United Kingdom at a Glance

Requirements of setting up a Subsidiary (Private Limited Company):

• At least one shareholder is required. This can either be an individual or a corporate entity.
• Requires a minimum of one director, and this director does not need to be a resident of the UK. In fact, there are no residency requirements for directors of UK entities.
• The minimum paid-up share capital is just £1, although it is often recommended to contribute £100 for practical reasons. There are no specific debt/equity rules for a private limited company beyond basic corporate governance and financial regulations.

Requirements of setting up a UK Establishment (Branch):

• No shareholders are applicable for branches, as it is directly linked to the parent company.
• Paid-up capital does not apply to branches, as they are part of the parent company.

A local resident is not required to be the administrator or director of the company in the UK. However, a local registered office address is mandatory. This address is where official communications and legal documents will be sent. It cannot be a PO Box, and the address must be a physical location.

Upon incorporation, UK businesses are required to have the following insurances:

1. Public Liability Insurance: This protects against claims for injury or damage caused by the business to third parties.
2. Employers’ Liability Insurance: This is mandatory when the company hires its first employee. It covers any claims made by employees for injury or illness related to their work.

We can assist you with competitive quotes for both of these insurances through trusted brokers.

For both subsidiaries and UK Establishments (branches), a physical office presence is not mandatory for operations. Employees can work remotely. However, it is essential to have a registered office address for legal and official communication purposes. This address must be a physical address and cannot be a PO Box. If required, we can help provide a registered office address for your business.

For both subsidiaries and UK Establishments (Branches), corporation tax registration occurs when the entity is incorporated. The rate of corporation tax is currently 19% for the tax year starting April 1, 2019, and 18% for the tax year starting April 1, 2020.

For both subsidiaries and UK Establishments (Branches), the local sales tax is VAT (Value Added Tax), with the current rate being 20%. VAT registration can be applied for after the entity has set up a local bank account. Registration typically takes about 6-12 weeks.

The transfer pricing methodology will depend on the activities being performed. Discussions should be held at the outset to understand the UK operations, and advice will be provided based on that understanding. There is no longer a one-size-fits-all approach due to the BEPS initiatives. Intercompany Agreements can be drafted as well.

E-invoicing is not broadly obligatory, though it is becoming an area of growing importance, especially for businesses interacting with the public sector and those looking to improve their invoicing practices.

You can choose your fiscal year, with the default being the anniversary of the end of the month in which you registered.

It is crucial for companies to understand and fulfill their tax obligations to maintain compliance and avoid penalties. These obligations include:

• Corporation Tax: File CT600 within 12 months; pay within 9 months and 1 day.
• VAT: Register if turnover exceeds £85,000; file VAT returns within one month and seven days.
• PAYE and NICs: Operate PAYE, report monthly, and pay by the 22nd (or 19th if by post).

There is no legal requirement for foreign companies to appoint a UK tax representative for corporation tax or VAT purposes. However, companies may choose to appoint a tax representative or adviser for convenience and to ensure compliance with UK tax legislation. Overseas companies can deal directly with HMRC (Her Majesty’s Revenue and Customs) for their tax obligations.

The standard employee personal allowance for the 2026 to 2027 tax year is:

• £242 per week
• £1,048 per month
• £12,570 per year

(NB: Rates valid for England, Northern Ireland and Wales. The Scottish government sets its own rate,s which are broadly similar.)

Employers are obliged to deduct and make tax payments (due from salary income) to the tax authorities on the employees’ behalf.

Some (non-salary) income is exempt from income tax, including:

• Interest and income from many savings and investments, the first £1,000 earned from property rental, the first £30,000 of payments which are compensation for loss of job, most welfare benefits.

Both the employee and the employer are required to contribute to National Insurance (NI). The rates and salary bands from 6 April 2026 to 5 April 2027 are as follows:

The employer is obligated to make the National Insurance contributions and income tax payments through the PAYE system.

*The above rates serve as a broad guideline. Actual rates charged will differ.

The apprenticeship levy is a type of tax to support companies in offering apprenticeships, by helping them with developing apprenticeship programmes and providing training. It is a tax paid by employers and stored in a fund which can be accessed to fund apprenticeship training costs.

Employers with an annual payroll of more than £3 million have to contribute, which is 0.5% of total payroll paid monthly via PAYE.

In the UK, employers are required to make several social security contributions. These contributions help fund various social welfare programs, including healthcare and pensions. Key mandatory social security contributions include:

• National Insurance: Employers must pay National Insurance contributions on behalf of their employees, which are used to fund state benefits and pensions.
• Apprenticeship Levy: Employers with a pay bill over £3 million per year are required to pay this levy, which funds apprenticeship training.
• Employer Liability Insurance: This insurance is mandatory for employers to cover potential compensation claims from employees.
• Auto-Enrolment Pension: Employers must automatically enroll eligible employees in a pension scheme and contribute a minimum percentage of their earnings to the scheme.

