Whether you’re thinking of starting a business in the UK, or you have a small company up and running, there are certain laws that you should be aware of. Depending on your company size, structure, and industry, some laws may not be applicable to you.
However, compliance with those laws that are is essential. In this article, we highlight the primary laws that affect companies in the UK.
Company law
First and foremost is company law. The principal source of company law applicable to UK businesses is the Companies Act 2006, which governs the way private and public companies are managed, run, and financed.
The Companies Act 2006 is the longest piece of legislation ever enacted in the UK, with over 1,300 sections. They include the following provisions:
- How to incorporate a company
- How to create and amend a company’s articles of association
- How to appoint and remove company officers
- The roles and statutory duties of company directors and officers
- The statutory records companies must file to Companies House
- Shareholder rights
- Rules regarding company names
- How to issue and transfer company shares
- Financial reporting and audit regulations and exemptions
- Consequences and penalties for failing to comply with regulations
There have been several changes to company law this year. For example, every UK company must have an ‘appropriate’ registered office address and a registered email address. Read our blog for more information on changes to UK company law.
While it’s a lot for new businesses to take in and ensure ongoing compliance with, the Companies Act’s primary purpose is to compile and restate company law from various sources into one act of parliament, helping to make the administration processes of forming and running a company in the UK as easy as possible.
How to stay compliant
Staying compliant with company law can be complicated for a newly incorporated company. For limited companies and limited liability partnerships (LLPs), one of your main duties is to file a confirmation statement.
This is a statutory filing requirement which verifies that your important company data (like your registered office address, statement of capital, and SIC codes) is correct and up to date. Your first confirmation statement is due no later than 14 days after your ‘made up to’ date – this is the day before your incorporation anniversary.
Another statutory filing you need to know to stay compliant with company law is your annual accounts. This is a way of reporting your company’s financial activity, allowing HMRC to work out your Corporation Tax bill.
Your annual accounts are due once a year, and your first filing is due 21 months after the incorporation date. You can submit this information to Companies House quickly and easily via their digital filing service, WebFiling.
The legal obligation regarding these statutory filings lies with the company directors. They are responsible for ensuring that the documents are completed accurately and submitted on time – even if your company is dormant.
If you need help with staying compliant with company law, we offer a Confirmation Statement Service at £59.99 and a Dormant Company Accounts Service at £49.99.
Consumer rights law
Consumer rights law is primarily governed by the Consumer Rights Act 2015, which protects individuals when they buy goods and/or services from companies. It ensures that they are treated fairly if things go wrong. For example, if they buy faulty or counterfeit goods.
If you run a customer-facing business and sell products (be it online or in-store, physical or digital items), consumer rights law applies to you. Any product or service you sell must meet the following standards:
- Satisfactory quality
- Fit for purpose
- As described
If you provide a service, such as accounting, construction, or beauty, it must meet the following criteria:
- Be carried out with care and skill
- All information, written or spoken, is binding when the consumer relies on it
- The service must be provided at a reasonable cost, if a price isn’t agreed with the customer beforehand
- The service must be carried out within a reasonable timeframe, if it is not agreed with the customer beforehand
Essentially, consumer law promotes confidence between individuals and businesses when they shop with them. Naturally, disputes can occur, in which case this law makes it as easy as possible to deal with them.
How to stay compliant
To comply with consumer rights law in the UK, you first need to understand the rights that your customers are entitled to.
Within 14 days
Customers have the right to cancel a purchase and receive a full refund on orders placed within the last 14 calendar days from the date of purchase. This is commonly known as the ‘cooling off period.’
Within 30 days
In the first 30 calendar days after purchase, they may reject or return an item that doesn’t meet the standards we outlined above and request a full refund.
This law doesn’t apply to digital downloads (such as software or music). However, customers can request repairs or a replacement for a sub-par product. Failing that, they have the right to a discount on the purchase.
After 30 days, consumers are not legally entitled to a refund. They can, however, ask for repairs or a replacement.
Within six months
Customers may ask for a refund on a faulty item within six months of the purchase or delivery date. In this instance, it’s up to you, the retailer, to prove that the fault wasn’t there at the point of purchase.
If you can’t repair or replace the item, the customer is entitled to reject the goods and receive a full refund.
