exitagreementRestrictive covenants and non-compete clauses in the UK
A restrictive covenant is a term in your contract that limits what you can do after you leave. The one most people mean is the non-compete. There is still no statute in force that limits non-competes in the UK, despite an announced 3-month cap in 2023 and a fresh pledge to legislate in October 2026. The rule that governs them today is older and stricter than most people assume.
What is a restrictive covenant?
GOV.UK describes them in two sentences:
There may be terms in your contract that says you cannot work for a competitor or have contact with customers for a period of time after you leave the company. These are called ‘restrictive covenants’. Your company could take you to court if you breach the restrictive covenants in your contract.Read it on GOV.UK
That covers several different kinds of restriction. They are usually drafted as separate clauses, and they are judged separately, so it matters which one you are looking at.
| Type | What it stops | Note |
|---|---|---|
| Non-compete | You may not work for, or set up, a competing business for a set period after you leave | The one the government is proposing to restrict |
| Non-solicitation | You may not approach your former employer’s clients or customers to win their business | The working paper's reform options are aimed at non-competes, not this |
| Non-dealing | You may not do business with those clients even if they approach you | The working paper warns it could be used to the same effect as a non-compete |
| Non-poaching | You may not recruit former colleagues to join you | Often paired with non-solicitation |
Labels vary between contracts; read the wording, not the heading. Notes refer to the government’s 2025 working paper on non-compete clauses.
Confidentiality obligations are different again. They protect information rather than restricting who you work for.
Key points
- No statute limits non-competes yet. The 3-month cap announced in 2023 was never legislated.
- The starting point is that a non-compete is unenforceable unless the employer can show it is reasonable — in the government’s own words.
- The government said on 9 October 2026 that it will legislate, after a 2025 working paper that put a ban, a salary threshold and length limits on the table.
- A payment for agreeing to a covenant is taxed as earnings under ITEPA 2003 s.225.
- A settlement agreement can rewrite your covenants, so read that clause closely.
Are non-compete clauses enforceable in the UK?
The clearest current statement comes from the government’s own working paper, published in November 2025:
The starting point under current law is that a non-compete clause, as with any clause in restraint of trade, is unenforceable, unless the employer can demonstrate it is reasonable, which is assessed by a court if a challenge is brought as to the clause’s enforceability. However, there are few constraints on employers including non-compete clauses in employment contracts, whether enforceable or not.Read the working paper on GOV.UK
Two things in that paragraph matter to anyone with a non-compete in their contract. First, the burden is on the employer: the clause is unenforceable unless it shows the clause is reasonable. Second, the paper is candid that this rule does little to stop employers putting such clauses in contracts in the first place. A clause can sit in your contract, and shape what you think you can do, without being one a court would enforce.
What counts as reasonable is decided case by case, by reference to the employer’s interests, the length, the area and the kind of work restricted. This page does not reproduce the case law; that is the job of the adviser who reads your contract. What it can say from the primary sources is that a longer restriction is harder to justify: the working paper notes that clauses over twelve months are only likely to be found reasonable in exceptional circumstances under existing law.
How common they are
The working paper cites previous analysis of around 5 million employees in Great Britain working under a contract that contains a non-compete clause with a typical duration of around 6 months. It also cites polling that 71% of non-compete clauses are longer than 3 months, and that some last up to 24 months. In other words, a typical clause is already twice the length of the cap that was announced and never enacted.
Is there a 3-month limit on non-compete clauses?
No, not in law. The idea has been announced, dropped and revived, and it is easy to read the announcements as if they were the law. The sequence, from the government’s own documents:
| When | What | Source |
|---|---|---|
| December 2020 | Consultation on reforming post-termination non-compete clauses opens | GOV.UK consultation page |
| May 2023 | The government says it will introduce a statutory limit of 3 months “when parliamentary time allows” | Consultation outcome |
| 2023 to 2025 | No legislation follows — “no action was taken” | Working paper, para 29 |
| 26 November 2025 | A new government publishes a working paper with five reform options | DBT working paper |
| 18 February 2026 | Responses to the working paper close | DBT working paper |
| 9 October 2026 | The Prime Minister says the government will legislate | PM speech, Innovation Nation Summit |
All sources on GOV.UK, read 20 October 2026. We found no bill or statutory instrument on non-compete clauses at that date.
The government will introduce a statutory limit on the length of non-compete clauses of 3 months and will bring forward legislation to introduce the statutory limit when parliamentary time allows.Read it on GOV.UK
On 10 May 2023, the previous government responded to the consultation and announced that it would introduce a statutory limit on the length of non-compete clauses of 3 months. However, no action was taken.Read the working paper on GOV.UK
The 2025 options
The working paper did not commit to the 3-month cap. It set out options instead:
- A statutory limit on length (3 months, or another length)
- Different limits by company size (for example 3 months above 250 employees, 6 months at or below)
- A ban on non-compete clauses in employment contracts
- A ban below a salary threshold
- A ban below a salary threshold combined with a 3-month limit above it
It also explained a worry about any fixed limit: that it could be read as an industry standard, so that employers and workers assumed any clause up to the limit was enforceable. The paper says the government would need to make clear that the common law test still applies to clauses shorter than the limit.