Each of these contributions is crucial for complying with UK employment law, and employers should ensure they are up-to-date with the rates and regulations.

These are the submission of several forms and statements to HMRC (Her Majesty’s Revenue and Customs):

• P45: When an employee leaves a company during the tax year, employers must provide a P45 form, which records the employee’s earnings and tax deductions.
• P60: At the end of the tax year (which ends on April 5th), employers must issue a P60 to employees who were employed on that date. This form summarizes the employee’s pay and tax deductions for the year.
• P11D: Employers must submit a P11D form to HMRC for employees who have received benefits or expenses during the tax year. This form must be submitted by July 6th following the tax year. Additionally, the P11D(b) form is required to report any Class 1A National Insurance contributions that the employer must pay on benefits provided.

The deadlines for payroll tax submissions in the UK are primarily based on Pay As You Earn (PAYE) and National Insurance Contributions (NICs). Employers must adhere to the following deadlines:

• RTI (Real Time Information) Reporting: Employers are required to submit their payroll information to HMRC on or before each payday. This reporting is done monthly, ensuring that employees’ tax information is updated in real-time.
• PAYE and NICs Payment: Employers must pay the amounts due for PAYE and NICs by the 22nd of the month following the tax month. If payments are made by post, they must be submitted by the 19th of the month.

Failure to meet these deadlines can result in fines and penalties, so it is essential for employers to maintain accurate records and submit their payroll information on time.

Bonus schemes are common and may be either guaranteed under contract or discretionary. Many schemes are a mixture of both, which means that while you have the right to be considered for a bonus, the employer has the final say as to whether to pay out or not. However, employers should take care when exercising the discretionary element of any bonus.

Except for redundancy dismissals (where an eligible employee will be entitled to a statutory redundancy payment) there is no statutory entitlement to a severance payment as such. An employee is entitled to notice, and it is common for employees to be paid a sum in lieu of notice, usually equal to the value of pay over the notice period.

Salary payments are normally paid monthly on or around the last day of the month.

By law, employers must provide their employees with a payslip. The payslip must, at a minimum, show:

• Earnings before and after any deductions
• The amount of any deductions that may change each time you’re paid, e.g. Tax and national insurance
• The number of hours you worked, if your pay varies depending on time worked.

Employers must also explain any deductions fixed in amount, for example repayment of a season ticket loan. They can choose to do this either on a payslip, or in a separate written statement.

Employees are entitled to a statutory minimum of 5.6 weeks paid annual leave per annum.

• England and Wales: 20 working days + 8 public holidays
• Scotland: 20 working days + 9 public holidays
• Northern Ireland: 20 working days + 10 public holidays

Employers often offer more than the statutory minimum.

The statutory minimum 20 days must be used in the holiday year otherwise, they will be lost except under exceptional circumstances such as long-term sickness, pregnancy/maternity leave etc. Other unused contractual paid leave may be carried over but only with the employer’s agreement and approval.

Eligible UK employees are entitled to ‘average holiday pay’. This refers to the amount a worker must be paid during statutory annual leave, calculated to reflect their normal earnings rather than just their basic salary.

Employees are entitled to receive statutory sick pay (“SSP”). The standard weekly rate of SSP is set by the government, paid for up to 28 weeks. For more information on Statutory Sick Pay, go here.

• Many employers offer enhanced rates of sick pay (company sick pay) with varying levels of pay
• Sick leave is usually considered long-term if it lasts longer than 4 weeks/20 working days.
• Employees on long-term sick leave can carry over 4 weeks’ unused holiday entitlement. This holiday must be used within 18 months from the date it’s carried over.

From their first day of employment, employees with parental responsibility can take up to 18 weeks of unpaid parental leave for each child up until their 18th birthday, usually in blocks of a week and with a limit of four weeks per child each year, with employment rights (holiday accrual, job protection etc.) preserved while on this leave.

• An employee has the right to time off for a funeral if the person who died was a dependant. For example, their partner or parent. There’s no legal right for this time off to be paid, however most employers will offer some period of unpaid leave.
• There is no legal right to time off in the case of the bereavement of other, non-dependant family. However, regardless of whether an employee has a right to time off, employers are encouraged to be compassionate towards a person’s individual situation.

Parental Bereavement Leave

In the United Kingdom, if a child dies under 18 or is stillborn after 24 weeks of pregnancy, eligible employees have the right to up to two weeks’ parental bereavement leave, which can be taken as one or two separate weeks within 56 weeks of the loss.

While the leave itself is a statutory right from day one of employment, statutory parental bereavement pay (at a set weekly rate or 90 % of earnings) requires you to meet minimum service and earnings conditions.

Further details can be found here

This leave allows fathers or partners to take extended unpaid leave if the baby’s mother or primary adopter dies during childbirth or within the first year of the child’s life (or placement for adoption), giving them legal protection to care for the surviving child. This leave can be taken for up to around 52 weeks in the first year following the loss.

