United Kingdom (UK)

An island nation at the edge of western Europe, the United Kingdom is a three hundred year-old union of four separate states: England, Scotland, Wales and Northern Ireland.

While Northern Ireland shares its southern border with the Republic of Ireland, the UK’s next closest neighbours are France and Belgium across the English Channel - and, the Netherlands, Germany and Denmark, across the North Sea.

Bordered by oceans on all sides, the United Kingdom is a historic seafaring nation, with a background of international exploration and colonisation which gave rise to the British Empire, and contributed to the country’s modern-day global influence.

The UK has a temperate climate with cold, wet winters and mild summers, and holds a variety of interior environments - from remote forests and mountains - to stretches of beach coastline, and bustling urban environments.

As one of the world’s busiest and most populous financial hubs, its capital city, London, is an epicentre of trade and commerce, and a popular tourism destination for millions of visitors.

General Information

• Full Name: United Kingdom of Great Britain and Northern Ireland
• Population: 66.97 million (World Bank 2022)
• Capital: London
• Major Language: English
• Major Religion: Christianity
• Monetary Unit: 1 pound sterling = 100 pence
• Main Exports: Machinery and Transport Equipment, Pharmaceutical Products, Financial Services, Chemicals, Crude Oil and Natural Gas, Food Beverages and Tobacco
• GNI per Capita: US $49,240 (World Bank, 2022)
• Internet Domain: .co.uk
• International Dialling Code: +44

Dates and Numbers

Dates can be written in the day, month and year sequence, or the month day and year sequence.

For Example: 1 July 2024 or 1/7/24

Numbers are written with a comma to denote thousands and a period to denote fractions, for example, £3,000.50 (three thousand pound and fifty pence.).

The United Kingdom (UK), consisting of England, Scotland, Wales, and Northern Ireland, stands as a prominent Western European nation and one of the world’s largest economies. It is bordered by the North Sea to the east, the English Channel to the south, and shares a land border with the Republic of Ireland. This geographical positioning, combined with its historical significance as a global financial and cultural hub, underscores the UK's role as a pivotal player in international trade and investment.

The business environment in the UK is marked by its dynamic blend of tradition and modernity, providing a fertile ground for innovation, entrepreneurship, and growth. As a leading global financial center, London anchors the UK’s economic prowess, offering unparalleled opportunities in finance, tech, and creative industries. The country’s commitment to maintaining a competitive and free market economy, supported by a strong legal framework and ease of doing business, attracts a wide array of foreign investments.

Companies venturing into the UK market benefit from a highly skilled and diverse workforce, renowned for its linguistic capabilities, innovative thinking, and adaptability. This is complemented by the UK's advanced logistics and digital infrastructure, which facilitates efficient supply chain operations and provides seamless access not only within its domestic market but also to international markets through its extensive trade networks.

Doing business in the UK represents an amalgamation of rich historical legacies with cutting-edge innovation. This combination crafts a resilient and forward-looking economic landscape, where businesses can thrive on both tradition and innovation. The UK's strategic position, both geographically and economically, coupled with its open and welcoming business environment, makes it an attractive and strategic choice for companies looking to establish or expand their presence on a global scale.

Investing in the United Kingdom opens the door to a world of opportunities in one of the world's leading economies, renowned for its strategic location, innovation-driven sectors, and dynamic financial markets. The UK's unique blend of historical heritage and forward-looking business environment makes it a magnet for global investors and companies aiming to expand their reach and impact.

At the heart of the UK's appeal is its status as a global financial center. London, a city with financial prowess, offers unparalleled access to deep capital markets and a wide array of financial services. This positions the UK as a strategic investment destination for businesses looking to thrive in a stable and mature market environment. The city's role as a bridge across time zones facilitates seamless international trade and investment, reinforcing the UK's position on the global stage.

The spirit of innovation is alive and well in the UK, particularly in the fields of technology, fintech, and biotech. The country is home to a vibrant ecosystem of tech startups, fueled by supportive government incentives such as research and development tax relief. These policies underscore the UK's commitment to fostering innovation and securing its place as a leader in technological advancement.

A key ingredient to the UK's success is its highly educated, skilled, and diverse workforce. With a strong emphasis on education and skills development, the UK offers businesses a rich talent pool that is essential for growth and competitiveness in today's fast-paced global economy. This skilled workforce is complemented by the UK's pro-business environment, known by competitive corporate tax rates and streamlined regulatory procedures, making it easier than ever for businesses to set up, expand, and succeed.

The robust legal system in the UK, with its strong protections for intellectual property rights, provides a secure foundation for business operations. This, combined with the country's commitment to the rule of law, ensures that investors can operate with confidence, knowing their innovations and investments are protected.

Quality of life is another compelling reason to invest in the UK. With high standards of living, excellent educational institutions, and a rich history of cultural heritage, the UK is not just a place to do business—it's a place to live, learn, and grow. The universal use of the English language further enhances the UK's attractiveness as a business location, simplifying international communication and trade.

The UK stands out as an investment destination that offers a perfect blend of tradition and innovation, financial stability, and a supportive business environment. Its strategic location, combined with a commitment to fostering innovation and a skilled, diverse workforce, makes the UK a prime location for businesses looking to make a global impact. Investing in the UK is not just an investment in a leading global economy - it's a step into a vibrant market that values growth, innovation, and international collaboration.

