How to start a recruitment agency in the UK: setup, the Conduct Regulations and the first year

To start a recruitment agency in the UK, first decide whether you will place people into permanent jobs, supply temporary workers, or both. The law treats those as two different businesses, an employment agency and an employment business, and the second carries far more duties. Then register a limited company with Companies House (£100 online), pay the ICO data protection fee (from £52 a year), register with HMRC, write terms of business for clients and terms for candidates, and win the first clients from people who already know your work. Most agencies do not need a licence, but every agency must follow the Employment Agencies Act 1973 and the Conduct Regulations 2003, which since 7 April 2026 are enforced by the Fair Work Agency. The paperwork costs little. The real costs are your runway until the first fee arrives and, if you supply temps, the wages you pay before the client pays you.

This guide is the UK version, written for recruiters leaving an agency or an in-house team to start their own. The US version is how to start a recruitment agency in the US. If you are a senior consultant setting up a retained practice, read it alongside how to start an executive search firm. Every fee and rule cited here comes from the official source named in the last section. Where nobody publishes a reliable number, we say so rather than guess.

Key takeaways

• Choose the model first. An employment agency introduces candidates who are then employed by the client. An employment business employs or engages temporary workers, pays them and supplies them to the client.
• There is no general licence. The exceptions are sector rules: a gangmaster licence from the Fair Work Agency to supply workers to agriculture, horticulture, shellfish gathering or food processing and packaging, and registration with the care regulator for some nursing and domiciliary care agencies.
• The Conduct Regulations apply from your first candidate. You cannot charge candidates a fee for finding them work, you must agree terms with them before you start, and you must collect set information from the client before you send a CV.
• Setup costs, as of November 2026: £100 to register a company online, £52 a year for the ICO fee for a micro business. VAT registration is compulsory once taxable turnover passes £90,000 in a rolling 12 months.
• If you supply temps, you must pay them for every hour worked even if the client has not paid you. Since 6 April 2026, an agency whose temps are paid through an umbrella company can be made to pay PAYE the umbrella fails to pay.

Employment agency or employment business?

In everyday speech both are "recruitment agencies". In law they are different, and the difference decides most of what follows.

If you do both, you must follow the rules for both. Most recruiters going independent start as an employment agency on permanent roles, because it needs the least capital. Contract recruitment brings recurring income, but it is a payroll business with a recruiting front end. Start with one model and add the other once the first is running.

Before you resign

Read your employment contract before you tell anyone. Non-solicitation of clients and candidates, non-dealing, non-compete and confidentiality clauses decide how fast you can start billing.

UK courts will enforce a restrictive covenant that protects a legitimate business interest and goes no further than reasonably necessary, so the length and scope of each clause matter. Take advice from an employment solicitor on your actual contract before you resign, not after. Never take your employer's candidate database, client list or vacancies with you. Personal data copied on the way out is a data protection problem as well as a contract one.

How do you choose a niche?

Pick the market where hiring managers would take your call today. For most people, that is the function, sector or level they have recruited for most often.

A niche works for a new agency when three things are true:

• You can name the buyers. Thirty to fifty hiring managers or heads of talent who have hired through you or know your work.
• You can name the candidates' employers. The companies that produce the people your clients want. A market map of them is the asset you sell from.
• The fee can carry the work. Roles that fill quickly from job adverts leave little room for an agency fee. Scarce, specialist or senior roles are where clients pay for search.

How do you set up the business?

Most new agencies trade as a private limited company. The setup takes days, and most of it happens on GOV.UK.

