The real cost of running a business in London in 2026: Office, staff and overheads

The cost of running a business in London is consistently underestimated by teams making their first hiring or office decisions. Salary is only part of it. Once you add employer National Insurance, pension contributions, office rent, service charges, business rates, software, insurance, and the administrative layer that holds a team together, the true figure is typically 30 – 50% higher than founders expect. This guide gives you real numbers for 2026 – not ranges wide enough to be useless, but benchmarks tight enough to build a budget from.

Whether you are a 5-person team weighing your first office or a 15-person team deciding whether to renew your lease, understanding the full cost of running a business in London is the starting point for every sensible financial decision.

What the cost of running a business in London actually includes

Most cost estimates focus on two lines: rent and salaries. The real cost of running a business in London covers at least eight categories. Missing any one of them produces a budget that fails within six months.

• Gross salaries
• Employer National Insurance and pension contributions
• Office rent, service charges, and business rates
• Software, subscriptions, and IT infrastructure
• Insurance (public liability, professional indemnity, employer liability)
• Legal, accounting, and compliance costs
• Marketing and business development
• Equipment, training, and staff development

Each category is broken down below with 2026 figures.

Salaries and the true employer cost

The single biggest line item in the cost of running a business in London is staff – but the figure you pay is not the figure you advertise. Every employee costs significantly more than their gross salary once statutory obligations are included.

Employer National Insurance: the 2026 change

From April 2025, employer National Insurance rose from 13.8% to 15%. The secondary threshold – the point at which you start paying – dropped from £9,100 to £5,000 per year. This means you now pay 15% on every pound above £5,000, with no upper earnings limit. The change affects every employer in London and adds materially to the cost of running a business in London for any team with more than two or three staff.

For a £60,000 salary, employer NI alone is £8,250 per year (15% of £60,000 – £5,000). Add 3% statutory pension (£1,800) and you are already £10,050 above gross salary before equipment, benefits, or sick pay.

Full employer cost breakdown: £30,000 salary

Item	Cost	Notes
Gross salary	£30,000	What you advertise
Employer National Insurance (15%)	£3,750	On salary above £5,000 threshold; new rate from April 2025
Workplace pension (3% minimum)	£713	Statutory requirement under auto-enrolment
Basic employer cost	£34,463	1.15x gross salary before extras
Statutory sick pay buffer	£500 – £1,000	Budget for absences; £116.75/week statutory rate (2026)
Holiday pay buffer	£500 – £1,000	28 days minimum statutory entitlement
Equipment (laptop, monitor, chair)	£500 – £1,500	Amortised over 3-4 years
Total all-in cost	£36,000 – £38,000	Realistic budget figure

The multiplier by seniority

Salary band	All-in multiplier	Approximate all-in cost
Entry level (£25,000 – £35,000)	1.25 – 1.35x	£31,000 – £47,000
Mid level (£40,000 – £60,000)	1.30 – 1.40x	£52,000 – £84,000
Senior (£70,000+)	1.35 – 1.50x	£95,000+

A £50,000 engineer costs roughly £65,000 – £70,000 per year once everything is included. A senior hire at £80,000 is closer to £110,000. These are not edge cases – they are the norm for any team running properly in London.

Office rent in London: the location multiplier

Office rent is the second-largest component of the cost of running a business in London, and the one with the widest variance. The same 2,000 sq ft can cost £80,000 per year in Stratford or £400,000 per year in Mayfair. The headline rent figure is also never the final figure: service charges and business rates add 25 – 45% on top.

Grade B office space by area, 2026

Area	Rent per sq ft/year	2,000 sq ft/year (rent only)	All-in (+ service charges + rates)
Hackney / Stratford	£40 – £55	£80,000 – £110,000	£100,000 – £145,000
Waterloo / Southwark	£55 – £70	£110,000 – £140,000	£140,000 – £185,000
Paddington / Farringdon	£60 – £80	£120,000 – £160,000	£155,000 – £210,000
King’s Cross	£60 – £75	£120,000 – £150,000	£155,000 – £200,000
Shoreditch / Clerkenwell	£70 – £85	£140,000 – £170,000	£180,000 – £225,000
Holborn / Fleet Street	£65 – £85	£130,000 – £170,000	£170,000 – £225,000
City of London	£80 – £120	£160,000 – £240,000	£205,000 – £315,000
Mayfair / West End	£130 – £200	£260,000 – £400,000	£335,000 – £525,000

Sources: Savills London Office Market Report 2025; Knight Frank London Offices 2025 outlook. Service charges (£12 – £30/sq ft/year) cover utilities, cleaning, maintenance, and building security. Business rates (£15 – £40/sq ft/year) are levied by the local authority and vary by area and rateable value.