The United Kingdom actively encourages foreign direct investment (FDI) by offering a range of incentives and support mechanisms designed to attract and facilitate international businesses looking to establish or expand their operations within its borders. These initiatives are tailored to promote economic growth, innovation, and competitiveness across various sectors. 

Key Sectors for Foreign Direct Investment (FDI) in the United Kingdom

The United Kingdom's economy, one of the largest and most diversified globally, offers a wide range of opportunities for foreign investors across various key sectors:

• Financial Services: The UK, particularly London, is a global hub for financial services, including banking, insurance, and fintech, offering vast opportunities for investment.
• Technology and Innovation: With a strong focus on innovation, the UK tech sector, encompassing areas such as artificial intelligence, cybersecurity, and digital health, is ripe for FDI.
• Renewable Energy: Commitment to sustainability positions the UK as a leader in the renewable energy sector, especially in offshore wind energy, solar power, and emerging green technologies.
• Life Sciences and Healthcare: The UK boasts a world-leading life sciences sector, with strengths in pharmaceuticals, biotechnology, and healthcare services, supported by a robust research and development ecosystem.
• Creative Industries: Recognised globally for its creative and cultural industries, including film, television, music, and fashion, the UK offers unique investment opportunities.
• Automotive and Advanced Manufacturing: With a focus on innovation and sustainability, the UK's automotive and advanced manufacturing sectors are transitioning towards electric vehicles and smart manufacturing, presenting new investment avenues.
• Education and Training: The UK's education sector, known for its prestigious universities and vocational training programs, attracts international investment in educational technology and services.

Foreign Direct Investment (FDI) Incentives Available in the United Kingdom

The UK government provides a variety of incentives to attract and support foreign investment:

• Competitive Tax Environment: The UK offers one of the lowest corporate tax rates among G20 countries, alongside attractive R&D tax credits and the Patent Box regime for reduced taxes on patented inventions.
• Financial Support: Various grants, loans, and financing options are available for qualifying investment projects, especially those that drive innovation, job creation, and regional development.
• Innovation Grants: Funding opportunities for businesses engaged in research and innovation activities, provided through organisations such as Innovate UK.
• Skilled Visas: The UK's immigration system includes visa routes for skilled workers, entrepreneurs, and leaders in technology and arts, facilitating the attraction of global talent.

Government Agencies Supporting FDI in the United Kingdom

Several UK government agencies and departments play crucial roles in facilitating and encouraging FDI:

• Department for Business and Trade (DIT): DIT is the primary government body responsible for promoting international trade and investment. It offers bespoke services to help investors set up or expand their business in the UK.
• Invest Northern Ireland, Scottish Enterprise, and Trade and Invest Wales: These regional agencies provide tailored support and incentives to attract FDI into specific parts of the UK, recognising the unique strengths and opportunities of each region.
• UK Research and Innovation (UKRI): UKRI supports research and development across all sectors, offering funding and support to businesses engaged in innovative projects.
• UK Export Finance (UKEF): UKEF assists in securing export deals through financing, insurance, and guarantees, supporting the global expansion of UK-based and foreign businesses.

Investing in the United Kingdom presents a blend of opportunities across various high-growth and innovative sectors, backed by a supportive regulatory environment and attractive incentives. The strategic efforts of government agencies, combined with the UK's established position in the global market, make it an appealing destination for investors looking to leverage the strengths of the UK's economy.

For foreign businesses looking to expand into the United Kingdom, establishing a legal entity is a critical step. The UK offers a conducive environment for business, with a straightforward process for company registration and various entity types to suit different business needs. Understanding these options and the general process for setting up can help streamline your expansion efforts.

Entity Types in the United Kingdom (UK)

The UK allows several types of business entities, each with its own set of rules and benefits. The choice of entity type will depend on various factors, including the nature of your business, tax considerations, and the level of liability your organisation is willing to accept. The most common entity types for foreign businesses in the UK include:

• Private Limited Company (Ltd): This is the most common form of entity for foreign businesses in the UK. Shareholders have limited liability, and the company is a separate legal entity. It allows for a flexible management structure and is subject to corporation tax.
• Public Limited Company (PLC): Similar to a private limited company, but it can offer shares to the public. PLCs have stricter regulations, including a minimum share capital requirement.
• Branch Office: Establishing a branch office allows a foreign company to engage in business activities in the UK while remaining part of the parent company. It is not a separate legal entity, and the parent company is responsible for all liabilities.
• Partnership: There are several types of partnerships in the UK, including General Partnerships, Limited Partnerships (LP), and Limited Liability Partnerships (LLP). These entities involve two or more individuals or entities doing business together. LLPs offer limited liability protection to the partners and are treated as separate legal entities.

Business Registrations with the HMRC

When expanding or establishing a new business entity in the United Kingdom, one crucial step is to ensure compliance with tax obligations and employment regulations from the outset. A key part of this process involves registering your company with Her Majesty's Revenue and Customs (HMRC), the UK's tax, payments, and customs authority. Here's what foreign businesses need to know about this critical requirement.

