The build quote is the smallest number in the deal. That is the part nobody says out loud when they send you a proposal for £18,000 and a delivery date.
We are close to four months into the 2026/27 tax year, which is when a lot of UK small firms look at what they committed to in April and work out what it is really costing them. So here is the honest three year picture for custom software: what you pay, when you pay it, and how it stacks up against the two alternatives you are actually choosing between.
The three routes, priced over three years
Take a common scenario: a 12 person business that needs an internal system its current tools cannot handle. Jobs in, schedule out, invoicing linked, five staff using it daily.
| Route A: stack of SaaS tools | Route B: hire a developer | Route C: build and have it managed | |
|---|---|---|---|
| Year 1 | £3,000 subscriptions | £67,000 salary and on-costs | £18,000 build plus £4,200 managed |
| Year 2 | £3,400 | £64,000 | £4,200 |
| Year 3 | £3,900 | £66,000 | £4,400 |
| Three year total | £10,300 | £197,000 | £30,800 |
| What you own at the end | Nothing | Everything, if they documented it | Everything, documented |
Route A wins on paper and loses in practice more often than the numbers suggest, because the £10,300 excludes the person who spends five hours a week copying data between two systems. Five hours a week at £18 an hour is £4,680 a year. Add that and the gap closes fast.
Route B is the one people underestimate most, so let us do it properly.
The in-house developer maths
Budget £50,000 to £65,000 for a competent mid-level developer outside London in 2026. That is the salary line. It is not the cost.
On top of a £55,000 salary you are paying employer National Insurance at 15% on earnings above the £5,000 secondary threshold, which is £7,500 a year. Both figures are on GOV.UK’s rates and thresholds for employers 2026 to 2027 ↗, along with the £10,500 Employment Allowance that many small employers can set against that bill. Then pension contributions, a laptop and tooling, recruitment fees if you use an agency, and roughly three months before they are productive in your business.
Call it £67,000 in year one. The harder problem is not the money.
One developer is one point of failure. They take holiday, they get ill, and at some point they leave, usually about eighteen months in, taking the only working knowledge of your system with them. A single hire also has no one to review their work, which is how businesses end up with software that runs fine until the day it does not. If your business genuinely needs a full-time developer’s worth of work, hire one. Most 12 person businesses need about four days a month, which is a terrible fit for a full-time salary.
What the build quote leaves out
Here are the lines that turn an £18,000 build into a £30,000 three year commitment. None of them are optional, and a proposal that omits them is not cheaper, it is just less honest.
- Hosting and services. £30 to £150 a month for a typical small business app: application hosting, database, backups, email sending, error monitoring, domain and certificates.
- Dependency and security updates. Frameworks and libraries release patches continuously. Skip them for a year and the update becomes a project rather than an afternoon.
- Third party API changes. Payment providers, accounting APIs and calendar integrations change without asking you. Something breaks on a Tuesday roughly twice a year.
- Small changes. Your VAT treatment changes, you add a service line, a client wants a different invoice layout. There is no version of “finished” for software a business is actually using.
- Backups you have tested. An untested backup is a hope, not a backup. Restoring one should be a scheduled exercise, not a discovery made during an incident.
- Someone who answers. When the system is down at 8am and orders are not coming through, the value of a maintenance arrangement is entirely in how fast a human replies.
That list is the whole argument for managed software rather than a build-and-walk-away agency. We wrote about the handover gap in who manages your app after launch, and what the managed model covers in what is managed software.
Budget 15% to 20% of the build cost per year for all of the above. On an £18,000 build that is £2,700 to £3,600, which is roughly what a serious managed arrangement costs. If someone quotes you 3%, they have priced for a system nobody uses.
The vibe coding line
There is now a fourth route: build it yourself with an AI tool for £20 a month. It is real, and for internal prototypes it is genuinely good.