1. Register a limited company with Companies House. It costs £100 online and £124 by post. Online registrations are usually done within 24 hours. Each director may first need to verify their identity through GOV.UK One Login and get a Companies House personal code.
2. Corporation Tax. Companies registered online are usually set up for Corporation Tax at the same time. As of November 2026 the main rate is 25% on profits over £250,000 and the small profits rate is 19% on profits of £50,000 or less, with marginal relief in between.
3. Register as an employer with HMRC before the first payday, and not more than two months before. HMRC says you must register even if the only person you employ is yourself as the company's sole director.
4. Decide on VAT. Registration is compulsory if taxable turnover goes over £90,000 in the last 12 months, or you expect it to in the next 30 days. You can register voluntarily below that. One permanent placement can be a large share of that threshold, so track turnover from the first invoice.
5. Pay the ICO data protection fee. An agency holds personal data on every candidate. The fee is £52 a year for a micro organisation (turnover up to £632,000 or no more than 10 staff) and £78 for a small or medium one, £5 less by direct debit.
6. Open a business bank account and keep the agency's money separate from your own.
7. Arrange insurance. Many clients ask for professional indemnity cover before they sign. If you employ anyone, including temps, you will normally need employers' liability insurance too.
8. Have a solicitor review two sets of terms once: terms of business for clients and terms for candidates. Then reuse them.

Do you need a licence to start a recruitment agency in the UK?

Usually not. There is no general licence for recruitment agencies in Great Britain. Most agencies only need to follow the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003. GOV.UK guidance says the Act covers executive search consultants too.

The exceptions are set by sector:

The regulator changed this year. On 7 April 2026 the Fair Work Agency took over from the Employment Agency Standards Inspectorate as the regulator for agencies in England, Scotland and Wales. Agencies based in Northern Ireland are regulated by the Employment Agency Inspectorate. Breaking the Act or the Conduct Regulations is an offence punishable by a fine, and the Secretary of State can apply to ban a person from running an agency for up to ten years.

What do the Conduct Regulations require from day one?

The Conduct Regulations are where most new agencies slip, because they apply to your first candidate, not your hundredth. The core rules for a permanent agency:

• No fees to candidates. You cannot charge a work-seeker for finding them work. Entertainment and modelling are the only exceptions. You cannot make your service conditional on a candidate buying anything else from you.
• Terms with candidates first. Agree terms with each candidate before you provide work-finding services, and keep a record that they were agreed.
• Information from the client before you send a CV. Before you introduce anyone, obtain the client's identity and business, the start date and likely duration, the role, duties, location and hours, known health and safety risks, the experience and qualifications needed, expenses, and, for a permanent agency, the minimum pay and benefits, pay intervals and notice periods. A CV counts as an introduction, so sending one before you have this breaches the regulations.
• Pass information both ways. When you propose a candidate, give the client what you have confirmed about them, in writing within three business days if you gave it verbally. When you offer a candidate a role, give them what you obtained from the client.
• Adverts. Every advert must carry your agency's full name and say whether the role is permanent or temporary. You cannot advertise a specific role without information about it and the client's written authority to recruit for it.
• Records. Keep records that show you complied, for at least 12 months after they were made and 12 months after you last worked for that candidate or client. If they are kept off your premises, you must be able to produce them within two business days of an inspector's request.

Limited-company contractors are covered by the rules unless they opt out, in which case you must tell the client. They cannot opt out of roles working with vulnerable people. Remember too that candidate data falls under UK GDPR: tell candidates how you use their details, including when you found them on a job board or online, and set a retention period your system can enforce.

What changes if you supply temporary or contract workers?

An employment business carries the duties of an employer, or close to it, from the first assignment:

• Key Information Document. Give every temporary work-seeker a Key Information Document before you agree terms with them.
• Terms of engagement covering how they are engaged, the type of work, your undertaking to pay them whether or not the client pays you, notice, pay rate, pay intervals and holiday entitlement.
• Pay for every hour worked. You cannot withhold pay because the client has not paid you or because a timesheet is not signed, if you can satisfy yourself the work was done by other means.
• Identity and right to work. Confirm each worker's identity and that they have the qualifications and authorisations the role needs, including the right to work in the UK.
• Equal treatment after 12 weeks. Under the agency worker rules, after 12 weeks in the same job a temp is entitled to the same basic pay and conditions as a comparable direct hire, including pay and annual leave.
• Transfer fees. If a client wants to hire your temp directly, you can charge a transfer fee only if your terms say so, only within the relevant period (14 weeks from the start of the first assignment or 8 weeks from its end, whichever ends later), and only if you offered an extended period of hire as an alternative.
• IR35. If you place contractors working through their own limited company with public sector or medium and large private clients, you must pass the client's status determination down the chain and may become the deemed employer. HMRC says small agencies are not exempt.
• Umbrella companies. From 6 April 2026, the agency that holds the contract with the end client is jointly and severally liable for PAYE an umbrella company fails to pay on the workers you supplied. Check every umbrella you use.