Registration as an Employer with HMRC

It is a legal requirement for every new company that starts trading in the UK must register as an employer with HMRC, even if you do not immediately hire employees. This is a legal requirement if you plan to employ staff at any point within the running of your business. Registration is essential for managing your company's Income Tax and National Insurance contributions, both for your employees and the business itself. It ensures that payments made by the company are correctly attributed and that you can claim any allowable expenses or reliefs.

The HMRC Registration Process

The process requires you to provide HMRC with comprehensive details about your company. This includes the trading name, registered address, and the type of business you're operating.

Upon registering, HMRC will issue you with unique reference numbers. These are crucial for all future communications with HMRC and for fulfilling your tax obligations. The Employer Reference Number (ERN) and the Accounts Office Reference are particularly important for the payroll process.

The most efficient way to register as an employer is through the HMRC website. You will need to create a Government Gateway account if you don't already have one. This online account will be your primary means of interacting with various UK government services, including tax filings and communications with HMRC.

Further Considerations for New Businesses in the United Kingdom (UK)

Pay As You Earn (PAYE)

If you plan to employ staff, you'll need to operate PAYE as part of your payroll. PAYE is the system HMRC uses to collect Income Tax and National Insurance Contributions from employment. Registering as an employer ensures you can set this up correctly.

VAT Registration

Depending on your expected annual turnover, you might also need to register for VAT (Value Added Tax). This is separate from registering as an employer but is another essential part of your tax obligations.

General Process for Establishing an Entity in the United Kingdom (UK)

1. Choose the Appropriate Entity Type: Based on your business needs and objectives, select the most suitable entity type.
2. Company Name and Registered Office: Decide on a unique company name and a registered office address in the UK. The registered office is where official communications will be sent.
3. Directors and Shareholders: Identify the individuals who will act as directors and the shareholders of the company. At least one director must be appointed.
4. Memorandum and Articles of Association: Prepare these legal documents. The memorandum of association includes the company’s name, registered office, and the nature of the business. The articles of association outline the rules for the company's internal management.
5. Registration with Companies House: Submit the necessary documents and registration fee to Companies House, the UK’s registrar of companies. This can often be done online and is a relatively quick process.
6. Tax Registration: Register for corporation tax with Her Majesty's Revenue and Customs (HMRC). Depending on your business activities, you may also need to register for VAT and PAYE (for employing staff).
7. Open a Bank Account: Open a business bank account in the UK. This may require providing detailed information about your company and its directors/shareholders.
8. Compliance and Licenses: Ensure compliance with UK business regulations, including obtaining any necessary licenses or permits for your specific industry.

Establishing a business entity in the UK is a straightforward process, designed to support businesses in their growth and expansion efforts. By following the outlined steps and considering the legal and financial implications, foreign businesses can effectively set up their operations and tap into the vast opportunities offered by the UK market.

Navigating the process of obtaining visas and work permits in the UK can be complex, especially with recent changes to immigration laws. Whether or not you need to obtain a visa before you travel to the UK depends on your nationality and the reason you want to travel to the country.

From 1 January 2020, ‘free movement’ in the EU ended and the UK’s new points-based immigration system began, which changed the way that employers hire most workers from outside the UK.

For recruitment purposes, EU and non-EU citizens are now treated equally. Employers are required to obtain a sponsor license to hire employees from outside the UK, with exceptions for Irish citizens and for some other immigration routes such as Global Talent.

Types of Visas in the United Kingdom (UK)

Understanding the various types of visas available in the UK is crucial for individuals planning to live, work, study, or visit the UK. Below an overview of the most common visa categories, including Skilled Worker Visa, Intra-company Transfer Visa, Innovator Visa, and more.

Senior or Specialist Worker Visa (Global Business Mobility)

This visa category is designed for senior executives or individuals with specialised skills who are employed by multinational companies. It allows them to transfer to a UK branch or subsidiary for a temporary period to fill a specific role or provide expertise.

Innovator Visa

The Innovator Visa is for experienced entrepreneurs who wish to establish innovative businesses in the UK. It requires endorsement from an approved endorsing body and is suited for individuals with a viable business idea and the necessary skills to execute it.

Scale-up Worker Visa

The Scale-up Worker Visa is aimed at individuals who are employed by high-growth UK companies and play a key role in their expansion. It allows skilled workers to join rapidly growing businesses and contribute to their success.

Frontier Worker Permit

Frontier Worker permits are for individuals who work in one country while being primarily resident in another. They are mandatory for most Frontier Workers except Irish citizens and enable them to maintain their employment status while residing outside the UK.

Overseas Domestic Worker Visa

This visa is for domestic workers accompanying their employers from overseas to the UK for up to six months. It allows domestic workers to accompany their employers temporarily and is subject to certain conditions, including having worked for the employer overseas for at least one year prior to the UK visit.

Graduate Trainee Visa (Global Business Mobility)

The Graduate Trainee Visa targets recent graduates from overseas who have been identified as potential future leaders. It allows them to undertake structured training programs with UK employers to enhance their skills and expertise.

Secondment Worker Visa (Global Business Mobility)

This visa permits skilled employees of overseas companies to be transferred to a UK branch or subsidiary for a temporary period. It facilitates international mobility within multinational corporations and supports the exchange of expertise.

