GBP

Currency, Pound Sterling

67.79 million

Population

2.789 trillion

GDP

8th RANKED

Ease of Doing Business

English

Language

MONTHLY

Payroll Cycle
How can EOR help you

Grow your team in the United Kingdom

Velocity Global’s EOR solution creates a streamlined, compliant business expansion into the U.K. Grow your team in the U.K. with our Global Work Platform™.

Benefits of hiring in the United Kingdom

Doing business in the U.K. presents several benefits. The U.K. is one of the top ten easiest markets in the world to do business.

London, the U.K.’s capital and economic powerhouse, has been ranked as one of the world’s top tech startup hubs and the top global fintech hub. As reported by Yahoo! Finance, London is home to at least 80 unicorns, tech businesses worth more than one billion dollars. London also ranked among the highest for access to early-stage funding.

The U.K.’s fintech sector includes more than 1,600 firms, and it’s projected to double by 2030. The sector contributes an estimated $9.18 billion and over 60,000 jobs to the U.K. economy. The U.K.’s fintech sector is more developed than other markets and routinely ranks as a leader for all businesses, not only startups.

The U.K. has a long history of cutting-edge leadership, giving the world its first industrial revolution over two centuries ago. Today, the U.K. shows the same pioneering spirit considering the creative, communications, digital, and agriculture industries heavily rely on the U.K.’s innovative and robust tech sector.

Benefits

The United Kingdom is one of the top-ten easiest markets in the world to do business.

Challenges of doing business in the United Kingdom

Brexit impacted trade, employment permits and visas, taxes, and other key business compliance considerations since the U.K. left the European Union (EU) on January 30, 2020. The true impact of Brexit on U.K. businesses is yet to be fully assessed, but limited trade, additional customs checks, and labor shortages are among the issues which emerged since the U.K.’s departure from the EU.

London is one of the most expensive cities in the world to do business. Property, energy, and transportation costs are all relatively expensive compared to many other European major cities.

Obtaining planning permission from government authorities and receiving water and sewage utilities take a considerable amount of time, and they are the costliest elements for expanding businesses in the U.K. Registering a property is the most arduous task of starting a business in the U.K., as stated in the World Bank’s Doing Business 2020 report.

The U.K. offers one of the world’s premier talent pools. However, many residents living in the U.K. are EU citizens who must emigrate to their home countries if they do not apply for settled status. An estimated 2.1 million residents, 90% of EU residents required to have settled status in the U.K., held pre-settled status as of September 2021, reported by the Migration Observatory at the University of Oxford. These EU residents need to reapply to remain permanently due to Brexit.

The U.K.’s tax system is notoriously complicated because the country’s legal system has grown through a piecemeal process. Local tax support is necessary for relieving this complex responsibility. An employer of record in the U.K. is another solution to help navigate these challenging legal systems.

Challenges

London is one of the most expensive cities in the world to do business. Property, energy, and transportation costs are all expensive compared to other major European cities.

Cultural nuances of doing business in the United Kingdom

  • Greet all colleagues with a handshake. If someone introduces themselves with their first name or formal title (such as Dr., professor, Miss/Mrs., or Mr.) introduce yourself accordingly. Formal introductions are commonplace.
  • Dress in formal business attire unless otherwise instructed, as different offices have their own dress codes. In general, it is best to dress more formally and conservatively when doing business in the U.K.
  • There is a strict separation between business and personal life in the U.K.
  • Following established processes is essential in building business relationships.
  • Verbal communications are usually confirmed in writing, where details are thoroughly described, and a record can be made.
  • Be mindful of direct and indirect statements. Forceful statements may come across as impolite.
  • There is a preference for understatement in communication, so be wary of tone during communication. For example, what might be described as “a bit expensive” may actually mean “very expensive,” or “a small issue” might actually mean “a big problem.”
  • Trust, reliability, and fairness are values highly appreciated in business relationships.
  • Hierarchies are not strictly vertical and tend to be flatter as duties overlap while responsibilities are loosely defined, and there are fewer distinctions between roles. The management style has a reputation for taking calculated risks since innovation is heavily regarded.
  • Traditionally, the British are often perceived as emotionally neutral. Emotional restraint and courage during difficult situations are generally expected. Public displays of emotion are considered unprofessional in a business setting.
Cultural Nuances

Trust, reliability, and fairness are values highly appreciated in business relationships.

mountain scape
Onboarding

Hiring in the United Kingdom

When employing an individual in the U.K., an employer must give employees a document known as a written statement of employment particulars, stating the main conditions of employment. The employment of particulars includes a principal statement and a wider written statement.