There is no statutory requirement for pay, so any pay during this period is at the Company’s discretion.

In the United Kingdom, employees have a statutory right to take up to one week of unpaid carer’s leave each year to provide or arrange care for a dependant with a long-term care need. It’s a day-one employment right, meaning no minimum length of service is required, and your job is protected while you’re on leave.

Further details can be found here

Neonatal Leave

In the UK, neonatal care leave lets eligible working parents take extra time off if their newborn baby is admitted to neonatal care within 28 days of birth for at least 7 continuous days, giving one weeks’ leave for each full week in care up to a maximum of 12 weeks.

It’s a day-one right and must be taken within about 68 weeks of the baby’s birth, and eligible parents may also get statutory neonatal care pay while they’re on this leave.

Further details can be found here

Maternity Leave

Employees can take up to 52 weeks of maternity leave, made up of 26 weeks of Ordinary Maternity Leave and 26 weeks of Additional Maternity Leave.

Statutory Maternity Pay is usually paid for up to 39 weeks if eligibility conditions are met, and the employee’s job and employment rights are protected whilst they are on leave.

It is a legal requirement that all pregnant employees must undergo a workplace pregnancy risk assessment. The aim of the risk assessment is to identify whether the employee’s job poses any risks to themselves or their baby. Where risks are identified, reasonable adjustments should be made to remove them. If it is not possible to remove the risks, suitable alternative work must be offered. Where suitable alternative work is not an option, the employee may be suspended on full pay for as long as necessary to protect their health and safety and that of their child. A risk assessment should also be carried out for employees that have returned to work following maternity leave and are breastfeeding or have given birth in the last 6 months.

A woman returning to work from leave generally has the right to return to the job in which she was employed before her absence, subject to the duration of her maternity leave.

Employees still accrue their usual holiday entitlement while on maternity leave. This includes bank holidays.

Employees cannot take holiday or get holiday pay while on maternity leave, but they can arrange with their employer to take it before or after maternity leave.

Where employees are unable to use their full entitlement in the holiday year in which their maternity leave started (because they have been on maternity leave for all or most of the year), they will be able to carry over their remaining entitlement (including Bank Holidays) to the following holiday year.

Paternity Leave

Eligible employees can take up to two weeks of paternity leave following the birth or adoption of a child. It must be taken within the first year after the birth or placement, and those who meet the qualifying criteria may receive Statutory Paternity Pay whilst they are off.

Further details can be found here

Shared Parental Leave

Eligible parents to share up to 50 weeks of leave and up to 37 weeks of pay between them following the birth or adoption of a child. It gives families flexibility to take leave in blocks or at the same time, as long as they meet the qualifying rules and give the required notice.

Further details can be found here

Adoption Leave

Eligible employees can take up to 52 weeks of adoption leave when they adopt a child, consisting of 26 weeks of Ordinary Adoption Leave and 26 weeks of Additional Adoption Leave. Statutory Adoption Pay may be available for up to 39 weeks if eligibility criteria are met, and employees’ jobs and employment rights are protected during the leave.

Further details can be found here

The UK has a comprehensive social security system, funded from general taxation and from National Insurance Contributions. The social security system provides state benefits to cover maternity/ paternity/adoption, childcare, disability and carer matters. It also administers retirement pensions. State benefits can be contractually supplemented by employers. The National Insurance Fund aims to provide subsistence level benefits to those in need that meet certain eligibility criteria.

Employers carrying on business in Great Britain (England, Scotland and Wales) are required to have in place employer’s liability insurance against liability for bodily injury or disease sustained by employees and arising out of and in the course of their employment in Great Britain (there are separate rules for Northern Ireland).

Employers have to ensure that workers in the UK, between the ages of 22 and state pension age, and earning a salary of at least GBP 10,000 per annum are automatically enrolled into a qualifying pension scheme to which the employer must contribute. There are minimum total contributions that have to be made. Currently, the total contribution rate is 8%. This includes a minimum for employers that is 3% of each employee’s qualifying earnings.

Details of the current qualifying earnings as set by HMRC can be found here

It is possible to contribute to a pension based on total earnings if agreed by the Employer and Employee and stated in the employment contract.

Employees have the right to opt out of the scheme; in this case, no contributions would be made.

Some employers may offer employees benefits such as life insurance, permanent health insurance, private medical insurance, company cars, season ticket loans for annual public transport tickets, subsidised gym membership etc.

These benefits are not legally required and vary by employer. Some benefits are taxable as a Benefit-in-Kind (BIK) (e.g. private medical insurance).

Employees are entitled to request to work flexibly (for example, to work on a part-time basis). This is a ‘day one’ right. The employer must consider the request reasonably and within two months of the request being made but is not obliged to agree to it. Originally, the right applied only to employees with caring responsibilities but is now extended to all employees, regardless of the reason for wanting to work flexibly. Employees can make two statutory requests for flexible working in any 12-month period.