Service Supplier Visa (Global Business Mobility)

The Service Supplier Visa is for individuals employed by overseas companies that provide services to clients in the UK. It allows them to travel to the UK temporarily to deliver specific services, contributing to cross-border business activities.

UK Expansion Worker Visa (Global Business Mobility)

This visa enables employees of overseas companies to establish a presence in the UK and expand their company's operations. It allows them to relocate temporarily to support business growth and investment in the UK.

Representative of an Overseas Business Visa

This visa is for employees of overseas companies tasked with setting up a branch or subsidiary in the UK. It allows them to establish and run the UK entity on behalf of the overseas parent company, promoting foreign investment and business networks.

Service Providers from Switzerland Visa

This visa allows service providers from Switzerland to provide cross-border services in the UK on a temporary basis. It facilitates the movement of skilled professionals between Switzerland and the UK and promotes trade and collaboration.

Application Process

Understanding the visa application process is essential for applicants to ensure a smooth and successful application. Key steps involved in applying for a UK visa, includes:

1. Online Application: Most visa applications are submitted online through the UK government's official website or the Gov.uk portal. Applicants must complete the relevant application form and provide supporting documents.
2. Supporting Documents: Applicants typically need to provide passports, photographs, proof of funds or sponsorship, and other specific documents depending on the visa category. Information on proving your identity can be found here.
3. Biometric Data: Some visas require applicants to attend an appointment at a visa application center to submit biometric data, including fingerprints and photographs.
4. Processing Times: Standard visa applications usually take several weeks to process, while priority or premium services may expedite the process for an additional fee.
5. Visa Fees: Applicants must pay the required visa fees, which vary depending on the type of visa and processing times.

In the UK, it is mandatory for businesses to pay authorities and employees for payroll and tax purposes from a UK bank account.

This facilitates compliance, avoids currency exchange issues, and leverages online banking for transactions outside traditional hours.

While UK banks generally open from 9:00 AM to 5:00 PM on weekdays, with reduced hours on Saturdays, digital banking services offer flexibility for managing financial operations anytime.

The tax year in the United Kingdom runs from 6 April to 5 April the following year.

Income Tax in the United Kingdom (UK)

The PAYE (Pay As You Earn) system is employed by HM Revenue & Customs (HMRC) to collect Income Tax and National Insurance contributions (NICs) directly from employees' earnings as they receive their pay.

As an employer in the UK, it is your responsibility to deduct the appropriate amount of tax and NICs from your employees' wages each pay period. Additionally, you are required to contribute Employer's Class 1 NICs for employees earning above a specific threshold. These deductions and contributions must be paid to HMRC either monthly or quarterly, depending on your arrangement. Failure to remit the correct amounts, or delays in payment, may result in interest charges.

The personal allowance, which is the amount an individual can earn before being liable to pay income tax for tax year 2024/2025 is £12,570 per year. Higher earners in excess of £100,000 will see a reduction in their personal allowance if their income exceeds a certain limit (or every £2 you earn over £100,000, you lose £1 of personal allowance.)

Income Tax Thresholds and rates in the United Kingdom

In the United Kingdom, income tax thresholds and rates vary across different parts of the country, reflecting the devolved powers of Scotland, Wales, and Northern Ireland to set their own tax policies within certain parameters.

England, Wales, and Northern Ireland generally share the same income tax rates and thresholds, with personal allowances and basic, higher, and additional rate bands. However, Scotland exercises its devolved powers to set distinct income tax rates and bands, resulting in a different tax structure that includes additional rate bands, potentially affecting taxpayers at different income levels differently than the rest of the UK.

These variations mean that the amount of income tax an individual pays can depend significantly on their place of residence within the UK. Taxpayers in Scotland might find themselves subject to different tax rates on their income compared to those in England, Wales, or Northern Ireland, reflecting the Scottish Government's approach to taxation.

Income Tax Thresholds and rates in England, Wales and Northern Ireland

For the tax year 2024 to 2025, employees in England, Wales and Northern Ireland can enjoy a standard personal allowance of £242 weekly, £1,048 monthly, or £12,570 annually, which is the portion of income not subject to income tax. Beyond this allowance, the following PAYE (Pay As You Earn) tax rates in England, Wales and Northern Ireland apply to annual earnings above the personal allowance threshold:

Income Tax Thresholds and rates in Scotland

In the 2024 to 2025 tax year, Scottish employees are allocated a standard personal allowance of £242 weekly, £1,048 monthly, or £12,570 annually. This amount represents the income portion exempt from taxation. Above this allowance, Scotland’s PAYE (Pay As You Earn) tax rates come into effect for annual earnings surpassing the personal allowance threshold. These tiered tax rates in Scotland are designed to progressively tax income, ensuring that taxation is aligned with individuals' ability to pay. 

The High Income Child Benefit Charge (HICBC)

The High Income Child Benefit Charge (HICBC), a tax measure introduced in January 2013, impacts individuals or their partners receiving Child Benefit with an income over £50,000. Aimed at reducing the financial benefit for higher earners, this charge scales with income, requiring repayment of some or all received Child Benefit. From April 2024, significant reforms will enhance the scheme's fairness: the income threshold triggering HICBC will rise from £50,000 to £60,000, and the charge rate will adjust from 1% of Child Benefit per £100 of adjusted net income over the threshold to 1% per £200. This modification means Child Benefit is fully withdrawn only when an individual's income surpasses £80,000. To comply with these changes, affected individuals must submit a Self Assessment tax return annually, regardless of their usual PAYE tax arrangements.

