As of 2026, the population of the U.K. is approximately 69.5 million people and is the 6th largest economy in the world by GDP. There are unique payroll and tax requirements for companies operating in the U.K., and many business entity options for companies looking to expand.
Depending on the type of business entity to be formed, there are several requirements that must be met, including:
*Companies are required to have a minimum of one (1) director. Directors do not have to reside in the U.K. but must have a registered U.K. office address.
Registration as an employer with HM Revenue and Customs (HMRC) is required to obtain a Unique Taxpayer Reference (UTR) and Pay-as-you-Earn (PAYE) reference number required for:
A U.K. business bank account is typically necessary for payroll and related money movement transactions.
The Government has announced National Minimum Wage (NMW) rates for 2026, including the National Living Wage. The new rates which will come into force from April 1, 2026, are as follows:
|
|
NMW |
|
National Living Wage (21+) |
£12.71 |
|
18-20 Rate |
£10.85 |
|
16-17 Rate |
£8.00 |
|
Apprentice Rate |
£8.00 |
|
Accommodation Offset |
£11.10 |
Employers are required to contribute 15% of total eligible employee wages to HMRC for National Insurance for wages exceeding 96 GBP per week. This amount remains unchanged for 2026.
There is no legal requirement for pay frequency; however, for salaried employees, monthly (12) is the most common. For hourly employees, weekly (52) and bi-weekly (26) are typical.
Hourly employees cannot be required to work more than 48 hours per week (averaged over 17 weeks) unless they specifically ‘opt out'. Employers are not required to pay overtime; however, an employee’s average wage for total hours worked must not fall below the minimum wage.
The U.K. tax year runs from April 6 – April 5 of the following year, requiring employers to provide several reports to HMRC, including:
Companies must file with HMRC as well as manage Pay-As-You-Earn (PAYE) reports to file taxes and National Insurance contributions. Depending on the industry and type of business, employers must submit payroll taxes monthly or quarterly for smaller employers to ensure compliance. Employers must comply with PAYE responsibilities including:
Eligible employees can take up to 52 weeks of maternity leave. The first 26 weeks is known as ‘Ordinary Maternity Leave’, the last 26 weeks as ‘Additional Maternity Leave’ with at least two weeks compulsory post-birth.
Effective April 2026, paternity leave will become a “day one right” meaning employees are eligible from the first day of employment. Paternity leave is 1 or 2 weeks and cannot be taken until after the birth of the child. If the employee takes leave, time can either be taken consecutively or separately, but any amount of time must be taken within the first 56 days after birth.
Full-time employees are entitled to 5.6 weeks or up to 28 days of paid annual leave (“holiday leave”) per year.
All employers must provide a workplace pension scheme, referred to as “automatic enrollment” for employees earning above 10,000 GBP per year, who are over the age of 22 and below State Pension Age.
Since 2019, the minimum total contribution has remained at 8% of qualifying earnings, with at least 3% contributed by the employer and the remaining 5% by the employee.
Dismissals must be for a fair reason and follow a fair process; statutory minimum notice applies, or the notice period stated in the employment contract, whichever is longer. Exceptions can be made if the dismissal is summary for gross misconduct. Employees may claim unfair dismissal (subject to qualifying rules and evolving reforms).
Employers must pay out any accrued holiday leave. Government reforms passed in December 2025 signal changes to unfair‑dismissal qualifying periods, but implementation is pending with undetermined timetables into 2026–2027.
Employees who are made redundant with at least two years of continuous service are entitled to redundancy pay. Amounts are based on an employee’s age and length of employment and are counted back from the date of dismissal.
Employees are entitled to:
Employers are required to give statutory notice to redundant employees ranging from one to twelve weeks, depending on length of service. Length of service is capped at 20 years.
Bank holidays vary by nation with England and Wales typically observing 8 while Scotland and Northern Ireland have additional dates. There is no statutory entitlement to additional pay for work performed on holidays, and employers may choose to include bank holidays as part of the employee’s statutory annual leave.
For a full list of observed holidays, please visit the government website UK bank holidays.
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The above information was last updated January 9, 2025. It is not intended as legal or tax advice.