The software is not the expensive part. You can keep compliant digital records for £0 a month on Sage’s free Sole Trader plan or Pandle’s free tier, for £7 a month excluding VAT on Xero Simple if you are not VAT registered, and for £18 on Xero Ignite if you are. If cost were the only question, DIY would win every time.
It usually is not the only question. The real cost of DIY bookkeeping is your time, and the cost of fixing what goes wrong.
Here is the honest comparison, in both directions.
What each option actually costs
| DIY | Outsourced | |
|---|---|---|
| Software | £0 – £70/month ex VAT | Usually included |
| Fee | £0 | £20 – £224/month + VAT |
| Your time | 2–8 hours a month, typically | Under an hour |
| Error correction | Charged at accountancy rates at year end | Absorbed |
| Who carries the liability | You | A regulated firm with PI insurance |
All prices verified from provider pricing pages on 21 August 2026, excluding VAT.
The time cost nobody puts in the comparison
Two to eight hours a month is a wide range because transaction volume drives it. A consultant issuing four invoices a month is at the bottom. A café taking 400 card payments, reconciling a till float and chasing supplier statements is at the top.
Put your own hourly value against it. If your billable rate is £60 and bookkeeping takes you five hours a month, you are spending £300 a month of capacity to save £20 to £70 of fees. That is not a saving. It is a swap, and usually a bad one.
The counter-argument is real though. If the alternative to bookkeeping is not billable work but an evening on the sofa, the maths flips. Plenty of one-person businesses genuinely have the slack, and paying for something you can do in ninety minutes on a Sunday is a poor use of money. Be honest about which of those two you are.
The cost that actually bites: error correction
The expensive failure mode is not doing bookkeeping badly. It is doing it plausibly badly — a record that looks finished and is not.
Common versions:
Bank feed guesses left unchecked. Software suggests categories from previous descriptions. It gets them wrong, confidently, and nobody looks.
Personal spending in the business account. Every mixed transaction becomes a judgement call someone makes later, and for directors part of it may be a director’s loan with its own tax consequences.
VAT treated as a single rate. Zero-rated, exempt and outside-the-scope supplies are not the same thing, and the difference lands in different boxes on the return.
Unreconciled months. Reconciliation is the step that proves the record is complete. Skipping it means missing income is invisible.
Each of these gets found at year end, by someone charging accountancy rates to unpick bookkeeping. That is the most expensive hour in the whole cycle, and it is entirely avoidable.
Where DIY genuinely works
Do not let anyone tell you it never does. DIY bookkeeping is a sensible choice when several of these are true.
- Low transaction volume — under roughly 25 bank lines a month
- One business bank account, used only for business
- Not VAT registered, or on a simple flat-rate footing
- No employees
- No stock
- No director’s loan account activity
- You are prepared to reconcile every month without fail
A dormant company, a landlord with two properties and one letting agent, a freelancer invoicing monthly — these need software, a routine and someone competent doing the year end, not a bookkeeper.
And if you bank with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle, FreeAgent is free. That removes the software cost entirely and makes DIY meaningfully cheaper for that group than for anyone else.
Where DIY reliably fails
Certain situations defeat non-specialists, not through lack of intelligence but because the rules are genuinely technical.
VAT partial exemption. If you make both taxable and exempt supplies, you cannot recover all your input tax. The first de minimis test is an average of £625 a month in exempt input tax and no more than 50% of your total input tax. That is the one everyone quotes, but it is one of three: two further simplified tests can also confer de minimis status, so failing the first does not settle the question. Get any of it wrong and you have either overclaimed VAT or given money away. Bank feeds do not do partial exemption.
Payroll. Real Time Information means reporting on or before payday, every time. Employer NIC runs at 15% on earnings above a £5,000 secondary threshold, and the £10,500 Employment Allowance is not available to single-director companies where the director is the only employee liable for secondary Class 1 NIC. That last point catches people out constantly.