Online deliveries and returns
If you sell items online, the delivery is covered by the Consumer Rights Act. You, the retailer, are responsible for ensuring that the item reaches the customer safely within 30 days (unless a different timescale has been agreed).
In the event of a late delivery (that arrives after the agreed date), the buyer is entitled to cancel their order and receive a full refund.
When a customer returns an online order that doesn’t meet the minimum standards, you must issue a full refund for the item, as well as standard delivery costs. If they paid extra for an additional service (e.g. next day delivery), that amount is not eligible for a refund.
Second-hand and perishable items
If you are a trader or own a registered company in the UK, all of the above laws apply to second-hand purchases.
The returns window for perishable goods can be complicated. Therefore, it is determined by how long the individual item is generally expected to last.
Services
If a customer receives a service from you that doesn’t meet the minimum criteria, you must either rectify the individual element, or supply the entire service again at no extra cost or at a reduced price.
What you need to do
First and foremost, to comply with consumer rights law, you need to ensure that the products and/or services that you offer meet the criteria outlined by the Consumer Rights Act.
You must notify your customers of their rights in the terms and conditions statement, which should be made available on your website. Terms and conditions are also typically included with a customer’s proof of purchase.
Employment law
Employment law is another key regulation that UK business owners should be familiar with, particularly if you employ (or plan to employ) staff. It concerns the relationship between companies and their employees, covering the rights, obligations, and responsibilities of both parties.
The key piece of legislation applicable to employment law is the Equality Act 2010, which ensures that all existing and potential employees are not subject to discrimination or unfair dismissal.
Recruitment
During the recruitment process, companies should avoid potentially discriminatory language, such as specific age or nationality requirements, to ensure that all candidates are treated fairly.
Employment contracts
There is no legal requirement to provide employees with an employment contract. However, for the protection and best interest of both parties, it is recommended. If you don’t supply an employment contract, the employee must receive a written statement of employment particulars on their first day.
Health and safety
All employers in the UK have a legal duty of care for their staff. As such, they are required to provide employees with a safe work environment, and carry out regular risk assessments, to ensure ongoing compliance with health and safety regulations.
Minimum wage
All employees must be paid at least the National Living Wage or National Minimum Wage (for workers aged 21 and over).
Annual leave
Full-time, part-time, and zero-hours workers have a right to statutory paid annual leave of 5.6 weeks (28 days). Depending on the employment contract, this may include bank holidays.
New laws were introduced earlier this year for irregular and part-year employees. For holiday years starting on or after 1 April 2024, employers can use rolled-up pay. This involves calculating holiday pay at a rate of 12.07% of the actual hours worked in a pay period (e.g. weekly or monthly).
Employees also have the right to carry over unused annual leave to the following holiday year, if it is left over due to the following:
- Sick leave
- Statutory leave
- The employer refusing to pay their entitlement
- The employer failed to give them a reasonable opportunity to take time off
- The employer failed to inform the employee that unused holiday must be taken before the end of the current holiday period
If you’re unsure how much holiday someone is entitled to, use the holiday calculator to check.
Statutory Sick Pay (SSP)
If an employee is too sick to work, they are entitled to £116.75 per week in SSP for up to 28 weeks. This is the legal minimum amount. However, you can choose to offer additional sick leave and pay to your staff if you wish.
To qualify for SSP, an employee must:
- Be classed as an ‘employee’
- Earn an average of at least £123 per week
- Have been ill for more than 3 consecutive days (including non-working days)
The employee is legally obligated to notify you, the employer, about their sickness within seven days or before your pre-agreed deadline, if applicable. If they are off work due to illness for more than seven days, they must give you proof of sickness (known as a ‘fit note’) from a healthcare professional. This includes:
- A GP or hospital doctor
- Registered nurse
- Occupational therapist
- Pharmacist
- Physiotherapist
Parental and carer’s leave
Workers who need time off work to have a baby are entitled to Statutory Maternity Pay (SMP) and Statutory Paternity Pay (SPP). SMP leave is 52 weeks, made up of 26 weeks of ordinary maternity leave and another 26 weeks of additional leave. Employees don’t need to take the full 52 weeks off but must take at least two.
