United Kingdom

Introduction

The United Kingdom is a sovereign country situated in the northwest of Europe. It consists of England, Northern Ireland, Scotland and Wales.

While English is the official language, there is a great deal of cultural diversity in the country with many other languages spoken. The UK is a truly diverse and multicultural country due to the immigration that has taken place there over the last 50+ years. As such, many successive UK governments have promoted social policies to encourage social cohesion and combat inequality and discrimination for all.

The UK has a unitary parliamentary democracy as well as a constitutional monarchy. Queen Elizabeth II has been monarch since 1952 – making her the longest-serving head of state in the world. The British Royal Family is adored the world over, with thousands of tourists flocking to the country each year because of them. They contribute around £1.8 billion to the UK economy each year, and around £550 million in tourism revenues each year.

The UK has a long and very rich history, and is renowned for its advanced approaches to science, technology, transport and education. It is also very culturally rich with an internationally acclaimed literature, theatre, music, media and sports scene. It is the birthplace of William Shakespeare, the Beatles, prestigious universities, historical castles and ancient landmarks.

London is the UK’s capital. This global city and financial centre has one of the most highly-developed social and market-oriented economies in the world, and is the sixth-largest national economy in the world based on GDP.

The UK formally left the EU in 31st January 2020; however the Brexit story is a long and complex one that continues to unravel. Ever since they left the EU, they entered into an 11-month transition period. During this period, the terms of the future UK-EU relationship will be established, with a new free trade agreement being a priority.

Registry/Registration  

If you are from the UK then you can live and work there without any conditions or restrictions. If you are a non-UK national you will need to apply for UK residency.

The first step is to determine your residence status. This depends on how many days you spend in the UK in the tax year (6th April to 5th April the following year).

You are automatically a resident if you have either:

  • Spent 183 days or more in the UK in the tax year
  • Owned, rented or lived in a UK home for at least 91 days in total, and spend at least 30 days there in the tax year.

You will need a permanent residence card to reside in the UK. You can apply for a permanent residence card if you’ve lived in the UK for 5 years.

Income Tax  

As a contractor or self-employed individual working in the UK it can be a complicated process understanding the legislation behind this and whether or not you are covered by double taxation agreements with the UK. This will depend on your nationality, type of visa and length of stay in the UK.

There are plenty of payment structures available to contractors. Regardless, at least a portion of your earnings must come through a UK payroll. Every contractor must get to grips with an IR35 (‘Intermediaries Legislation’). Your IR35 status will vary depending on whether you are working as a contractor for a company or via an intermediary.

The UK income tax rates as of 2020 are as follows:

  • £0 – £12,500: 0%
  • £12,501 – £50,000: 20%
  • £50,001 – £150,000: 40%
  • Over £150,000: 45%

Social Security

A self-employed professional or contractor in the UK you will need to pay National insurance. How you pay depends on whether you are UK self-employed or employed.

However, you will not need to pay National Insurance for the first 52 weeks if you:

  • Are sent by an employer in your home country to temporarily work in the UK
  • Come from a non-EEA and non-bilateral agreement country.

Further, you do not need to pay if you have:

  • A Portable Document A1, E101 or E102 proving that you pay National insurance in another European Economic Area (EEA) country.
  • A certificate from another country that has a bilateral agreement on social security with the UK.

Employment Rules

Immigration is a primary concern for anybody hoping to work in the UK as you must obtain a work permit in order to do so.

A self-employed person will find it easy to obtain their UK work permit as they will receive sponsorship from their prospective employer for the entire stay. The British work permit depends on this sponsorship since it is confirmation that you will be earning money during your stay in the UK.

All workers are protected by employment law; however the law distinguishes between employees, workers and the self-employed, with employees having the most extensive rights. The self-employed typically have less protection; however various terms are implied into contracts of employment.

Some of the most important pieces of UK employment law legislation are:

  • Employment Rights Act 1996
  • National Minimum Wage Act 1998
  • Employment Relations Act 1999
  • Maternity and Parental Leave etc. Regulations 1999
  • Part-Time Workers Regulations 2000
  • Agency Workers Regulations 2010
  • Transfer of Undertakings (Protection of Employment) Regulations 2006

Banks

Traditionally, it was very difficult to open a bank account in the UK if you were a non-UK resident. Today, however, the process is easier and banks have become more flexible, particularly in terms of what documents they will accept as proof of address. That being said, it is easier to open a bank account if you are an EU national, but many banks are quite strict with their requirements, particularly if you have a limited credit history in the country.

In order to open a bank account in the UK, you will one document that proves your identity, and another that proves your address. If you have a correspondent bank, you can also set up an account with your home bank before you arrive in the UK. Further, many renowned British banks, including, Barclays, HSBC, Lloyds and NatWest offer international bank accounts.

Corporate Structures

Demand for contractors in the UK depends on your skills and years of experience in your field. Once you have made the decision to freelance or take on UK contracting, you will need to set up your finances, whether as a Limited Company or Umbrella Company. Each structure has its advantages and disadvantages, and your selected option will depend on your specific circumstances and criteria. You will also need contractor insurance for peace of mind and protection.

Setting up an umbrella company is the ultimate solution if you’re a contractor working in the UK. The Umbrella Company acts as your full-time employer, while you maintain your independence as a contractor. They can sponsor you and provide you with a single work permit for multiple contracts in the UK.

Using an umbrella company gives you the freedom to work independently under your hours, contracts and schedule, while dealing with complex admin and immigration issues. Umbrella companies are also experts in UK and expat tax law, and as such, you’ll be in a better position to optimise your earnings in the UK.

Chesterfield offers comprehensive UK freelancer services and contractor management solutions in the UK. We can support you with all your needs in terms of contractor insurance, umbrella companies and UK employer of record.   

Chesterfield and Contracting in the UK

Due to the complexities in place when it comes to contracting and freelancing in the UK, it is strongly advised to use a specialist service provider, such as Chesterfield, to assist you with your UK employed solution. Our team of specialists understand the intricacies in place in terms of national laws and regulations, and are well-positioned to fast-track the entire process. We possess our own umbrella companies in the UK, and possess thorough knowledge of the different services they provide.