Most guides to nearshore software development are written for an American buyer and then lightly relabelled for the UK. The cost comparisons use US salaries, the legal section talks about USMCA, and the time zone analysis treats a four-hour overlap as a selling point. None of that is much use if you are sitting in Manchester or London trying to work out whether moving engineering work to Poland or Portugal is worth the trouble.
This guide is written from the other chair. It covers what a UK developer actually costs in 2026 after the National Insurance changes, what a nearshore engineer costs against that baseline, whether IR35 applies to an outsourcing arrangement, and what Brexit did and did not change about moving personal data to an EU supplier. The short version on that last point: considerably less than most vendor websites still imply.
What A UK Developer Actually Costs In 2026
Two numbers set the baseline. The median contractor day rate for a software developer in the UK is £525, measured over the six months to 22 September 2026, up 5% year on year, and that figure is the same inside and outside London. The median permanent salary for the same role is £65,000 in the six months to 21 September 2026, up 8.33% year on year.
The permanent number is the one that moved most, and not only because of salary inflation. From April 2025 employer National Insurance rose to 15% and the secondary threshold, the point at which employers start paying it, dropped from £9,100 to £5,000. The Employment Allowance rose from £5,000 to £10,500 and the previous eligibility cap was removed, which softens the blow for smaller employers, but for anyone past that allowance the cost of employing people went up.
Run the arithmetic on a median developer. A £65,000 salary now attracts roughly £9,000 in employer National Insurance, taking the cost to about £74,000 before pension contributions, equipment, recruitment fees, or office space. Spread across roughly 220 working days, that is about £336 a day on salary and NI alone, against £525 a day for a contractor. Add minimum auto-enrolment pension and the real figure is higher again.
One qualifier on that illustration. The Employment Allowance is claimed per employer per year, not per employee, so a company employing three or four developers may find much of that National Insurance absorbed by the £10,500 allowance. It is the marginal hire at a larger employer, already past the allowance, where the full £9,000 bites.
What Nearshoring Actually Costs
Here is where most rate guides mislead, including several that rank well for this topic. They quote a single number per country without saying whether it is what the developer earns or what an agency bills you. Those are very different figures, often by a factor of two, and the gap is the single most important thing to understand before you read any nearshore pricing table.
The table below is developer contract rates at senior level, drawn from Lemon.io’s published vetted-contract data so the methodology is consistent across countries rather than stitched together from different sources. Converted to pounds at the mid-market rate on 22 September 2026 and expressed as an eight-hour day, so it sits next to the £525 UK figure on a like-for-like basis. Worth noting the sample skews senior and remote-first, and these are contractor rates, which run above the equivalent permanent salary in each market. That is the right comparison here, because £525 is also a contractor rate.
Destination
Senior developer, per day
Saving vs £525 UK contractor
In the EEA?
Poland
£150 to £360 (median around £250)
Roughly 30% to 70%
Yes
Romania
£210 to £320 (median around £270)
Roughly 40% to 60%
Yes
Ukraine
£204 to £263
Roughly 50% to 60%
No
Spain
£210 to £330
Roughly 35% to 60%
Yes
Portugal
£240 to £270
Roughly 50%
Yes
Two things to take from that table. The first is that the saving at developer level is real but not the 80% that offshore marketing sometimes implies. Against a UK contractor you are looking at somewhere between a third and two thirds, and against a permanent hire at roughly £336 a day on salary and National Insurance the gap narrows considerably, to something closer to 20% to 45% depending on destination and seniority.
The second is that these are not the rates you will be quoted if you buy through an agency. A supplier that manages the team, handles QA, carries delivery risk and gives you a single contract will bill at a substantial multiple of the underlying developer cost, commonly somewhere between one and a half and two times. At the upper end of that range, a premium nearshore agency in Poland or Portugal can quote a day rate at or above the £525 you would pay a UK contractor.
That is not automatically a bad deal, because you are buying management, continuity, replacement cover and a contractual structure rather than a single pair of hands. But it does mean the saving you were promised can quietly disappear. Ask any prospective supplier what proportion of the day rate reaches the engineer. A serious partner will answer.
What Brexit Actually Changed, And What It Did Not
A lot of nearshoring content aimed at UK buyers still carries a vague implication that leaving the EU made European engineering partnerships legally awkward. For the specific question of buying development services from an EU supplier, that is largely wrong, and it is worth being precise about why.
Immigration is not a factor
Free movement ended, which matters enormously if you want to bring a Polish engineer to work in your London office. It is irrelevant if the engineer stays in Kraków and works for a Polish company that invoices you. Nobody crosses a border, so no visa, sponsorship licence or right-to-work check is engaged. This is the main practical reason UK firms that used to recruit EU nationals into UK roles now buy the capacity instead.
