The legal requirements for self-employed estate agents: Your definitive guide to getting started
Setting up as a self-employed estate agent under a brokerage, such as Hortons, can be an exciting and rewarding move. However, it’s essential to understand the administrative and legal responsibilities that come with it. It might seem daunting at first, but whether you are stepping into this role for the first time or transitioning from another brokerage and want to ensure you're set up correctly, here’s a breakdown of all the things you’ll need to do.
1. Instructing an accountant and creating an LTD company
One of the first steps to becoming a self-employed estate agent is to decide on your business structure. In the UK, most estate agents set up as a limited company (LTD), which provides limited liability protection and can be more tax efficient.
You’ll need to:
- Register your LTD company with Companies House.
- Instruct an accountant to help with tax returns, VAT registration (if applicable), and all of the other legal obligations that come with setting up a LTD company. Your accountant could also form your company for you, which is advisable if you’ve never done it before.
The cost for setting up an LTD company is around £12 to register online. Accountant fees vary, but expect to pay £300–£1,500 per year depending on services offered. The right accountant can end up saving you thousands of pounds, in being tax efficient, but also ensuring there is no risk of missing a HMRC deadline.
2. Setting up bookkeeping software
To keep your finances in order, we highly recommend using a bookkeeping software. It'll help you keep track of exactly where your business is financially, how much profit you've made, and how much tax you'll need to pay.
Xero is a popular option, and most accountants will be very familiar with it. You should expect to pay between £12–£30 per month for Xero or a similar software.
When instructing your accountant, ask them if they have a preferred software - they will be able to help set it up for you and give you advice about how to best utilise it day to day
3. Registering with HMRC for Anti-Money Laundering (AML) supervision
Estate agents must comply with Anti-Money Laundering regulations. You’ll need to register with HMRC for AML supervision, unless your brokerage offers full AML support. Some brokerages will have sufficient oversight and control over the process to cover you under their supervision, while others will require you to manage your own registration.
You’ll need to:
- Confirm with the brokerage what level of AML support they provide.If required, you’ll need to register and complete AML training.
- Pay the HMRC AML registration costs £300 per year, if applicable.
4. Set up Public Liability and Professional Indemnity insurance policies
Having the correct insurance is a legal requirement. Public liability insurance covers you if a member of the public is injured or their property is damaged because of your business. Professional indemnity insurance protects you against claims of professional negligence.
There is a minium level of cover you will be required to be insured for, which is specified by the Redress Scheme you choose to join (more on that below)
Estimated costs:
- Public liability insurance: £100–£200 per year.
- Professional indemnity insurance: £150–£500 per year.
Most policies can be paid monthly.
The best way to find a suitable policy is to use a comparable website or speak to an insurance broker. If you’d like a recommendation - please reach out to me via email (adam@hortons.co) and I’ll put you in contact with a broker we use.
5. Registering with the ICO
As an estate agent, you’ll be handling personal data, so you need to register with the Information Commissioner’s Office (ICO).
The registration is simple, and costs around £40–£60 per year.
6. Joining a Redress Scheme (PRS or TPOS)
It's a legal requirement for estate agents to join a redress scheme to ensure customers can escalate complaints. You’ll need to register with either:
- The Property Redress Scheme (PRS) or
- The Property Ombudsman Scheme (TPOS).
Membership costs are around £100–£200 annually.
Optional Extras
While not required, some additional types of insurance may provide peace of mind, given you will most likely be leaving the security and comfort of an employed role.
- Critical Illness Insurance: Offers financial support if you are diagnosed with a serious illness.
- Income Protection Insurance: Covers your income if you’re unable to work due to illness or injury.
A full breakdown and tick-list:
- Instruct an accountant
- Register an LTD company with Companies House
- Set up bookkeeping software like Xero
- Check AML registration requirements with your brokerage
- Get public liability and professional indemnity insurance
- Register with the ICO Join a redress scheme (PRS or TPOS)
- Consider optional insurances (critical illness, income protection)
