How to start a recruitment agency in the UK: the 2026 guide
The short answer
Most recruitment agencies in Great Britain don’t need a licence. The exceptions are agencies supplying workers to agriculture, horticulture, shellfish gathering and food processing or packaging, which need a gangmaster licence from the Fair Work Agency, and care agencies that may need to register with a care regulator. Every agency must follow the Conduct of Employment Agencies and Employment Businesses Regulations 2003: no fees to work-seekers, agreed terms before you find them work, identity and suitability checks, and a Key Information Document for temporary workers. To set up, register a company with Companies House (£100 online), register with HMRC for Corporation Tax and PAYE, pay the ICO data protection fee, get employers’ liability insurance once you employ anyone, and run right-to-work checks. In 2026, the Fair Work Agency took over enforcement and agencies became responsible for PAYE when an umbrella company employs their workers.
Every legal, tax and fee figure links to an official source, read on 1 October 2026.
Starting a UK recruitment agency, step by step
The official steps in order. Each is explained below with its source.
| Step | What to do | Where | Official cost |
|---|---|---|---|
| 1. Choose your model and niche | Permanent placement (employment agency), temporary supply (employment business) or both | Your own market research | – |
| 2. Register a company | Incorporate a limited company, or register as a sole trader | Companies House | £100 online |
| 3. Register with HMRC | Corporation Tax within 3 months of starting to trade; PAYE before your first payday | HMRC | Free to register |
| 4. Check if you need a licence | Gangmaster licence for food, farming and shellfish; care regulator registration for care agencies | Fair Work Agency; CQC or the regulator for your nation | Gangmaster licence from £3,490 |
| 5. Pay the ICO fee | Data protection fee for handling candidate data | ICO | £52 or £78 for most agencies |
| 6. Get insurance | Employers’ liability insurance of at least £5 million once you employ anyone | An authorised insurer | Market price |
| 7. Set up compliant processes | Terms with work-seekers, checks before placing, Key Information Documents, right-to-work checks | Conduct Regulations and Home Office guidance | Your time |
| 8. Win clients and candidates | Terms of business, a target client list and a screening process | Your market | Your time and software |
Employment agency, employment business or both
UK law distinguishes two kinds of recruitment business. An employment agency finds people work with employers, which then employ them directly: the classic permanent placement. An employment business supplies workers it employs or engages to work under a client’s control: temporary and contract staffing. Many agencies do both, and the rules differ in places.
Permanent recruitment earns placement fees but no payroll; temporary supply earns a margin on hours worked but brings payroll, PAYE and the cash needed to pay workers before clients pay you. Choose a niche where you already have contacts: a sector, role family and region where you can win the first clients quickly.
Do you need a licence?
General licensing of employment agencies in Great Britain ended in 1995, when the licensing sections of the Employment Agencies Act 1973 were repealed. Gov.uk now says some agencies need a licence if they supply specific types of workers.
Agencies supplying workers for agriculture, horticulture, shellfish gathering, or food processing and packaging need a gangmaster licence from the Fair Work Agency, which took over from the Gangmasters and Labour Abuse Authority in April 2026. Operating without one carries a maximum penalty of 10 years in prison and a fine. Nursing and domiciliary care agencies may need to register with the Care Quality Commission in England, or the care regulator in Wales, Scotland or Northern Ireland.
Agencies based in Northern Ireland follow separate legislation and are regulated by the Employment Agency Inspectorate.
| Expected annual turnover | Application and inspection | Annual renewal |
|---|---|---|
| Less than £1 million | £3,490 | £620 |
| £1 million to less than £5 million | £5,190 | £1,860 |
| £5 million to less than £10 million | £6,820 | £3,100 |
| £10 million or more | £8,500 | £4,000 |
The rules every agency follows: the Conduct Regulations
The Conduct of Employment Agencies and Employment Businesses Regulations 2003 set out how agencies must treat work-seekers and hirers. Since 7 April 2026 they are enforced by the Fair Work Agency, which absorbed the Employment Agency Standards Inspectorate. Breaking them is a criminal offence that can lead to a fine, and the government can seek an order banning a person from running an agency for up to ten years.
- Don’t charge work-seekers for finding them work. The exceptions are mainly for entertainment and modelling work, and professional sports. Paid extras such as CV writing are allowed, but work-seekers have the right to cancel them by giving notice.
- Agree terms with each work-seeker before you provide any work-finding services.
- Before placing someone, confirm their identity from a document such as a passport, that they have the experience, training, qualifications and authorisation the hirer requires, and that they are willing to do the work. Get copies of professional qualifications for the hirer.
- Give every temporary work-seeker who registered on or after 6 April 2020 a Key Information Document.
- For work with vulnerable people, obtain two references from people who aren’t relatives of the work-seeker and who agree to the reference being shared with the hirer.
- Keep records for at least 12 months after they are created.
- Under the Agency Workers Regulations 2010, temporary workers get the same basic working and employment conditions as the hirer’s own staff after 12 weeks in the same role with the same hirer.
Companies House, HMRC and tax
Registering a limited company online costs £100, and Companies House usually registers it within 24 hours. Tell HMRC about Corporation Tax within three months of starting to trade.