Data flows both ways without extra paperwork, for EEA destinations
This is the part that gets misreported most often. Under UK GDPR, sending personal data abroad is a restricted transfer that needs a legal basis. But every country in the European Economic Area is covered by UK adequacy regulations with full adequacy status, so a UK company can send personal data to a supplier in Poland, Romania, Portugal or Spain relying on adequacy alone. No International Data Transfer Agreement, no UK Addendum, no standard contractual clauses. You should still make reasonable and proportionate checks that the supplier will meet its obligations under local law, but there is no transfer instrument to negotiate.
In the other direction, the European Commission renewed its adequacy decisions for the UK on 19 December 2025, running to 27 December 2031 with a mid-point review after four years. So an EU supplier sending data back to you is equally unobstructed.
The exception in the table above is Ukraine, which is not in the EEA and does not hold UK adequacy. A Ukrainian engagement involving personal data does need a transfer mechanism, in practice the IDTA or the UK Addendum to the EU clauses, plus a transfer risk assessment. That is a solved problem and Ukrainian suppliers deal with it daily, but it is genuine additional work that an EEA destination does not require.
IR35 And Outsourcing: The Part Worth Getting Right
This is the question UK buyers actually worry about, and it is the one most nearshore vendors skate over.
The off-payroll working rules, still universally called IR35, bite when an individual provides their services through an intermediary such as their own limited company to a client who is effectively engaging them like an employee. They are not designed for, and do not apply to, a genuine contracted-out service. HMRC’s own position is that the rules do not apply where services have been fully contracted out to a third party and the workers do not personally provide their services to the client. Where that is genuinely the case, the supplier rather than you is treated as the client for these purposes.
First, check whether the rules apply to you at all
The off-payroll rules only place obligations on medium and large private-sector clients, and on public authorities. A small client is exempt, and responsibility for status stays with the contractor’s own intermediary. From 1 April 2025 the thresholds widened: a company is small if it meets two or more of turnover not exceeding £15m, balance sheet total not exceeding £7.5m, and no more than 50 employees on average, tested across two consecutive financial years. That change pulled a meaningful number of UK scale-ups back out of scope, so it is worth establishing where you sit before worrying about anything else in this section.
The catch, and it is a significant one, is that calling something a managed service does not make it one. Arrangements fail this test when they look like labour supply wearing a different label. The markers HMRC and specialist advisers look for include:
Looks like genuine outsourcing
Looks like disguised labour supply
Supplier delivers defined outputs or deliverables
Supplier provides named individuals to you
Supplier chooses, manages and substitutes its own people
You approve CVs and interview candidates
You are invoiced against milestones or scope
You are invoiced per head, per day
Supplier carries delivery risk and its own resources
Your managers direct the work day to day
Workers sit within the supplier’s structure
Workers are treated as part of your team
HMRC’s guidance is explicit that whether a service is fully contracted out turns on the commercial reality of the arrangement rather than what the contract says. A detailed statement of work on its own will not convert a staffing arrangement into a contracted-out service if the day-to-day reality points the other way.
What happens if you get it wrong
This is the part most vendor content leaves out, and it is the reason to take the question seriously rather than accept a supplier’s reassurance. If an arrangement you treated as contracted out is later found not to be, you do not simply lose an argument. You are treated as the client for that period retrospectively, which means you should have issued status determination statements you never issued, and HMRC’s guidance states in terms that the service recipient is liable for the tax, National Insurance contributions and Apprenticeship Levy that were not accounted for.
So the exemption is real, but it is conditional and it is assessed after the fact on how the work actually ran. The liability sits with you, not with the supplier who told you the structure was fine.
The practical consequence for a nearshoring decision is that the engagement model matters more than the destination. A fixed-scope build delivered by a supplier that manages its own engineers sits comfortably outside the rules. A “dedicated team” of named individuals whose CVs you approved, who attend your standups and take direction from your engineering manager, billed per person per day, is a much harder argument to run, whatever the contract says on the cover.
Worth saying plainly: this is tax law, the fact pattern is what decides it, and the above is general information rather than advice. If you are structuring anything substantial, have the arrangement reviewed before it starts rather than after HMRC asks.
VAT On Services Bought From Overseas
A smaller point, but one that surprises people. When a UK VAT-registered business buys services from an overseas supplier, the supplier does not charge VAT. Instead you account for it yourself under the reverse charge, declaring the VAT as both output tax and input tax on the same return. For a fully taxable business that nets off and costs nothing, though it still has to be recorded properly.
Two situations where it is not neutral. If your business has exempt activities, only part of that VAT may be recoverable and the rest becomes a real cost, which catches a lot of financial services and healthcare buyers. And if you are not VAT-registered, the value of reverse charge services counts towards the registration threshold, currently £90,000 on a rolling twelve-month basis, so a substantial overseas development contract can drag a small company into VAT registration purely on that basis.