Employers are responsible for making National Insurance contributions (NICs) in the UK on both the salaries and additional benefits provided to their employees, including non-cash perks like company cars. These contributions are essential not only for compliance but also for supporting the social security system, contributing to entitlements such as the State Pension and Jobseeker’s Allowance for both employed and self-employed individuals.

The process integrates the calculation and deduction of both taxes and NICs from employees’ earnings through the PAYE (Pay As You Earn) system during the standard payroll process, with these amounts then remitted to HM Revenue & Customs (HMRC). It's important to note that NICs on many employer-provided benefits are tallied at the end of the tax year, and the NIC rates are consistent across the UK, without variation for employees in Scotland or Wales.

Class 1A and Class 1B NICs, employers cover these for any expenses and benefits given to employees, at a rate of 13.8% for the period from 6 April 2024 to 5 April 2025. This includes payments on certain lump sums, like redundancy payouts. Employers are advised to consult HMRC’s comprehensive guidance on these rates for complete compliance details.

For married women, a reduced National Insurance rate is applied to employed earnings from 6 April 2024 to 5 April 2025. Specifically, this rate is 1.85% on weekly earnings ranging between £242 and £967. Employers, however, contribute to National Insurance at varying rates based on their employees’ category letters, which are critical in determining the exact contribution required.

Employer National Insurance Rates in the United Kingdom (UK)

The following table provides a detailed overview of the Employer National Insurance Rates in the UK effective from 6 April 2024. It illustrates the varying contribution percentages that employers are required to pay towards their employees' National Insurance, based on specific earnings brackets and category letters. This table is essential for employers to understand their financial responsibilities in supporting the UK's social security system through National Insurance contributions.

Workplace Pensions in the United Kingdom (UK)

In the UK, the introduction of the workplace pension scheme, backed by government legislation, marks a significant shift in retirement saving. This scheme obligates employers to automatically enroll eligible employees into a pension plan, ensuring that both parties contribute towards the employee's retirement savings.

The government initiative is designed to complement private pension schemes, with two main types:

1. Defined contribution
2. Defined benefit pensions

Defined Contribution Schemes

The defined contribution scheme accumulate a pension pot based on the contributions paid in by both the employee and employer. The funds are invested, and the final pension value can fluctuate with investment performance. Employees have options on how to withdraw these funds in retirement, including lump sums, with up to 25% being tax-free.

Defined Benefit Schemes

The Defined Benefit Schemes provide a guaranteed income in retirement, calculated based on salary and years of service, independent of investment performance. These are less common but offer a predetermined payout.

The legislation mandates employers to automatically enroll employees over 22 years, earning above £10,000 per year and they ordinarily work in the UK, into a workplace pension scheme, requiring contributions from both the employer and the employee. Employers must also contribute towards employees' pensions at a minimum rate, fostering a culture of saving for retirement. Employees, unless they opt out, will see a portion of their salary automatically contributed to their pension pot.

Workplace pension contributions

The following table shows the current employee and employer workplace pension contributions for 2024/2025.

A beneficial arrangement for both parties is the salary sacrifice scheme, where employees opt to reduce their salary in exchange for higher pension contributions from you. This method not only boosts their pension pot but also results in tax and National Insurance efficiencies. Adopting such strategies enhances your support for employees' retirement planning.

When operating PAYE (Pay As You Earn) for your employees, it’s crucial to stay on top of monthly and annual reporting tasks to ensure compliance with HM Revenue & Customs (HMRC) regulations.

Monthly Reporting Tax & Social Security in the UK

Monthly, PAYE tax and National Insurance contributions collected from employees' wages must be paid to HMRC by the 22nd of the following month when using electronic payments.

Under Real Time Information (RTI), reports are sent to HMRC in real time, so HMRC have to be notified “on or before” each payment is made to employees or pensioners. 

Yearly Reporting Tax & Social Security in the UK

Taxable Benefits

Where an employer provides taxable benefits in addition to salary, these can be reported and taxed in one of two ways.

1. The company can register for voluntary payrolling of benefits, and include the benefits in the taxable pay of each employee through the payroll. The registration for this must be completed prior to the beginning of the tax year.
2. At the end of each tax year, employers have to report to HMRC and to the individuals any benefits provided to their employees which have not already been reported and taxed via the payroll. This reporting is carried out using forms P11D. The majority of benefits provided to employees have to be reported to HMRC, including medical cover, mileage payments made in excess of the approved HMRC rates, company cars and so on. In addition to this a benefit summary form P11D(B) has to be prepared and submitted to HMRC by 6th July following the end of the tax year.

