

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.