  • Principal statements

     According to the U.K. Government Employee Contracts Guide, the principal statement must include:

    • The employer’s name
    • The employee’s name
    • Job title
    • A description of work
    • Start date
    • How much and how often an employee will be paid
    • Work hours and days
    • Holiday entitlement and if that includes public holidays
    • Where an employee will be working and whether relocation is necessary
    • If an employee works in different places, the locations and employer’s address
    • How long a job is expected to last, and the end date if it’s a fixed-term contract
    • Probationary period length, if applicable, and its conditions
    • Any other benefits such as childcare vouchers and lunch
    • Whether or not obligatory training is required and if it is paid by the employer
  • First day of employment

    On the first day of employment, the employer must provide the employee with information about:

    • Sick pay
    • Other paid leave such as maternity leave and paternity leave
    • Notice periods

    The employer can include the information above in the principal statement or provide it in a separate document on the first day of employment.

    As stated in the U.K. Government Employee Contracts Guide, employers must give employees a wider written statement within two months of an employee’s start date. This must include information about:

    • Pensions
    • Collections agreements
    • Any rights to non-compulsory training provided by the employer
    • Disciplinary and grievance procedures
Payroll

Easily navigate payroll laws, contributions, and requirements

January 31

Tax due date in the U.K.

The deadline for submitting income tax returns is October 31 for paper filings and January 31 for online filings.

Monthly

Payroll cycle in the U.K.

The payroll cycle in the U.K. is usually monthly, with payments made at the end of each month.

48 HRS/WK

Average working hours in the U.K.

Employees work up to 48 hours per week but can opt out of the 48-hour workweek and work additional hours. Exceptions to these rules apply, including managers and executives who set their own hours

  • Minimum wages and salaries in the United Kingdom

    In the U.K., the National Minimum Wage and National Living Wage vary depending on age. The minimum wages in the U.K. increase every year on April 1.

    As of April 1, 2022, the wages were listed as:

    • National Living Wage: £9.50
    • Age 21-22: £9.18
    • Age 18-20: £6.83
    • Age 16-17: £4.81
    • Apprentice Rate: £4.81
    • Accommodation Offset: £8.70
  • Probationary periods in the United Kingdom

    Probationary periods in the U.K. are common but not required by law, and they typically last between three and six months. Depending on the employer, employees may not receive all contractual benefits during the probationary period. However, employees remain entitled to all statutory rights during this time.

    Learn more in our guide to employment law in the U.K.

  • Bonus payments in the United Kingdom

    There are no bonus requirements for employers in the U.K., but they are common. If employers pay either a cash or non-cash bonus, they must report it to Her Majesty’s Revenue & Customs (HMRC), the non-ministerial department of the U.K. government responsible for tax collection. Reporting requirements vary depending on the type of bonus.

Employee Cost Calculator

Accurately budget payroll costs for your global team.

Get reliable insights into employee costs and contributions in the U.K. so you can confidently expand your global workforce.
Request a Quote for Your Global Team
Please fill out your contact information and hiring details, and an expert from our team will be in touch with you shortly.
Taxes

Taxes and social security in the United Kingdom

The U.K. residence status affects whether individuals need to pay taxes in the U.K. on their foreign income. The U.K. tax year is April 6 to April 5 of the following year. The U.K. Government’s Income Tax Guide shares that individuals are considered U.K. tax residents if one of the following conditions are met:

  • An individual spent 183 or more days in the U.K. in the tax year
  • An individual has their only home in the U.K., it was available to use for at least 91 days in total, and time was spent there for at least 30 days in the tax year
  • An individual worked full-time in the U.K. for any period of 365 days, and at least one of these days fell into the specific tax year

Non-residents only pay taxes on their U.K. income, not foreign income. U.K. residents usually pay taxes on all income, whether it’s from the U.K. or abroad. However, there are special rules for U.K. residents whose permanent home is abroad.

 

Tax thresholds in the United Kingdom

  • In the U.K., income tax thresholds depend upon:
    • How much income is above Personal Allowance
    • How much income falls within each tax band
  • The standard Personal Allowance is £12,570. Tax is paid on the amount of taxable income remaining after the Personal Allowance has been deducted. Personal Allowance may be larger if Marriage Allowance or Blind Person’s Allowance is claimed. It’s smaller if income is over £100,000.
  • Income tax bands differ in Scotland versus England, Wales, and Northern Ireland.