SMP is paid at a rate of 90% of a worker’s average weekly gross earnings for the first 6 weeks. Then, it’s £184.03 or 90% of their average weekly earnings (whichever is lower) for the next 33 weeks.
SPP entitlement is now two weeks, at either £184.03 or 90% of the employee’s average weekly earnings (again, whichever is lower). The two-week period can either be taken consecutively, or split into two one-week blocks. Some employees may also take shared parental leave (SPL).
During parental leave, new employment laws protect staff from redundancy for at least 18 months.
Under the Carer’s Leave Act 2023, qualifying employees now have the right to take one week of unpaid carer’s leave per year. This entitlement is applicable from day one of employment. They may take a half or full day off with at least 3 days’ notice, or more than one day off with notice of at least double the amount of time off.
Flexible working
Workers have the right to make up to two flexible working requests a year from the first day of employment. If you receive such a request from a staff member, you must respond within two months and consult with the employee before making a decision.
If you deny the request, you must provide a reason for doing so. Potential reasons for denying a request may include if the flexible working request will incur additional costs that will damage the business, or impact the worker’s performance.
Disciplinary procedures
In the event of an employee’s misconduct or performance issues, you, the employer, are required to follow certain disciplinary procedures under employment law.
Generally (with the exception of gross misconduct), you cannot dismiss staff members without a disciplinary procedure, as this could result in allegations of unfair dismissal or discrimination and, therefore, legal action against your company.
For more guidance on employment law, visit the ACAS website. To ensure your business is prepared for the series of new employment laws coming in the second half of this year, see our blog on ‘New employment laws for 2024 you need to know’.
How to stay compliant
Guidance on the above should be clearly explained in each worker’s employment contract, and policies, such as health and safety and your company’s holiday booking procedure, should be expressed and made freely available to all staff in a company handbook.
If you’re unsure about anything regarding employment law and regulations for employees, seek professional advice on the ACAS or government websites.
Intellectual property law
Intellectual property (IP) law protects your company’s original work, like your brand name, product, or high-value business assets, preventing others from copying or distributing it without your permission. Key areas of intellectual property law include trade marks, copyrights, and patents.
Registered trade marks (®) provide legal protection for your brand’s unique elements, such as your logo, slogan, or colours. You can also use an unregistered trade mark (™) alongside your work if you are pending registration.
Copyrights (©), on the other hand, don’t cost anything and are automatically assigned to your company’s original work. This can involve music, art, photography, or content you have written on your website, for example.
If you wish to use someone else’s work or they wish to use yours, you should get their permission first. While copyrights don’t legally protect others from using or copying your work, it can be a powerful deterrent.
Finally, patents specifically protect new inventions which are not yet publicly available and are significantly different from what is already on the market. Patents protect your work for five years, allowing you to take legal action against someone who uses your invention without your permission.
How to stay compliant
You should ensure that your company’s work is marked with the correct protective symbol. If you’d like to use someone else’s protected work, be sure to get the owner’s permission first.
Likewise, you should provide relevant contact details on your website for anyone wishing to gain permission to use any of your company’s assets. If you notice that someone hasn’t complied with this law, it could be a criminal offence, and you should report suspected IP crime to Trading Standards.
Law of contract
A significant part of running a business involves entering into contracts with various parties, such as suppliers, customers, employees, directors, and other companies. In creating a legal agreement between parties, you effectively create your own law through the terms contained within the contract.
These terms, however, must be made within the confines of the law of contract. This provides the elements that allow a contract to exist, as well as the circumstances in which contracts may be terminated.
However, disputes between parties can arise, and some may seek to impose unfair terms on others. Contract law, therefore, provides protection by regulating the use of certain terms.
How to stay compliant
If you sign a contract with another party, that is controlled by contract law. You are, therefore, bound by the provisions of the individual contract. Generally, the principle of freedom of contract gives businesses the autonomy to create a contract on any terms they choose (unless, of course, those terms are against the law).
However, if you are looking to enter into a contract, or write terms relating to a dispute or breach which will form part of the contract, it is best to seek professional advice to ensure fairness for both parties.
Law of tort
The law of tort covers civil wrongs and includes negligence, nuisance and defamation. It is largely based on case law, whereby judges interpret existing laws to particular circumstances and facts of an individual case. These interpretations create precedents for future judges to follow when presented with similar cases.
