How to Start a Recruitment Consultancy in the UK

Recruitment consultancy is a high-earning business for experienced recruiters with strong industry networks. The model is simple — connect employers with talent and earn fees — but the regulatory and financial side needs careful attention.

Legal Requirements

Employment Agency Standards

Recruitment agencies must comply with the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003:

• You cannot charge candidates fees for finding them work (with very limited exceptions)
• You must provide candidates with written terms of engagement
• You must verify candidates' identities and right to work
• Specific regulations apply if you supply temporary workers

Data Protection

You handle large amounts of personal data. Register with the ICO (£40–£2,900 per year depending on turnover and staff numbers) and ensure GDPR compliance.

Sole Trader or Limited Company?

Most recruitment consultancies operate as limited companies:

• Professional image — clients expect a company structure
• Limited liability — important given the contractual nature of the business
• Tax efficiency at higher income levels
• Easier to manage multiple revenue streams (permanent placements, temporary staffing)

However, sole trader works for independent consultants with a simpler operation.

Registering with HMRC

Register for Corporation Tax (limited company) or Self Assessment (sole trader). VAT at £90,000 — recruitment turnover can reach this threshold quickly. If you supply temporary workers and invoice for their time, your entire billing (not just your margin) counts towards the VAT threshold.

Insurance

• Professional indemnity — essential. Covers errors in recruitment (e.g., failing to conduct proper checks).
• Public liability
• Employers' liability — if you employ internal staff
• Cyber insurance — you hold significant personal data

Expect £300–£1,000 per year.

Claimable Expenses

• Job board subscriptions — LinkedIn Recruiter, Indeed, Reed, specialist job boards
• CRM and ATS software — Bullhorn, Vincere, or similar
• Marketing — website, LinkedIn advertising, employer branding
• Office or co-working space
• Phone and broadband
• Travel — to client meetings and candidate interviews
• Professional memberships — REC (Recruitment & Employment Confederation), APSCo
• Training and CPD
• Insurance premiums
• ICO registration
• Background check costs — DBS, reference checks
• Accountancy and legal fees

Accounted handles expense tracking and categorisation automatically.

Revenue Model

• Permanent placement fees — typically 15–25% of the candidate's first-year salary
• Temporary staffing margin — the difference between what the client pays and what the worker receives (plus employer's NI, holiday pay, etc.)
• Retained search — an upfront fee plus completion bonus for senior/specialist roles
• Contract staffing — margin on interim and contract placements

Permanent placement fees generate lumpy, high-value income. Temporary staffing provides steadier cash flow but requires managing payroll and compliance.

Bookkeeping Tips

• Track placements and fees carefully — each placement is a significant revenue event
• Manage temporary worker payroll — if you supply temps, you are their employer for tax purposes
• Separate client billing from worker payments
• Monitor aged debtors — recruitment invoices can be slow to pay
• Budget for refund periods — most permanent placement agreements include a rebate period
• Set aside money for tax

Accounted connects to your bank and categorises transactions with AI.

Key Deadlines

• 31 January — Self Assessment or Corporation Tax return
• Monthly/quarterly — PAYE returns for temporary workers
• Quarterly — VAT returns if registered

Getting Started

Recruitment consultancy offers excellent earning potential for well-networked professionals. Get your compliance in order, register appropriately, and keep your finances well-managed.

Ready to recruit some financial order? Sign up for Accounted and let Penny manage the bookkeeping while you make placements.