Register as an employer for PAYE before your first payday, even if you are the only director paying yourself; you can’t register more than two months before you start paying people. For 2026 to 2027, employer National Insurance is 15%, the Employment Allowance is £10,500 and the National Living Wage is £12.71 an hour for workers aged 21 and over.
You must register for VAT if your taxable turnover over the last 12 months goes over £90,000, or you expect it to in the next 30 days.
- Off-payroll working (IR35): the client usually decides a contractor’s employment status, but HMRC says all agencies in the chain have some responsibilities, and the fee-payer may become the deemed employer.
- Umbrella companies: since 6 April 2026, the agency that contracts with the end client is responsible for making sure PAYE is operated correctly when an umbrella company employs its workers, and HMRC can recover any underpayment from the agency.
- If you supply workers without operating PAYE on their pay, you must send HMRC an employment intermediary report every three months.
Candidate data and the ICO fee
Organisations that use personal information must pay the ICO a data protection fee unless they are exempt. For most organisations it is £52 (tier 1: turnover up to £632,000 or no more than 10 staff) or £78 (tier 2), with £5 off by direct debit.
The ICO’s draft guidance on recruitment says an agency sourcing candidates for a client is likely to be a processor, with the employer as controller, and needs a binding written contract; an agency that uses candidate information for its own purposes is a controller. Don’t keep unsuccessful candidates’ records for longer than you need them.
Insurance and right-to-work checks
Once you employ anyone, including temporary workers on your payroll, you need employers’ liability insurance covering at least £5 million from an authorised insurer. You can be fined £2,500 for every day you are not properly insured.
For temporary workers, the Home Office treats the employment business as the employer for the right-to-work scheme, so the agency is responsible for the check, including while the worker is on assignment with a client. Employing someone without the right to work can bring a civil penalty of up to £60,000 per illegal worker, and knowingly doing so can lead to five years in prison and an unlimited fine. Correct checks give you a statutory excuse.
Rule changes in 2026 and 2027
Several changes affect new agencies. From 7 April 2026, the Fair Work Agency enforces the agency rules and issues gangmaster licences. From 6 April 2026, agencies are responsible for PAYE when umbrella companies employ their workers. The government’s Employment Rights Act timeline lists the regulation of umbrella companies, and new rights to guaranteed hours and to reasonable notice and short-notice payments, among the measures for 2027, with some timings to be updated after consultation.
From registered company to first placement
The practical work that wins the first clients, once the legal set-up is under way.
- 01
Step 01
List your first ten clients
Name ten companies in your niche you can reach this month, and the person at each who signs off on agency spend. Your first placement will almost certainly come from this list. - 02
Step 02
Write your terms of business
Fees or margins, payment terms, rebate or replacement periods, and what happens if a client hires a temporary worker directly. Have a lawyer review them before the first client signs. - 03
Step 03
Choose a small software stack
An ATS or recruitment CRM for candidates and clients, a job board or two, and a way to screen applications quickly. Our guides compare agency software and list published prices. - 04
Step 04
Build a repeatable screening process
Use the same phone screening questions, structured interview questions and scorecard for every candidate on a role, so clients get comparable shortlists from day one. - 05
Step 05
Track a few KPIs from week one
Placements, fill rate, time to first shortlist and interview-to-offer ratio are enough to start. The business plan template includes the formulas.
Screen every applicant without hiring a team first.
A new agency usually has more applicants than consultant hours. Beatview screens every application against the criteria you agree with each client and runs structured AI video interviews, so you can present evidence-backed shortlists quickly and spend your time on clients. The Free plan covers one active job with unlimited candidates; AI interviews are on Pro.
Starting an agency: frequently asked questions
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Usually not. General licensing of employment agencies in Great Britain ended in 1995. You need a gangmaster licence from the Fair Work Agency if you supply workers for agriculture, horticulture, shellfish gathering or food processing and packaging, and care agencies may need to register with a care regulator such as the CQC.
Official costs are modest: £100 to register a limited company online, a £52 or £78 ICO fee for most agencies, and employers’ liability insurance once you employ anyone. A gangmaster licence, if you need one, starts at £3,490. The larger costs are your own salary while you build the business, software and job boards, legal fees for terms of business, and cash to pay temporary workers before clients pay you.
Mainly the Employment Agencies Act 1973, the Conduct of Employment Agencies and Employment Businesses Regulations 2003 and, for temporary workers, the Agency Workers Regulations 2010. They cover fees, terms with work-seekers, checks before placing someone, Key Information Documents and equal treatment after 12 weeks. Data protection, right-to-work and tax rules also apply.
Since 7 April 2026, the Fair Work Agency, which absorbed the Employment Agency Standards Inspectorate and now issues gangmaster licences. Agencies based in Northern Ireland are regulated by the Employment Agency Inspectorate.
Generally no. Agencies and employment businesses can’t charge work-seekers for finding them work. The exceptions mainly cover entertainment, modelling and professional sports. Paid extras such as CV writing are allowed, but work-seekers have the right to cancel them by giving notice.
Since 6 April 2026, the agency that contracts with the end client, or the end client if there is no agency. HMRC can recover any underpaid PAYE from that agency.
About this guide
This guide is general information, not legal, tax or financial advice. Rules change, and several 2026 changes are recent; check the official sources and talk to a qualified adviser before you start. Beatview publishes this guide and sells screening software to recruitment agencies. Spotted something out of date? Tell us.