Year-end adjustments. Accruals, prepayments, depreciation, stock valuation, capital allowances. None of these appear in a bank feed, and the rules move — the main pool writing-down allowance was cut from 18% to 14% with effect from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax, which quietly invalidates any spreadsheet built last year.
Catch-up. Once you are more than a quarter behind, DIY stops being cheap. Published catch-up pricing runs at £750 to £850 per financial year, and doing it yourself means reconstructing months of decisions from memory.
Anything with a director’s loan account. The section 455 charge is 35.75% for loans made on or after 6 April 2026 and 33.75% for loans made between 6 April 2022 and 5 April 2026. Which rate applies is fixed by when the loan was made. Misrecording drawings has a real cash cost.
The compliance changes that shift the balance
Two things happened in 2026 that make the DIY route harder than it was.
Making Tax Digital for Income Tax went live. Sole traders and landlords with qualifying income over £50,000 (measured on their 2024/25 return) were mandated from 6 April 2026, over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028. In scope means digital records in compatible software and quarterly updates due 7 August, 7 November, 7 February and 7 May, plus a year-end return.
The joint HMRC and Companies House “File your accounts and Company Tax Return” service closed on 31 March 2026. Companies must now use commercial software to file a Company Tax Return. Companies House accounts filing remains free, and web filing works until software-only filing begins in April 2028.
Neither makes DIY impossible. Both raise the minimum standard.
The hybrid most small businesses land on
The either/or framing is a false one. The arrangement that works for most owner-managed businesses is split:
You do capture. Photograph receipts, raise invoices, keep the bank feed connected. Nobody can do this for you and it costs you minutes, not hours.
Someone else does categorisation, reconciliation and VAT. These are the steps where judgement matters and errors compound.
That combination keeps the fee at the lower end of the range while removing the failure modes that cost real money.
The liability point
One difference no price comparison captures: file it yourself and every error is yours — the tax, the interest at 7.75%, and any penalty. Engage a regulated firm and you have professional indemnity insurance and a regulator behind the work.
But relying on an accountant is not accepted by Companies House as an excuse for late filing. Outsourcing moves the work, not the directors’ legal duty.
Frequently asked questions
Is it cheaper to do my own bookkeeping?
On fees, yes — software costs £0 to £70 a month excluding VAT against £20 to £224 a month + VAT for a service. On total cost, it depends entirely on what your time is worth and how much correction work lands at year end. If bookkeeping displaces billable work, DIY is usually a false economy.
How long does bookkeeping take each month?
Typically two to eight hours for a small business, driven almost entirely by transaction volume rather than turnover. Under 25 bank lines a month is manageable. Several hundred is a job.
When should I stop doing my own bookkeeping?
The usual trigger points are VAT registration, the first employee, holding stock, a director’s loan account, or falling more than one quarter behind. Any of those turns bookkeeping from data entry into a technical exercise.
Can I do my own bookkeeping under Making Tax Digital?
Yes. There is no requirement to use an agent. You do need compatible software, digital records, and quarterly updates filed by 7 August, 7 November, 7 February and 7 May if you are in scope. Retyping figures between systems is not permitted — the data has to move digitally.
What happens if my bookkeeping is wrong?
Errors surface at year end and get corrected at accountancy rates, which is the most expensive way to fix a bookkeeping problem. If they are not caught, you may under or overpay tax. HMRC charges late payment interest at 7.75%, and inadequate records can attract a penalty of up to £3,000.
A middle option that is not all or nothing
SmartFiling runs bookkeeping on flexible plans — you keep control of invoicing and receipt capture, we handle categorisation, reconciliation and VAT, and your year end arrives clean. We work with Xero, QuickBooks, FreeAgent, Sage and Dext.
Fixed fees agreed upfront, fully online, no phone calls required, every filing reviewed by an ICAEW Chartered Accountant.
SmartFiling is the trading name of Ballards Newman (Finchley) Limited, an ICAEW-regulated London practice with over twenty years of UK tax and compliance experience.
