Service Charge Accounts: Examples and Format Guide

Year-end accounts are due and you're staring at a bank statement, a spreadsheet, and no idea what format the accounts should be in. Professional accountants charge £500-1,500 to prepare service charge accounts for a small block. Before you write that cheque, understand what the standard format actually looks like — you may be able to produce it yourself.

This guide shows example service charge accounts in the recommended format, explains each component, and flags the most common mistakes volunteer directors make.

For a walkthrough of the full annual accounting cycle (budgeting through year-end), see our service charge accounting guide. If you're building the budget itself — deciding what to include, how much to contribute to the reserve fund, and how to calculate individual demands — see our service charge budget planning guide.

What standard are you following?

There is no statutory requirement specifying exactly how service charge accounts must be formatted. However, two authoritative sources define best practice:

• RICS Service Charge Residential Management Code — sets out the principles of transparency, timeliness, and reasonableness for service charge management
• ICAEW TECH 03/11 — provides detailed guidance and illustrative examples for residential service charge accounts

Following these standards isn't legally mandatory, but the First-tier Tribunal expects accounts to meet them. If a leaseholder challenges your charges under Section 27A of the Landlord and Tenant Act 1985, clear and properly formatted accounts strengthen your position significantly.

The three components of service charge accounts

1. Income and expenditure statement

This is the core document. It shows what was collected, what was spent, and the difference.

Example — 8-flat block, accounting year ending 31 March 2026:

Key points:

• Use income and expenditure, not profit and loss — service charges are not for profit
• Show budget vs actual vs variance for every line item
• The reserve fund contribution is shown as expenditure (it's money set aside, not available for current spending)
• The surplus or deficit tells you whether you collected enough to cover costs
• A small surplus is normal and healthy. A large surplus suggests overcharging. A deficit means you underspent the collection or had unbudgeted costs

2. Reserve fund (sinking fund) statement

The reserve fund tracks money set aside for future major works. It must be reported separately.

Example:

If major works were funded from the reserve during the year, list them:

Key points:

• A separate bank account for the reserve fund is strongly advisable, and is what the RICS code expects — but it is not currently a statutory duty. The designated-account requirement is section 42A of the Landlord and Tenant Act 1987, and it has never been generally commenced (its note reads "26.7.2002 for E. for specified purposes, 1.1.2003 for W. for specified purposes and otherwise prosp."). At minimum, ring-fence the money clearly.
• What the law does require is a trust. Under Section 42 of the Landlord and Tenant Act 1987, reserve fund contributions are held on trust for the leaseholders — they cannot be used for the RMC's general purposes. Section 42(2) lets the money be held "either as a single fund or, if he thinks fit, in two or more separate funds", so a single fund is permitted
• Show interest separately — it belongs to the fund, not the operating account
• List any expenditure from the reserve with dates and descriptions

3. Notes to the accounts

Notes provide context that the numbers alone don't convey:

Essential notes:

• Accounting basis: State which basis you use. The RICS Service Charge Residential Management Code recommends accruals basis (recording income when earned and expenditure when incurred, regardless of when money moves) — this gives a more accurate picture of each year's costs. However, many volunteer directors use receipts and payments basis (recording when money actually enters or leaves the bank) because it is simpler and maps directly to bank statements. Either basis is acceptable provided you state which you are using and apply it consistently. If in doubt, consult an accountant
• Accounting period: "Year ended 31 March 2026"
• Arrears disclosure: "Service charge arrears outstanding at the year-end totalled £600, relating to Flat 3 (£600 for Q4 2025/26). Recovery action has been initiated." See our arrears recovery guide for the process
• Reserve fund policy: "The RMC maintains a reserve fund to cover future major works. The current target balance is £40,000 based on a 10-year planned maintenance schedule"
• Significant variances: Explain any line item where actual spend differed from budget by more than 10% — "Buildings insurance increased by £250 due to claims experience from the previous year's water damage"
• Post year-end events: If something significant happened after the year-end that affects the accounts (e.g., a major claim, a large unexpected repair), note it

Per-unit statements

In addition to the block-level accounts, leaseholders are entitled to see their individual position. A per-unit statement shows:

Example — Flat 4 (18% lease percentage):

The credit arises because the flat's share of actual costs (£3,133.80) was less than the budgeted demands (£3,240.00). This is carried forward to the next year or offset against future demands.

Use our free Service Charge Demand Generator to calculate per-unit shares from your lease percentages.

Common formatting mistakes

1. Mixing service charge accounts with company accounts. Your RMC files company accounts with Companies House separately. The service charge accounts are a different document — don't combine them. ICAEW TECH 03/11 is explicit about this: the service charge statement should be separate from the Companies Act accounts.

2. Not showing the reserve fund separately. Lumping the reserve fund into the general income and expenditure makes it impossible for leaseholders to see how much is actually set aside for future works. This is the single most common cause of challenges at the tribunal.

3. Confusing accruals and receipts-and-payments basis. Accruals accounting records income when earned and expenditure when incurred, regardless of when money moves. Receipts and payments (cash) accounting records when money actually enters or leaves the bank. The RICS code recommends accruals, but receipts and payments is acceptable for smaller blocks — the key is to state which basis you're using and apply it consistently year-on-year.

4. Missing the Section 21 summary. Section 21 of the Landlord and Tenant Act 1985 gives leaseholders the right to request a summary of costs. If you produce clear accounts proactively, you'll rarely receive formal Section 21 requests — but be prepared for them.

⚠️ Follow that link to the point-in-time version, not the default view. The default /section/21 page shows a substituted section 21, commenced only so far as it confers a regulation-making power — it contains neither "more than four dwellings" nor "qualified accountant". The text that remains in force is the 1996 point-in-time version linked above.

5. No comparatives. Showing only the current year leaves leaseholders unable to see trends. Best practice is to show the current year alongside the previous year for comparison.

When to use an accountant

Do it yourself if: Your block has straightforward finances (no major works, no complex lease structures, no ongoing tribunal cases), and you're comfortable with the format above.

Use an accountant if: You have active tribunal proceedings, complex reserve fund expenditure, mid-year director changes affecting the accounting period, or your lease specifically requires certified accounts. For blocks over 20 flats, an accountant review adds credibility.

What to expect to pay: £500-800 for straightforward preparation of a small block's accounts. £1,000-1,500 if the accountant needs to reconstruct records from bank statements because no tracking was done during the year. The more organised your records, the lower the fee.

LevyBoard keeps the records those accounts are built from. Every transaction is categorised and designated to the right fund as you go — general service charge or reserve — so at year end you have an income and expenditure statement by fund and a full period export. Your accountant still prepares the accounts your lease requires; they start from clean books instead of reconstructing a year from bank statements.

This guide covers service charge accounting for residential blocks in England and Wales. This is general guidance, not financial or legal advice — for complex accounting situations, consult a qualified accountant.

Sources

• ICAEW — Accounting for service charges and service charge accounts — includes TECH 03/11 guidance
• RICS Service Charge Residential Management Code — best practice standard
• Section 21, Landlord and Tenant Act 1985 — right to request summary of costs
• Section 27A, Landlord and Tenant Act 1985 — tribunal jurisdiction for service charge disputes
• Section 42, Landlord and Tenant Act 1987 — service charge contributions held on trust