None of this makes contract recruitment a bad business. It makes it a different one, and a new agency should not drift into it with one temp for one client without the payroll, insurance and terms in place.

What should your terms of business cover?

The Act does not regulate what you charge clients. Fees are a commercial matter between you and the client, so your terms of business decide what you earn and when.

On late payment: unless your contract sets a different rate, UK law lets you charge business clients statutory interest of 8% plus the Bank of England base rate, and a fixed sum for recovery costs of £40, £70 or £100 depending on the size of the debt.

How do UK recruitment agencies get paid?

Permanent agencies are usually paid a percentage of the hire's first-year salary when the hire is made. Retained search is paid in instalments during the search, typically about a third of first-year cash compensation; the market practice is set out in retained executive search. No official body publishes UK fee rates, and we will not invent an average.

What decides your first year is when the money arrives. Take a hypothetical permanent role at a 20% fee on a £60,000 salary. The fee is £12,000, invoiced on the start date, on 30-day terms. If the search takes eight weeks to an accepted offer and the candidate then works a three-month notice period, the invoice goes out around week 21 and the cash arrives around week 25. That is our own arithmetic from those assumptions, not a survey. The notice period is the variable you control least, so ask about it at the first interview and build it into your runway.

Three things shorten the gap:

• Ask for an engagement fee on roles that need real research, credited against the final fee.
• Invoice on the earliest date your terms allow, such as offer acceptance rather than the start date, if the client will agree.
• Run several roles at once, so one candidate who withdraws during notice does not wipe out a quarter.

Where do the first clients come from?

The first clients of a new agency nearly always come from people who already know your work. Build the list before you build the website.

1. Write down everyone who has hired through you, been placed by you or referred you a role, and check each name against your restrictive covenants.
2. Contact them one by one. Say what the new agency does, which roles you want and how you charge.
3. Pick a few target companies in your niche that are likely to hire soon, for example after a funding round or a leadership change, and approach them with something useful, such as a view of the candidate market for a role they will need.
4. Publish what you see in your niche, regularly, on LinkedIn or by email. Check the email marketing rules first: they treat companies and sole traders differently.
5. Keep a warm talent pipeline between roles, so the next search for a client starts from a bench.

Expect the first signed role to take longer than you hoped. A client who liked working with you at your old agency still has to approve a new supplier, its terms and its insurance, and larger clients may run a preferred supplier list that you are not on yet.

What does the stack cost in year one?

A one-person agency needs a system of record, a source of candidate data, business email and calendar, e-signature, and accounting and invoicing. An employment business adds payroll and timesheets.

The software choice is the hardest to undo. Check that the system can record when candidate terms were agreed, what you obtained from the client before each introduction, and how long you keep each record, because those are what an inspector asks for. Read the contract as closely as the feature list: renewal increases, whether seats can be reduced and how you export your data. Our guides to ATS for executive search and how to choose executive search software set out the questions to ask.

What does the first year look like?

Slower to pay and lonelier than most people expect, even with a strong network.

Nobody publishes reliable figures for how many new UK recruitment agencies survive their first years or what an owner earns, and we will not invent them. What tends to decide the first year is easier to see:

• How much of your network was yours. Some recruiters find that clients called the old agency's brand, not them. The first few months tell you.
• Notice periods. A placement made in month three may not pay until month six or seven. Plan for it.
• Concentration. If one client produces most of your fees, a hiring freeze there is a crisis for you.
• Capacity. Alone, you are sales, research, candidate care, compliance and billing. Count how many live roles you can run well, and say no to the rest.
• Discipline on terms. The roles that hurt most are those taken without exclusivity, without an engagement fee and without written terms.

Where does Topliner fit?

Topliner is an executive search OS for independent and boutique search firms. We sell software and research in this category, so read this section as a vendor's view.