According to the U.K. Government’s Income Tax Rates Guide, in England, Wales, and Northern Ireland, the following are the tax rates in each tax band if a Personal Allowance is £12,570:

Taxable Income Tax Rate up to £12,570 0% £12,571 to £50,270 20% £50,271 to £150,000 40% over £150,000 45%

 

  • The tax rates and tax bands for all U.K. countries (England, Wales, Northern Ireland, and Scotland) without a Personal Allowance can be found in the U.K. Government’s Tax Rates and Bands Guide.

  • The corporate income tax rate in the United Kingdom is 19%.

  • Social security contributions are payable on employees’ gross annual earnings. The contributions are shared between the employer and the employee. As of 2022, the U.K.’s current social security rate charged on income for employees is 27.8% in total: 14% paid by the employee and 13.8% paid by the employer.

Health insurance in the United Kingdom

All U.K. residents are eligible for free public healthcare through the National Health Service (NHS), including hospital, physician, and mental healthcare. Health coverage in the U.K. has been universal since the founding of the NHS in 1948. Under the 1946 Act, the Minister of Health was assigned to provide a full-scale, free healthcare service, which replaces insurance and out-of-pocket payments. Non-residents with a European Health Insurance Card receive free health coverage. For others, such as visitors, only treatment in an emergency department and for infectious diseases is covered.

Pension in the United Kingdom

  • Individuals can claim the basic State Pension in the U.K. if they’re:
    • A woman born before April 6, 1953
    • A man born before April 6, 1951
  • Following the U.K. Government’s basic State Pension Guide, individuals must have paid or been credited with National Insurance contributions to receive the basic State Pension of £141.85 per week.
  • Individuals born later need to claim the new State Pension.
  • Individuals can claim the new State Pension if they’re:
    • A woman born on or after April 6, 1953
    • A man born on or after April 6, 1951
  • The pension age is currently under review, but it’s been set at 67 or 68 years old depending on birthdate.
  • Individuals need at least 10 qualifying years recorded of paying National Insurance to receive any State Pension.
  • Pursuant to the U.K. Government’s new State Pension Guide, the full new State Pension is £185.15 per week.
mountain scape
Leave

Leave entitlements in the United Kingdom

Workers in the U.K. are entitled to several types of leave, including time off granted by employers and national holidays.

  • Annual leave in the United Kingdom

    Nearly all workers in the U.K. receive 5.6 weeks of paid holiday each year, including agency workers, contract workers, and those with irregular hours. The U.K. Government Holiday Entitlement Guide shares that most workers who work a five-day week must receive at least 28 days’ paid annual leave a year.

    Employers use the U.K. government’s holiday entitlement calculator for part-time and irregular hourly workers’ paid time off allotment.

  • Paternity and maternity leave in the United Kingdom

    Statutory Maternity Leave in the U.K. is set at 52 weeks, where ordinary leave is defined as the first 26 weeks, and additional leave is defined as the last 26 weeks. Mothers are not required to take all 52 weeks but must use two weeks’ leave after childbirth or four weeks for factory workers.

    Statutory Maternity Pay (SMP) is paid for up to 39 weeks. Mothers receive 90% of their average weekly earnings before tax for the first six weeks. After the first six weeks, mothers receive £156.66 or 90% of their average weekly earnings, whichever is lower, for the next 33 weeks. SMP is paid monthly or weekly, depending on how the mother is usually paid. All taxes and National Insurance contributions are deducted from SMP.

    Paternity leave in the U.K. grants fathers a choice to take one or two weeks of paid leave after childbirth. The statutory weekly rate of Paternity Pay is £156.66 or 90% of the father’s average weekly earnings, whichever is lower. Paternity Pay is paid monthly or weekly, depending on how the father is usually paid. All taxes and National Insurance contributions are deducted from Paternity Pay.

    Parents are eligible for Shared Parental Leave (SPL) and Statutory Shared Parental Pay (ShPP) if they’re having a baby, using a surrogate to have a baby, adopting a child, or fostering a child they’re planning to adopt. Parents can share up to 50 weeks of leave and up to 37 weeks of pay between them. They need to share the pay and leave in the first year after childbirth or after the child is placed with the family. To receive SPL and ShPP, parents must take less than the 52 weeks of maternity or adoption leave and use the rest as SPL and take less than the 39 weeks of maternity or adoption pay and use the rest as ShPP. The ShPP has the same rates and conditions as the SMP and Paternity Pay.

  • Sick leave in the United Kingdom

    U.K. employees must present their employer with a physician’s sick note for all illnesses lasting longer than seven consecutive days, including weekends and bank holidays.