A worked example: 2,000 sq ft in Farringdon at £70/sq ft = £140,000 rent + £25,000 service charges + £20,000 rates = £185,000 total per year. Budget accordingly.

Serviced office as an alternative

Serviced offices bundle rent, rates, utilities, reception, cleaning, and basic meeting rooms into a single monthly fee. For growing teams uncertain about headcount 18 months from now, the flexibility has real value – no break clause negotiation, no dilapidations liability, no fit-out cost.

Location tier	All-in per desk per calendar month	10 desks/year
Zone 2 (Stratford, Woolwich, Acton)	£350 – £500	£42,000 – £60,000
Zone 1 outer (Farringdon, Southwark)	£500 – £700	£60,000 – £84,000
Zone 1 central (City, King’s Cross)	£700 – £950	£84,000 – £114,000

Serviced office costs more per sq ft than a traditional lease. The trade-off is predictability and exit flexibility. For the cost of running a business in London at the 5 – 10 person stage, a serviced office often makes sense until the team stabilises above 15 people and a three-year lease becomes the cheaper option per desk.

For a deeper look at how the two models compare over time, see serviced office vs coworking space: which makes sense for a team of 5-20?

Other overheads: what gets missed in every budget

Beyond salaries and office rent, the cost of running a business in London includes a layer of operational costs that are easy to underestimate individually but significant in aggregate.

Recurring overheads per person per calendar month

Item	Monthly per person	Annual (10 people)
Software and subscriptions (Slack, Google Workspace, project tools)	£20 – £40	£2,400 – £4,800
Marketing (digital, events, tools)	£50 – £200	£6,000 – £24,000
Insurance (public liability, professional indemnity, employer liability)	£30 – £100	£3,600 – £12,000
Equipment refresh (laptop every 3 years, chair every 5)	£30 – £50	£3,600 – £6,000
Training and professional development	£20 – £50	£2,400 – £6,000
Legal and accounting (shared across team)	£10 – £20	£1,200 – £2,400
Total per person	£160 – £460	£19,200 – £55,200

One-time setup costs (budget upfront)

• Office fit-out (furniture, desks, meeting room setup): £15,000 – £30,000 for a 10-person office
• IT infrastructure and security setup: £3,000 – £10,000
• Initial recruitment costs: £3,000 – £5,000 per person hired (job boards, agency fees, or referral incentives)
• Legal and company formation: £500 – £2,000

Real example: cost of running a business in London for a 5-person team

This example uses a Farringdon Grade B office (1,500 sq ft) and a mixed-seniority team. All figures are annual.

Staff costs

Role	Gross salary	All-in employer cost
Founder / director	£50,000	£65,000
Mid-level (x2)	£45,000 each	£55,000 each = £110,000
Junior (x2)	£28,000 each	£33,000 each = £66,000
Staff total		£241,000

Office costs (Farringdon, 1,500 sq ft)

Item	Annual cost
Rent (£75/sq ft)	£112,500
Service charges	£18,750
Business rates	£15,000
Office total	£146,250

Overheads

Item	Annual cost
Software and subscriptions	£3,000
Insurance, legal, accounting	£6,000
Marketing and outreach	£12,000
Equipment and furniture refresh	£4,000
Contingency (10%)	£41,225
Overheads total	£66,225

Grand total: approximately £453,000 – £475,000 per year. That is £91,000 – £95,000 per person per year – a figure that surprises most founders until they see the breakdown. Add one-time fit-out (£15,000 – £25,000) in year one and you are closer to £500,000 all-in for a five-person team’s first full year.

Real example: cost of running a business in London for a 10-person team

This example uses a King’s Cross Grade B office (2,500 sq ft). The cost of running a business in London scales non-linearly at this team size – fixed costs (office infrastructure, accounting, legal) are spread across more people, bringing per-person costs down slightly.

Staff costs

Role	Gross salary	All-in employer cost
Founder / director	£70,000	£95,000
Senior (x2)	£60,000 each	£80,000 each = £160,000
Mid-level (x3)	£45,000 each	£55,000 each = £165,000
Junior (x4)	£28,000 each	£33,000 each = £132,000
Staff total		£552,000

Office costs (King’s Cross, 2,500 sq ft)

Item	Annual cost
Rent (£70/sq ft)	£175,000
Service charges	£35,000
Business rates	£28,000
Office total	£238,000

Overheads

Item	Annual cost
Software and subscriptions	£6,000
Insurance, legal, accounting	£9,000
Marketing	£30,000
Equipment and furniture	£8,000
Training and development	£8,000
Contingency (10%)	£79,900
Overheads total	£140,900

Grand total: approximately £930,000 – £960,000 per year. A realistic 10-person London team needs £950,000 – £1,100,000 in annual budget, depending on area and seniority mix. Per-person cost drops to £93,000 – £96,000, reflecting the spread of fixed overhead costs across a larger team.