The October 2026 pledge
So, I can confirm today we will legislate to make sure that non-compete clauses will no longer be a barrier to hiring for our most promising startups and scaling firms. … And we will ensure, by the way, that workers in the foundational economy, the everyday economy, are not prevented from moving jobs too. We will also bring forward options to address the wider use of restrictive practices.Read it on GOV.UK
That is a commitment, not a law. It points towards protecting staff at start-ups and scale-ups and workers in everyday jobs, but it does not say which of the working paper’s options will be used, or when a bill will be introduced. Until legislation is passed and brought into force, the common law test above is the only rule, and contracts signed today are judged by it.
Leaving with a non-compete in your contract?
Send your postcode and when your notice ends, and say that there is a covenant. We pass an enquiry to a firm only with your agreement, and only to a firm entitled to receive it.
Restrictive covenants in a settlement agreement
Many settlement agreements deal with restrictive covenants. An agreement may restate the ones in your contract and say they continue, add new ones, or shorten or drop one as part of the deal. Because the agreement is a fresh contract, whatever it says about covenants is what you will be held to.
Three questions to ask. Does the agreement add anything that was not in your contract? Does it restate an old covenant in wider terms? And is any part of the payment attributed to the covenants? The last one has a tax consequence.
How a payment for a covenant is taxed
(1) This section applies where— (a) an individual gives a restrictive undertaking in connection with the individual’s current, future or past employment, and (b) a payment is made in respect of— (i) the giving of the undertaking, or (ii) the total or partial fulfilment of the undertaking. (2) It does not matter to whom the payment is made. (3) The payment is to be treated as earnings from the employment for the tax year in which it is made.Read the section on legislation.gov.uk
So a payment made for giving, or keeping, a restrictive undertaking is earnings in full. It does not share in the £30,000 threshold that applies to compensation for losing your job. If an agreement splits the payment and puts part of it against the covenants, ask why and ask what the tax will be on that part. How a settlement is taxed · the clauses one by one.
Garden leave and covenants together
Garden leave runs during your notice; covenants usually start when the employment ends. The working paper itself mentions gardening leave, where the worker is paid, as one way employers might respond to tighter limits on non-competes. If your contract has both, check whether time on garden leave is deducted from the covenant. If it is not, six months of each keeps you out of your field for a year. Garden leave.
Common questions
Are non-compete clauses enforceable in the UK?
Only if the employer can show the clause is reasonable. The government's 2025 working paper puts it this way: a non-compete clause, as with any clause in restraint of trade, is unenforceable unless the employer can demonstrate it is reasonable, which a court assesses if the clause is challenged.
Is there a 3-month limit on non-compete clauses?
Not in law. In May 2023 the government said it would introduce a 3-month statutory limit when parliamentary time allowed, but the 2025 working paper records that no action was taken. On 9 October 2026 the Prime Minister said the government will legislate; until a law is passed and in force, there is no statutory limit.
What is a restrictive covenant in an employment contract?
A term that limits what you can do after you leave, such as working for a competitor or contacting customers. GOV.UK says your company could take you to court if you breach the restrictive covenants in your contract.
How long do non-compete clauses usually last?
The government's working paper cites previous analysis of around 5 million employees in Great Britain with a non-compete clause, with a typical duration of around 6 months. It also cites polling that 71% of non-compete clauses are longer than 3 months.
Is a payment for agreeing to a restrictive covenant taxable?
Yes. Section 225 of the Income Tax (Earnings and Pensions) Act 2003 treats a payment for giving a restrictive undertaking as earnings, so it does not benefit from the £30,000 threshold that applies to compensation for losing a job.
Can a settlement agreement change my restrictive covenants?
It can restate them, shorten them, remove them or add new ones. Read that clause as carefully as the payment clause, and ask your adviser how any payment linked to it will be taxed.
Does garden leave count towards a non-compete?
Only if your contract says so. Some contracts deduct time spent on garden leave from the length of the non-compete; others do not, and the two periods can run one after the other.
Sources cited on this page
- GOV.UK — Handing in your notice: restrictive covenants
- GOV.UK — Measures to reform post-termination non-compete clauses (consultation and outcome)
- Department for Business and Trade — Working paper on options for reform of non-compete clauses
- GOV.UK — PM speech at the Innovation Nation Summit, 9 October 2026
- Income Tax (Earnings and Pensions) Act 2003, s.225 — payments for restrictive undertakings
Every figure above was read from the source it is attributed to on 19 September 2026. How we check this.
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