If your new agency works on senior, specialist or retained roles, Topliner holds each search as one record: brief, market map, off-limits, approaches, shortlist and client report, with an ATS and CRM on the same data. Senior researchers can run the research beside you, so a one-person firm can deliver a mapped market without hiring a research team. Topliner is not built for temporary staffing; if you will run an employment business, choose a system with payroll and timesheets.

Topliner is not sold per seat. It works with independent firms as a partnership, on a revenue share, by invitation, so the cost follows the searches you run. A revenue share is not automatically cheaper than a licence, so compare it with your expected fees.

How do you start a recruitment agency in the UK, step by step?

1. Choose the model: employment agency (permanent), employment business (temporary or contract), or retained search.
2. Read your contract and take advice on your restrictive covenants before you resign.
3. Choose a niche where 30 to 50 buyers already know you, and start a market map of it.
4. Register a limited company, register as an employer with HMRC, and decide on VAT.
5. Pay the ICO data protection fee and write privacy notices for candidates and clients.
6. Check whether your sector needs a gangmaster licence or care registration.
7. Have a solicitor review terms of business for clients and terms for candidates, and set up the records the Conduct Regulations require.
8. If you will supply temps, put payroll, Key Information Documents, right to work checks and umbrella company checks in place before the first assignment.
9. Size your runway from when cash arrives, including notice periods, and tell the people who already trust you what the new agency does.

How we know

The agency rules, the Fair Work Agency's role, transfer fees, terms with work-seekers, information from hirers, advertising and record keeping are from GOV.UK's overview of the Conduct Regulations 2003, updated 29 October 2026, the Conduct Regulations on legislation.gov.uk, and GOV.UK's guide to employment agencies and businesses, including its pages on licences and limited company contractors. The 12-week rule is from GOV.UK's guide to agency workers' rights. Company registration fees are from GOV.UK's register your company page. Tax rules are from HMRC's pages on registering as an employer, VAT registration and Corporation Tax rates. The ICO fee is from the Data Protection (Charges and Information) Regulations 2018 and the ICO's guide to the data protection fee. IR35 duties are from HMRC's off-payroll working rules for agencies, and the umbrella company rules from HMRC's PAYE rules for labour supply chains that include umbrella companies from 6 April 2026. Late payment interest and recovery costs are from GOV.UK's guide to late commercial payments. All were read on 3 November 2026.

Fee ranges for retained search are market practice as set out in our retained executive search page. The cash-flow example is our own arithmetic from the stated assumptions. This is a general guide, not legal, tax or financial advice. Rules change, so check them before you place your first candidate.

If you are setting up a specialist or retained desk and want the research loop on the system we use ourselves, request an introduction.

Questions people actually ask

How much does it cost to start a recruitment agency in the UK?

The legal setup is small: £100 to register a limited company online and £52 a year for the ICO data protection fee for a micro business, as of November 2026. The real costs are your runway until the first fee arrives, software and candidate data, insurance, and, for a temp desk, the wages you pay before clients pay you.

Do you need a licence to start a recruitment agency in the UK?

Usually not. You need a gangmaster licence from the Fair Work Agency to supply workers to agriculture, horticulture, shellfish gathering or food processing and packaging, and some nursing and care agencies must register with the care regulator. Every agency must follow the Employment Agencies Act 1973 and the Conduct Regulations 2003.

Can you start a recruitment agency from home?

For most agencies, yes. There is no general licence, and the official guidance we read sets no premises requirement for a permanent agency. If you keep records anywhere other than where you trade, you must be able to produce them within two business days of an inspector's request.

Can you start a recruitment agency with no experience?

There is no legal requirement for recruitment experience in the UK. In practice the first clients come from people who know your recruiting work, so starting without a track record is much harder and slower.

Do you have to register for VAT?

Only once your taxable turnover goes over £90,000 in the last 12 months, or you expect it to in the next 30 days. You can register voluntarily below that.

What is the difference between an employment agency and an employment business?

An employment agency introduces candidates who are then employed by the client. An employment business supplies temporary workers whom it engages and pays, and who work under the client's direction. If you do both, you follow the rules for both.

Can a recruitment agency charge candidates a fee?

No, not for finding them work. Entertainment and modelling agencies are the only exceptions. You may offer other services for a fee, but you must not make your work-finding service conditional on buying them.