Compliance by Country: The UK

Through our monthly ‘Compliance by Country’ series we aim of provide information that candidates need to consider in order to ensure that they fully comply with the rules/requirements of working in different countries.

We recently gave advice for compliance in Switzerland and The Netherlands.

For the third post of the series, Smriti Malik BCom MBA, Senior Manager at Access Tax & Accounting Limited provides answers to frequently asked questions for contractors working in the UK.

What are the residency rules/requirements in the United Kingdom where the contract will take place and how does one go about registering if required to do so? 

There are no individual registrations required upon arrival in the UK.

A UK National will have an existing NI number which will be used for paying National Insurance contributions in the UK and a UTR number for settlement of income tax.

A non UK National will need to apply for a NI number at the Job Centre and a UTR (Unique Tax Reference Number) which will be required in all tax related matters. Both the registrations involve filling in forms and sending them to the HMRC. Registration numbers are then received by post.
Do I need to move from a Limited Company to an umbrella company? 

Not necessarily. It is possible to work in the UK through your Limited Company.

If you have a UK Limited Company, it will be your employer in the UK that is liable for corporation tax and VAT. If you have a foreign Limited Company, you need to get it registered as a foreign employer in the UK without tax liability. Further your employer will also be liable for PAYE and employer’s NI contribution in the UK. If the contractor chooses to take dividends from his Limited Company in the UK, these dividends will be subject to dividend tax, taxable in the hands of the contractor.

You can choose to work through a Limited Company or under an umbrella, as both are recognised as legal structures in the UK. Umbrella will give you lesser administration burden but a Limited Company can give you higher net take home.

What are the income tax and social security rates in the UK? 

Resident individuals are liable to pay tax on their worldwide income in the UK.

Income tax is charged at a progressive rate from 20% on earnings up to GBP 31,785 to 45% on earnings over GBP 150,000.

Social security is obligatory for all employed contractors working in the UK. Employees pay Class 1 NI. The contribution is 12% for income greater than GBP 155 per week up to GBP 815 per week and 2% over GBP 815 per week.

Employers pay 13.8% NIC on weekly earnings over GBP 156.
Are you able to give an indication of the legitimate tax allowances available to expatriates? 

There are no special expatriate tax rulings in the UK. However the UK offers tax free personal allowances of GBP 10,600 to non – UK nationals who are tax residents.
Do I need a VISA to work in the UK?

All EEA (EU and EFTA) and Swiss nationals can enter and work in the UK without needing to apply for a Visa, but if you are a national of Croatia, you need to apply for permission before you start work.
Should I keep my company registered in my home country? What are the pros and cons of this?

You should keep your company registered if you plan to use it for your next assignment or in future.

The benefit of keeping your current company active can be to facilitate its use for your future assignments rather than incurring costs by closing the current company and incorporate a new one for future use.

The negative of keeping a company can be maintaining its dormant status (inactive but alive), complying with a few legal formalities like filing dormant accounts every year.

A cost analysis should be done comparing the costs involved in closing down the company and keeping a dormant company.

For more information on freelance and permanent SAP jobs from Recruit 121, call us on +44 02920 496121 or email us at:

Recruit 121 Limited and Access Tax & Accounting Limited are unrelated companies, other payroll solution providers are available and contractors should take independent advice so that their individual circumstances are properly considered.

EDITOR: Ian Zagrecki BA MA