Annually, around the end of the tax year on 5 April, several key tasks must be completed:

• Provide a P60 to All Employees: By 31 May, you need to give a P60 to each employee who is working for you at the end of the tax year. The P60 summarises their total pay and deductions for the year.
• Report Expenses and Benefits: Use form P11D to report expenses and benefits given to employees, including company cars, health insurance, and travel expenses, by 6 July.
• Submit the Final PAYE Submission: You must send the final PAYE submission for the year by 19 April. This includes reporting any corrections or adjustments to the year’s PAYE reports.
• Prepare for the New Tax Year: Update employee payroll records, issue new tax codes as received from HMRC, and set up payroll records for new employees.
• Class 1A National Insurance Contributions: If applicable, calculate and report Class 1A NICs on work benefits you’ve provided, to be submitted and paid by 22 July (19 July if not paying electronically).
• PAYE Settlement Agreement (PSA): A PSA is an agreement with HMRC where a company agrees to meet some Income Tax and National Insurance liability on behalf of its employees. This is generally used where a company has paid for staff entertaining, and doesn’t want their staff to have a tax liability on this benefit, although it can be used for relocation expenses (over the HMRC limit for allowable expenses) and other irregular items of expenditure. The PSA is an easement to make life simpler for both the company and HMRC, and can reduce the end of year reporting significantly if used correctly. Entering into a PSA is a good thing, as it demonstrates to HMRC that you are aware of your reporting obligations.

When onboarding new employees in the UK, businesses have a number of essential steps to follow to ensure compliance with HM Revenue & Customs (HMRC) regulations and to properly integrate the employee into their payroll system. Beyond submitting full details of the employee via the Real Time Information (RTI) payroll submission, employers must:

1. Obtain a P45: Ask for a P45 from the new employee, which they should have received from their previous employer. Employers who are filing RTI should no longer send forms P45 (Part 3) or P46 to HMRC; starter details will be included on their FPS instead.
2. Assign a Tax Code: Use the information from the P45 or Starter Checklist to assign the correct tax code. If unsure, use the emergency tax code until HMRC provides an updated code.
3. Add to Payroll: Incorporate the new employee's details into your payroll system, ensuring accurate record-keeping for wages, taxes, and National Insurance contributions.
4. Auto-enrollment into Workplace Pension: Assess the new employee's eligibility for auto-enrollment into your workplace pension scheme. If eligible, enroll them and inform both the employee and the pension provider accordingly.
5. Report to HMRC: Include the employee's details in your RTI submission to HMRC, which should be done before or on the employee's first payday.

When an employee leaves a company in the UK, the employer must complete a form P45 confirming:

• Leaving date
• Full name
• Home address
• National Insurance Number
• Date of birth
• Gender
• Works/payroll number
• The individual's tax code

The employer must also provide:

• Their overall pay and tax totals for the tax year so far, including from any previous employments during the year
• Their pay and tax figures relating only to their work for you during the tax year, if these differ from the employee's overall totals for the year

A copy of the P45 form is given to the employee. HMRC are notified that an employee has left a company by including a date of leaving in the next RTI submission.

In the UK, employers are generally required to implement the PAYE (Pay As You Earn) system as a component of their payroll process. PAYE (HMRC) facilitates the collection of Income Tax and National Insurance contributions directly from employment income. Employers have the option to manage payroll internally using specialised software or to outsource this function to a professional payroll service provider like activpayroll.

The payroll process involves making necessary deductions from employee payments, which encompass salaries or wages, alongside any additional earnings like tips, bonuses, or statutory sick and maternity pay. These deductions typically include Income Tax, National Insurance contributions for most employees, and possibly student loan repayments or pension contributions.

Managing payroll in-house requires timely reporting of employees' payments and deductions to HMRC for each pay period. Payroll software assists in calculating the taxes and National Insurance due, including employer contributions for earnings above £175 weekly. Additionally, employers must submit reports to claim any allowable reductions from HMRC, such as for statutory pay entitlements.

It is legally acceptable in the UK to provide employees with online payslips.

For businesses with an international workforce, understanding the implications of residency status on tax obligations is crucial. Non-residents are taxed solely on UK-earned income, whereas residents are taxed on all income, both within the UK and abroad. To ensure adherence to UK tax regulations, especially for foreign companies, partnering with a payroll and global mobility provider can offer a streamlined solution for global payroll compliance and efficient payment distribution.

Payroll Reports

Payroll reports must be kept for 3 years from the end of the tax year they relate to.

It’s the employer’s responsibility to keep records proving that they are paying the minimum wage to their employees. These records must be kept for at least 6 years if they:

• Created on or after 1 April 2021
• Still had to be kept on 31 March 2021 under the previous rule that records must be kept for 3 years

UK Payslip Example

Holiday Accrual and Calculations in the United Kingdom (UK)

In the UK, almost all individuals categorised as workers are entitled to a minimum of 5.6 weeks or 28 days of paid holiday per year. This entitlement applies to various types of workers, including agency workers, those with irregular hours where the number of hours worked in a pay period fluctuates, and part-year workers who have periods of at least a week within a leave year where they don't work and aren't remunerated.

It's important to note that an employer has the option to incorporate bank holidays into their employees' statutory annual leave allocation. This means that bank holidays may count towards the total annual leave entitlement specified by law. By integrating bank holidays into the statutory leave allowance, employers can ensure that their employees receive their entitled time off while accounting for nationally recognised holidays.

The entitlement for part-time workers is calculated on a pro-rata basis.