How to reduce the cost of running a business in London without cutting performance

The cost of running a business in London is not fixed. Four levers reduce it materially without compromising the team’s ability to operate.

1. Location choice

Moving from Farringdon to Stratford saves £70,000 – £100,000 per year on rent for a 10-person team. That is one additional hire or a meaningful improvement in runway. The trade-off is commute time for staff and slightly less client-facing prestige. For teams whose clients visit rarely, this trade-off is usually worth making.

2. Flexible working patterns

Full-time in-office working requires roughly 250 sq ft per person. A 60/40 hybrid model (three days in, two remote) reduces the requirement to 150 sq ft per person. For a 10-person team, that is 2,500 sq ft vs 1,500 sq ft – a difference of £80,000 – £120,000 per year in rent, rates, and service charges. The calculation only holds if the team actually adopts the hybrid pattern rather than all arriving on the same days.

3. Serviced office vs traditional lease

For teams below 15 people, a serviced office is frequently the right call financially. There is no fit-out cost, no break clause penalty, and no dilapidations liability at exit. The per-desk cost is higher on a like-for-like basis, but the absence of capital commitment and the flexibility to scale desks up or down within the same agreement changes the economics for fast-growing teams. The break-even point vs a traditional lease is typically 2.5 – 3 years – if you expect to outgrow the space before then, serviced wins.

4. Mixed-seniority hiring

An all-senior team is expensive. A mixed model – two senior hires paired with two junior hires mentored by each – delivers comparable output for materially less cost. Junior London salaries (£25,000 – £35,000) all-in cost £31,000 – £47,000. A team of four at the same output level but with mixed seniority can cost £60,000 – £80,000 less per year than four seniors.

Moving offices: the cost of growth

Most 5 – 10 person teams outgrow their first space in 18 – 24 months. Moving is not just a new rent bill. The cost of running a business in London through a move includes:

• Break fees and notice periods from the existing lease
• Dilapidations (returning the space to its original condition): £5,000 – £20,000 for a small office
• New fit-out in the replacement space: £15,000 – £35,000
• IT reconfiguration: £2,000 – £8,000
• Moving day lost productivity: typically one to two days
• Temporary morale dip if the new location is less convenient for some staff

Budget £8,000 – £25,000 for a move at the 5 – 10 person scale, excluding any lease break penalty. This is one reason why growing teams evaluate private offices in London carefully before committing to a lease – a premature commitment costs significantly more to exit than it saves in monthly rent. See private office space in London: what growing teams need to know before they sign anything for the full lease evaluation framework.

The practical budgeting checklist

Before committing to a hire or an office, build your budget from this list. Each item is non-negotiable in the cost of running a business in London:

• Staff cost: gross salary x 1.25 – 1.35 for on-costs (NI, pension, equipment, sick pay)
• Office rent: get three actual quotes, then add 30% for service charges and rates
• Software and tools: £20 – £50 per person per calendar month
• Insurance (employer liability is a legal requirement; professional indemnity depends on sector): £3,000 – £10,000 per year for a 10-person team
• Marketing: 5 – 20% of revenue, or £1,000 – £5,000 per calendar month if bootstrapped
• Legal and accounting: £500 – £2,000 per calendar month depending on complexity
• Contingency: 10 – 15% of total budget for unexpected costs and delayed revenue
• Runway: six months’ operating expenses in accessible cash if self-funded

Total annual cost = staff + office + overheads + contingency. Run this calculation before signing anything.

Office options for London teams watching costs in 2026

The office market in London has changed since 2023. More landlords are offering shorter initial terms, and serviced office operators have expanded into neighbourhoods that were previously coworking-only (Stratford, Woolwich, Bermondsey). For teams at the 5 – 15 person stage, there are more options at each price point than there were two years ago.

You can compare coworking and serviced office options across London – including per-desk pricing by area – on myhqspaces.com’s London workspace listings. Filtering by area and desk count gives a realistic picture of what your team’s space will actually cost per calendar month, which is the figure that belongs in your budget rather than the headline sq ft rate.

For a breakdown of how much office space costs per desk across London’s main areas, the cost of office space in London: a real per-desk breakdown for 2026 covers the numbers in detail.

Frequently asked questions