The cost does not disappear, it moves. It shows up as your time, as the security review nobody did, as the moment the tool cannot explain why the totals are wrong, and as the rebuild when you need it to handle real customer data. We put actual numbers on that in the hidden costs of vibe coding. Prototype with those tools. Do not run payroll, customer data or invoicing on something no one has reviewed.
The tax point most owners miss
Custom software is usually a capital purchase, and computer software generally qualifies as plant and machinery for capital allowances, which for most small companies means the Annual Investment Allowance can be set against profits. The rules are summarised on GOV.UK’s capital allowances guidance ↗.
Meanwhile SaaS subscriptions are a revenue expense, deductible but permanent. The practical effect: an £18,000 build may cost materially less after tax relief than the headline suggests, while £3,000 a year of subscriptions carries on forever. Ask your accountant how it applies to your business before you rely on this; the treatment depends on how the arrangement is structured.
Four questions that decide the route
- How many hours a week does the current mess cost you? Multiply by 52 and by a real hourly rate. If the answer is under £3,000 a year, do not build anything yet.
- Is the process the thing you are actually good at? If your scheduling, pricing or fulfilment logic is a competitive advantage, off-the-shelf tools will flatten it into whatever the vendor’s average customer does.
- What happens to your data if the vendor doubles the price? Export it and see. If you cannot get it out cleanly, you do not control your business.
- Can you name who fixes it at 8am? For every route. If the honest answer for Route B is “our one developer, if he is not on holiday”, that is the real risk, not the salary.
If three of those four point the same way, you have your answer. If you are leaning towards building, the next step is writing something down: our guide to writing a brief for custom software is deliberately non-technical, and a decent brief is the single biggest lever on the final quote.
What to put in the contract
Two clauses matter more than the price.
You own the code and the data, on day one. Not on final payment, not “subject to licence”. Ask for it in writing, and ask where the repository lives. If the answer is “our internal system”, ask what happens to it if the company folds.
There is a documented exit. A good partner can hand your system to another firm in a week: source code, infrastructure access, environment variables, deployment steps, database schema. Ask for that list before you sign, not when the relationship has soured. Nobody who runs software properly is offended by the question.
This is how we work. Forgd builds custom systems and then runs them: hosting, updates, monitoring and the fixes, for a fixed monthly fee, with the code yours throughout. Our numbers are on the pricing page, and if you want the three year figure for your specific situation rather than a worked example, tell us what the current mess costs you and we will put real numbers against it.
Frequently asked questions
How much does custom software cost for a UK small business?
A focused internal system for a small business typically lands between £8,000 and £35,000 to build, then 15% to 20% of that per year to host, maintain and support. Anything quoted under £5,000 is usually a prototype, and anything over £50,000 for a small business is usually a scope problem rather than a price problem.
Is it cheaper to hire a developer or use an agency?
For most businesses under about 30 staff, a partner is cheaper, because a full-time developer costs roughly £67,000 a year loaded and most small firms need a few days of work a month. Hiring wins when you have enough continuous work to keep someone busy and enough people to review what they build.
What are the ongoing costs after a custom software build?
Hosting and services, dependency and security updates, fixes when third party APIs change, small changes as your business changes, tested backups, and a support route with a human on the end. Budget 15% to 20% of the build cost per year to cover all of it.
Can I just build it with an AI tool for £20 a month?
For a prototype or an internal experiment, yes, and it is a genuinely good use of the money. For anything handling customer data, payments or your accounts, the £20 buys you code, not a reviewed, hosted, backed-up and maintained system, and the difference is where the real cost lives.
Who owns custom software once it is built?
You should, in writing, from the start. Insist on ownership of the source code and the data, plus documented access to the repository and infrastructure. If a contract makes ownership conditional or vague, that is a lock-in clause with better manners.
How do I know when off-the-shelf tools have stopped being enough?
When people are re-keying the same data into two systems, when the reports you need require a manual spreadsheet every month, and when your answer to a customer request is “our system will not let us do that”. We covered the full list in signs your business has outgrown its software.