Maternity Leave in the United Kingdom (UK)

• Ordinary Maternity Leave: First 26 weeks
• Additional Maternity Leave: Subsequent 26 weeks

Maternity leave can begin as early as 11 weeks before the expected week of childbirth, except in cases of special circumstance such as 

• Premature Birth: Leave starts the day after birth in case of early childbirth, with necessary documentation required for verification.
• Loss of Baby: Employees qualify for leave or pay in case of stillbirth or infant death, with appropriate adjustments to entitlements.

Employees must take at least 2 weeks off after the birth, or 4 weeks for factory workers.

Statutory Maternity Pay (SMP)

• 90% of average weekly earnings (AWE) before tax for the first 6 weeks
• £184.03 per week or 90% of AWE (whichever is lower) for the remaining 33 weeks, with tax and National Insurance deductions.

Employers have the option to offer enhanced maternity leave and pay beyond statutory requirements through company maternity schemes, with clear and accessible policies. If an employer pays an employee more than the statutory amount, the organisation can reclaim 92% of that amount. an Organisation may be able to reclaim 103% if you qualify for Small Employers’ Relief.

Employees seeking SMP must meet specific eligibility criteria, including continuous employment for at least 26 weeks. Essential for SMP administration, provided through a doctor's letter or MATB1 certificate issued approximately 20 weeks before the due date.

Employers must maintain records of proof of pregnancy and adhere to stipulated timelines for submission to ensure compliance with statutory regulations.

Employees' employment rights, including protection against discrimination, are safeguarded during maternity leave.

Employers must continue providing SMP even if business operations temporarily cease.

Paternity Leave in the United Kingdom (UK)

To qualify for ordinary paternity leave in the United Kingdom (UK), employees must have worked continuously for the employer for at least 26 weeks up to the 15th week before the baby's due date or 26 weeks into the week the adoption agency matches the adopter with a child. The employee must remain employed until the baby's birth or the date the adopted child is placed.

Eligible employees are entitled to one or two weeks of ordinary paternity leave in the UK. Paternity leave must be taken within 56 days of the baby's birth or the date an adopted child is placed with the adopter. If opting for two weeks of leave, they must be taken consecutively; partial days are not permitted.

The statutory weekly rate of Paternity Pay is £184.03, or 90% of the employees average weekly earnings (whichever is lower) in the UK. This is paid in the same way as wages, for example monthly or weekly. Tax and National Insurance will be deducted.

Parental Leave in the United Kingdom (UK)

In the UK, Parental leave allows eligible employees to take unpaid time off to care for their child's welfare. Parental leave provisions facilitate the integration of work and family life, enabling parents to fulfill care giving responsibilities while maintaining job security. Employment rights, including the right to pay, holidays, and job security, are safeguarded during parental leave.

Eligible employees are entitled to 18 weeks of parental leave for each child or adopted child, up to their 18th birthday. The maximum parental leave each parent can take in a year is 4 weeks per child, unless otherwise agreed upon with the employer.

Parental leave must be taken as whole weeks (e.g., 1 week or 2 weeks) rather than individual days, unless the employer agrees otherwise or if the child is disabled.  Employees are not required to take all the leave at once, providing flexibility in managing care giving responsibilities.

Parental leave entitlement applies to each child rather than to an individual's job, allowing leave to be carried over from previous jobs.

Sick Leave in the United Kingdom 

Employees may qualify for Statutory Sick Pay (SSP) in the UK, providing financial support during periods of illness. SSP provisions ensure that employees receive financial support during periods of illness, fostering a supportive work environment and safeguarding employee welfare in the UK. Employers must adhere to statutory regulations regarding SSP entitlements and maintain accurate records of sickness absence to ensure compliance with HMRC requirements.

SSP is £116.75 per week from 6 April 2024 and can be paid for up to 28 weeks. Employers can offer more generous sick pay through company sick pay schemes, termed 'contractual' or 'occupational' sick pay, which must be outlined in the employment contract.

SSP Entitlement and Qualification Conditions

• SSP is paid for the days an employee normally works, known as 'qualifying days'.
• Payment is processed similarly to wages, including deductions for tax and National Insurance.
• SSP is payable when an employee is sick for more than 3 consecutive days, including non-working days.
• If an employee works a shift spanning two days and falls ill during or after the shift, the second day is counted as a sick day.
• SSP is not payable for the first 3 working days of sickness unless SSP has been paid within the last 8 weeks and was not paid for the initial 3 days at that time.
• SSP ceases upon the employee's return to work or if they no longer meet the eligibility criteria.

Employers are not required to maintain records of SSP payments made to employees but must keep records of sickness absence, which may be requested by HMRC in case of disputes.

National Service in the United Kingdom

There is no compulsory national service in United Kingdom.

The National Living Wage in the UK is applicable to individuals aged 21 and over, and the National Minimum Wage in the UK, for those of at least school leaving age, are revised annually on April 1st.

As of April 2024, the rates stand at:

• £11.44 for individuals aged 21 and over
• £8.60 for those aged 18 to 20
• £6.40 for individuals under 18
• £6.40 for apprentices

These rates ensure fair remuneration for workers across different age groups and skill levels, promoting equitable treatment in the workforce. Employers must adhere to these minimum wage standards to ensure compliance with employment regulations and uphold the rights of their employees.

In the UK, the standard working week for commercial offices is from Monday to Friday, with a typical 8-hour workday starting between 8:00 or 9:00 AM and ending around 4:00 or 5:00 PM, including a one-hour lunch break.