Tort law primarily concerns instances where a duty of care is owed, such as construction accidents, workplace injuries, the distribution of dangerous products, and even trespassing.
How to stay compliant
Your company and its officers have a duty of care with regard to the law of tort. This means you are legally obligated to take reasonable steps to avoid causing harm to another person or property.
This relates to any person or group that your company might interact with, such as employees, customers, clients, and the general public. For instance, if you’re a professional photographer and a client visits your studio, you need to ensure proper health and safety measures have been taken to avoid accidents.
In the event of a breach of duty, a key concept to establish is negligence versus intent. In other words, was the incident intentional or an accident? And did those actions lead to any physical harm? If not, there’s no tort.
Data protection law
Data protection law is underpinned by the Data Protection Act 2018 and the UK General Data Protection Regulation (GDPR). These provide protection for individuals and the personal data held about them by organisations. These strict principles state that personal information must:
- Be used fairly, lawfully, and transparently
- Be used for specified, explicit purposes
- Be used in a way that is adequate, relevant, and limited to only what is necessary
- Be accurate and, where necessary, kept up to date
- Not be kept for longer than necessary
- Be handled with appropriate security, including protection against unlawful or unauthorised processing, access, loss, destruction, or damage
Legal protection also exists for sensitive information, such as race, ethnic background, and religious beliefs. Everyone has the right to freedom of information and to ask for their details to be erased.
Data protection law applies to your business if you capture someone’s personal information, like their name and address. This could be, for example, when a customer places an online order with you, subscribes to your newsletter, or enters your social media competition.
How to stay compliant
First, if you hold people’s personal data, you are legally required to pay the data protection fee to the Information Commissioner’s Office (ICO). For small companies, this is normally £52-£78 a year. Once you’ve paid, your company will be added to the ICO’s register to show that it takes data protection seriously.
In addition, it’s a good idea to create your own privacy notice, to let your customers know how you store and use their data. This will show your customers and other interested parties that you take data protection laws seriously. Use the ICO’s privacy notice generator to create a bespoke document for your customers or suppliers easily.
Tax laws
Tax law is a complex area, but one that applies to all businesses in the UK. Below are the main tax laws applicable to limited companies:
PAYE
If you have staff members or are a company director receiving a salary, they/you will be subject to Pay As You Earn (PAYE) tax and National Insurance contributions. These deductions apply to wages over the current Personal Allowance threshold, which is £12,570. Each employee’s deductions depend on how much they earn.
How to stay compliant
You need to register as an employer with HMRC when you start taking on staff or subcontractors. You need to register even if you’re a director and the only employee. This will allow you to run payroll.
HMRC will then issue your PAYE bill by the 22nd of the next tax month if you pay your staff monthly, or the 22nd after the end of the quarter if you pay quarterly.
VAT
Another tax you might have to pay is VAT. This tax law applies to your business if its taxable turnover exceeds £90,000 or is expected to do so in the next 30 days.
How to stay compliant
If your company’s turnover has surpassed the above limit, you need to register for VAT. You must register even if you or your business is based outside of the UK, or you supply any goods or services to the UK (or expect to in the next 30 days).
To register as a limited company, you’ll need the following information:
- Company registration number
- Business bank account details
- Unique Taxpayer Reference (UTR)
- Annual turnover details
- Self Assessment details
- Corporation Tax details
- PAYE details
Depending on your industry, you might be exempt from VAT. The HMRC website has a list of exemptions. Please note that if you need to register but do so late, you might incur a penalty charge.
When you start charging VAT on your goods or services, this needs to be stated clearly next to your prices, and you will need to issue VAT receipts.
Capital Gains Tax
Another is Capital Gains Tax (CGT), which applies when you sell a business asset (like shares or property) for a profit of more than £3,000.
How to stay compliant
You won’t receive a CGT bill automatically. If you are liable to pay, you are responsible for working this out and ensuring the correct charge is paid. If your total taxable gains exceed the £3,000 allowance, you need to report this to HMRC.