    To qualify for Statutory Sick Pay (SSP), employees must:

    • Be classified as an employee
    • Earn an average of at least £123 per week
    • Have been ill for at least four days in a row

    Employees are eligible to receive £99.35 a week of SSP for up to 28 weeks. Employees will be paid SSP for all the days they normally would have worked, except for the first three days.

  • Regional and national holiday in the United Kingdom

    The U.K has the following eight public holidays, which are not included in the minimum paid leave entitlement. However, employers generally give their employees all of the U.K.’s public holidays off work. The eight national holidays in the U.K. are:

    • New Year’s Day (January 1)
    • Good Friday (April, the specific day fluctuates each year)
    • Easter Monday (April, the specific day fluctuates each year)
    • Early May Bank Holiday (May, the specific day fluctuates each year)
    • Spring Bank Holiday (May, the specific day fluctuates each year)
    • Summer Bank Holiday (June, the specific day fluctuates each year)
    • Christmas Day (December 25)
    • Boxing Day (December 26)
Termination

Termination and notice period in the United Kingdom

Employee termination in the U.K. requires employers to give employees between one and 12 weeks’ notice before termination, depending on an employee’s accumulated time of service. The statutory notice periods in the U.K. include:

  • One week’s notice for employees with one month to two years of service
  • After that, employees are entitled to receive an additional week’s notice for each complete year of service, up to a maximum of 12 weeks

The statutory minimum notice that an employee is required to give an employer does not increase over time, and it remains fixed throughout employment at one week.

An employee continuously employed by an employer for two years is entitled to statutory redundancy pay (SRP) and payment through the notice period or payment instead of notice, depending on the circumstance. Learn more about employment termination payment details in the U.K.

FAQ

  • What is an employer of record in the United Kingdom?

    An employer of record (EOR) in the U.K. serves as the legal employer of your British employees. An EOR takes on the responsibilities of all employment tasks and liabilities on your behalf by handling payroll, benefits, taxes, and compliance so you can hire employees in the U.K. without having to navigate complex labor laws or increase your workload.

    Learn more about the role of an employer of record.

  • How does an employer of record work in the United Kingdom?

    An employer of record (EOR) in the U.K. allows international employers to quickly and compliantly hire British talent without having to take on the burden of setting up a local entity or navigating local labor laws. While your EOR partner serves as the legal employer, you keep control of daily management tasks, such as work schedules, compensation, and role responsibilities.

    Learn more about how an employer of record works.

  • Can an employer of record run payroll in the United Kingdom?

    Yes. Employer of record (EOR) services in the U.K. include handling all payroll operations on behalf of your company so you can save time and eliminate the stress of payroll compliance, U.K. payroll taxes, and delivery. Our payroll solution coordinates all payroll processes in one platform and allows employers to easily provide accurate, on-time payroll to their workforce in the U.K.

    Learn more about the functions and benefits of global payroll.

  • What are the employee benefits in the United Kingdom?

    Mandatory employee benefits in the U.K. include:

    • Holiday entitlement and pay
    • Sick pay
    • Pension
    • Parental leave and pay
    • Redundancy pay
    • Time off for emergencies

    Common supplemental benefits in the U.K. include:

    • Supplemental medical insurance
    • Employee share schemes
    • Health and wellness funds
    • Flexible working options
    • Employee assistance plans
    • Employee rewards

    Learn more in our guide to employee benefits in the U.K.

  • Can a U.S. company hire an employee in the United Kingdom?

    Yes. A U.S. company can hire an employee in the U.K. through three methods: establish a local entity, partner with an employer of record, or engage contractors. The right option depends on factors such as cost, time, and your company’s long-term goals.

    Learn more in our guide to hiring employees in the U.K.

Get a global perspective with our resources

Learn about payroll and tax in the U.K., including contribution rates and how to calculate payroll tax in the U.K.
Blog

Payroll and Tax in the UK: An Overview for Global Employers

As one of the world’s primary financial and investment centers, the U.K. is a top location for
Read this Blog
U.K. neighborhood looking over city skyline at sundown
Blog

Can a U.S. Company Hire a U.K. Employee? A Guide to Hiring in the U.K.

The U.K. is a popular market for companies in the U.S. to expand their global reach—and for good
Read this Blog
St. Paul’s Cathedral in London, England, United Kingdom
Blog

U.K. Employee Benefits: A Guide to Mandatory and Common Benefits

The U.K. is a top location for companies seeking to hire abroad. Home to many of the world’s leading
Read this Blog
Countries
More countries we serve

Click on the countries below to learn more about a new market.

Help your team reach its fullest potential

Mountain Scenery
Man writing on tablet