However, working hours can vary based on the employer and the nature of the work, with flexible and remote working schedules increasingly common.

In the United Kingdom England, Wales and Scoyland celebrate different bank (public) holidays. Bank or public holidays do not have to be given as paid leave. An employer can choose to include bank holidays as part of a worker’s statutory annual leave.

England and Wales National Public Holidays 2024

National Public Holidays in Scotland 2024

Expense Exemptions and Dispensations

Employees in the UK enjoy certain benefits regarding business expenses. It's essential for them to comprehend what's expected, what they can claim, and what they can't. HM Revenue and Customs (HMRC) has introduced exemptions to simplify expense reporting, replacing the previous dispensation system.

Expenses that need to be reported typically include those that are reimbursed or paid for by the employer and are considered taxable benefits. This includes:

• Cash payments
• Benefits in kind (non-cash benefits)
• Any expenses or benefits that are not covered by exemptions or dispensations
• Any expenses or benefits provided that are not wholly and exclusively for business purposes

These expenses may include:

• Private medical insurance
• Company cars
• Loans provided to employees
• Living accommodation provided by the employer
• Any other non-cash benefits provided to employees

It's essential to accurately report these expenses to HMRC to ensure compliance with tax regulations.

Expenses Covered by Exemption

Under this system, certain routine expenses don't require reporting to HMRC. These include business travel, phone bills, business entertainment expenses, and work-related uniform and tools.

Benefits in Kind

This legislation change impacts employers who provide benefits to their employees, requiring them to register these benefits with HMRC using the Payrolling Benefits in Kind (PBIK) service. Through this service, benefits and expenses can be payrolled, eliminating the need for P11D reporting. Unofficial payrolling schemes are no longer accepted, and approval for such schemes is necessary.

Certain benefits, like employer-provided living accommodation and beneficial loans, cannot be payrolled and must still be reported on a P11D. Employers must register by April 6th for the following tax year to allow HMRC to adjust tax codes. The cash equivalent of benefits for payrolling is calculated similarly to P11D reporting. Changes in benefit value may require recalculations, and employers must ensure tax deductions do not exceed 50% of employees' pay. Options are available to exclude employees from payrolling or carry forward taxable benefits into future pay periods.

As we navigate through 2024, several pivotal updates in the areas of National Insurance, Income Tax in Scotland, child benefits, and broader fiscal policies have been announced, reflecting the UK's government's commitment to fostering a robust economic environment. Here’s what you need to know:

National Insurance Adjustments

Significant changes are on the horizon for National Insurance Contributions (NICs) designed to alleviate financial pressures on both employees and the self-employed:

• For Employees: The Class 1 employee NICs see a two-phase reduction; initially dipping from 12% to 10% starting 6 January 2024, followed by a further decrease to 8% from 6 April 2024. These adjustments cumulatively aim to save the average worker on a £35,400 salary over £900 annually.
• For the Self-Employed: From 6 April 2024, Class 2 NICs will be abolished, while Class 4 NICs will be reduced from 9% to a more manageable 6%.

Income Tax Adjustments in Scotland

Scotland introduces a nuanced approach to income tax with the following key points:

• The inception of an Advanced Income Tax Band of 45% for annual incomes between £75,000 and £125,140.
• An increase in the Top rate of income tax to 48%, affecting incomes above £125,140.

It's crucial to note that there will be no alterations to the tax rates for earnings under £75,000, with the Starter and Basic rate bands adjusting in alignment with inflation.

Enhancements to Child Benefit

In a move to further support working families, the threshold for the High Income Child Benefit Charge will be elevated to £60,000 from April 2024, benefiting around 170,000 families by excluding them from this tax. Additionally, the charge rate will be halved, ensuring Child Benefit is fully repaid only when earnings reach £80,000 or more, impacting nearly half a million families with an average gain of £1,260 in the fiscal year 2024-25.

Strategic Support for Growth and Innovation

The Spring Budget illuminates the government's strides in delivering the growth package from Autumn Statement 2023, showcasing initiatives such as:

• A £4.5 billion funding package for strategic manufacturing sectors.
• The introduction of a new UK ISA to foster investments in UK equities.
• An extension of 75% business rate relief for select sectors, coupled with a VAT registration threshold increase to £90,000, to catalyze the growth of SMEs.
• Over £1 billion in new tax reliefs for the creative industries, including significant benefits for film studios, the independent film sector, and permanent extensions for tax reliefs benefiting theatres, orchestras, and more.

Capital Gains Tax and Loan Schemes

The government is set to cut the higher Capital Gains Tax rate on property from 28% to 24% and extend the Recovery Loan Scheme (now the Growth Guarantee Scheme) to March 2026. These measures are designed to invigorate the property market and ensure SMEs have access to necessary financing for growth.

Employment Law Updates

Lastly, in employment law, the National Living Wage and Minimum Wage rates have been updated as of April 2024 to ensure fair compensation across various age groups and employment statuses, highlighting the government's dedication to equitable workforce treatment. As of April 2024, the rates stand at: £11.44 for individuals aged 21 and over £8.60 for those aged 18 to 20 £6.40 for individuals under 18 £6.40 for apprentices

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.