You’ll need to report the following details:
- How much you bought and sold the asset for
- Dates of ownership and asset disposal
- Any other relevant details, such as the cost of buying, selling, or making improvements to the asset and any tax relief you’re entitled to
- Calculations for each capital gain or loss you report
If you are a non-UK resident, you must report all sales of property or land in the UK on or after 6 April 2020, even if you have no tax to pay.
Corporation Tax
Private limited companies must also pay Corporation Tax (CT) on their business profits. For the current tax year, the CT rate is 19% for annual profits of up to £50,000 and 25% for profits of up to and over £250,000. Marginal Relief could be available for annual profits between £50,000 and £250,000.
How to stay compliant
Limited companies, foreign companies with UK-based branches or offices, and unincorporated associations, are legally required to pay CT on profits from carrying out business activities. Like CGT, you don’t automatically get a bill; you need to work out what you owe and report and pay it.
First, register your company for CT. Then, ensure that you keep accurate accounting and financial records, to keep track of your business profits.
You then need to prepare a Company Tax return, to work out how much CT you owe and pay your bill. If you have nothing to pay, you’ll still need to report this to HMRC.
The deadline for filing your CT return is 12 months after the end of your accounting period, and the deadline for paying your bill is usually 9 months after your accounting period.
Dividend Tax
If you’re a limited company director receiving dividend payments over £500, you may have to pay Dividend Tax on them. HMRC works out your bill by adding your total annual dividends to your base salary, which may change your income tax band.
How to stay compliant
If your dividends are within the allowance, you don’t need to do anything. However, if you receive up to £10,000 in dividends, you need to tell HMRC either by contacting the Income Tax Office or declaring it in your Self Assessment tax return (if you complete one).
For dividends over £10,000, you need to fill in a Self Assessment tax return. If you’re not already registered, you need to do so by 5 October following the tax year you had the income.
Business rates
Business rates are charged on non-domestic business premises, such as shops, offices, and warehouses. If you work from home and use a small part of it for work (i.e. one room), you could be exempt from business rates. Otherwise, the charge is based on the property value.
How to stay compliant
Your local council will send you a business rates bill in February or March each year. You can estimate what you might need to pay using this business rates table. To pay or find out more about your bill, contact your local council.
If your business premises change, you need to report it to the Valuation Office Agency (VOA).
Small business owners with a single business property and a relatable property value of less than £15,000 could qualify for small business rate relief.
Property law
As a newly incorporated company, you might be working from home or shared office space, as your business grows. Eventually, you could expand into a rented commercial office. At this stage, you have certain rights and obligations under the Landlord and Tenant Act 1954.
A quick way to gauge if property law applies to your business is to check if you meet the following requirements:
- If your company occupies the premises for business purposes
- If the property is being occupied by virtue of a lease (as opposed to a licence)
- If the tenancy must not be specifically excluded from the 1954 Act
However, there are certain exclusions, namely:
- If your lease is for six months or less
- If your total period of occupation does not exceed 12 months
How to stay compliant
The 1954 Act protects you with security of tenure. This means that you, the tenant, have a legal right to stay in the business property after the lease has expired. It also dictates that, as a commercial tenant, your company is responsible for:
- Fire safety
- Safety of electrical equipment
- Gas, appliance, and pipework safety and maintenance
- Asbestos management
- Setting a ‘reasonable’ temperature within the property
- Providing enough space, ventilation, and lighting
- Maintaining toilets and washing facilities
- Providing drinking water
- Maintaining safety equipment
Under property law, these are your fundamental responsibilities. However, you could be subject to additional laws, which will be set out in the property lease. Be mindful of any restrictive clauses in your residential contract that could enforce additional regulations.
Thanks for reading
There are several laws that UK business owners are required to follow. Fundamentally, company law sets out the regulations for forming, running, and closing a company in the UK.
Other key laws you should know relate to consumer rights, employment, law of contract, law of tort, data protection, tax and property.
Thanks for reading. Please leave any comments or questions you have on this topic below.
Please note that the information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While our aim is that the content is accurate and up to date, it should not be relied upon as a substitute for tailored advice from qualified professionals. We strongly recommend that you seek independent legal and tax advice specific to your circumstances before acting on any information contained in this article. We accept no responsibility or liability for any loss or damage that may result from your reliance on the information provided in this article. Use of the information contained in this article is entirely at your own risk.