Choosing A Destination From The UK
One thing simplifies the decision considerably compared with the same exercise done from the United States. From the UK, essentially the whole of nearshore Europe sits between zero and two hours ahead. Mainland Portugal keeps the same clock as the UK all year round. Poland and Spain run an hour ahead, Romania and Ukraine two. There is no version of this where you lose meaningful overlap, so time zone, which dominates American nearshoring advice, is close to a non-factor here. Decide on other grounds.
If you want the deepest talent pool
Poland, comfortably. It has the largest technology workforce in Central and Eastern Europe by a wide margin, the most mature supplier ecosystem, and the widest range of specialisms, which matters if you expect to scale past a handful of engineers or need an unusual stack.
If cost is the deciding factor
Poland has the lowest entry point, starting around £150 a day for a senior engineer at developer-rate level, with Ukraine and Romania next at roughly £200 to £210. Note how wide Poland’s range is: the same country supplies both the cheapest and among the most expensive engineers in this comparison, so the destination tells you much less than the specific supplier does.
If English fluency is critical
Poland, Portugal and Romania all sit in the top “very high” band of the 2025 EF English Proficiency Index, with Portugal 6th globally, Romania 11th and Poland 15th. Poland sits almost exactly on the band boundary and was a tier lower in the 2024 edition, so treat the three as broadly comparable rather than ranked. This is a genuine advantage of European nearshoring over most other regions, and one reason UK firms rarely report the communication friction that shows up in arrangements further afield.
If you want the simplest compliance position
Any EEA destination, because of the adequacy position described above. Ukraine is the one option here that adds a data transfer instrument to your setup, which is manageable but is genuine extra work and needs reviewing if you handle sensitive personal data.
If you are serving Iberian or Spanish-speaking markets
Spain or Portugal, for obvious reasons, and both also suit teams that want the option of same-day travel and heavy in-person collaboration early in an engagement.
Engagement Models, And Which Ones Create Problems
Model
What you get
IR35 exposure
Typical cost position
Outsourced delivery (fixed scope or managed service)
Supplier owns delivery, staffing and management
Lowest, if genuinely contracted out
Highest day rate, lowest overhead on you
Employer of Record
Worker employed compliantly abroad, you direct the work
Not an off-payroll issue, they are employed
Developer cost plus a per-head fee
Direct contractor
You contract an individual or their company
Highest, needs a status determination
Lowest headline cost, most admin and risk
The pattern most UK buyers land on is outsourced delivery for a defined project, and an Employer of Record where they want long-term people embedded in their own team without the status question. If you are considering the EOR route, our roundup of global Employer of Record and PEO providers covers the main vendors.
Frequently Asked Questions
Does IR35 apply if I outsource development to a company abroad?
Often not, but check two things first. The rules only apply to medium and large clients, so if you are small on the Companies Act test you are outside them anyway. If you are in scope, a genuinely contracted-out service falls outside the rules and the supplier is treated as the client. The risk is labour supply relabelled as managed service, judged on how the work actually runs rather than the contract wording. Get that wrong and you are treated as the client retrospectively and become liable for the unpaid tax, National Insurance and Apprenticeship Levy, so have anything substantial reviewed before it starts.
Do I need extra data protection paperwork to use an EU supplier?
No, for any EEA country. All EEA states hold full adequacy under UK adequacy regulations, so transfers can rely on adequacy with no IDTA, Addendum or standard contractual clauses required. You should still carry out proportionate due diligence on the supplier. Ukraine is the common nearshore destination that falls outside this and does need a transfer mechanism.
How much does nearshoring actually save a UK company?
At developer level, senior engineers in the main European nearshore markets run roughly £150 to £360 a day against a £525 UK contractor median, so between about a third and two thirds. Measured against a permanent UK hire at roughly £336 a day on salary and National Insurance, the gap is narrower. Buying through a managed-service agency reduces the saving further and at the premium end can eliminate it, so compare like with like.
What is the time zone difference?
Minimal. Mainland Portugal shares the UK clock all year round, Poland and Spain sit an hour ahead, and Romania and Ukraine two. Unlike US nearshoring, overlap is effectively a full working day everywhere, so it should not drive the decision.
Do I have to pay VAT on overseas development services?
You account for it under the reverse charge rather than being charged it by the supplier. For a fully taxable business it nets to zero. If you have exempt activities part of it may be irrecoverable, and if you are not VAT-registered the value counts towards the £90,000 registration threshold.
Is Ukraine still a realistic option?
For many UK buyers, yes. The sector has continued operating throughout the war with the large majority of contracts maintained, and rates reflect the residual risk. It carries two things the EEA options do not: a data transfer instrument, and genuine continuity questions that deserve direct answers from any supplier about team location, power, connectivity and mobilisation exposure.
The Bottom Line
For a UK company in 2026, the case for nearshoring rests on cost and access to skills rather than on any post-Brexit legal advantage, because for EEA destinations the legal position is close to frictionless. Senior engineers across Poland, Romania, Portugal and Spain cost roughly £150 to £360 a day against a £525 UK contractor, the whole region sits within two hours of London, and sending personal data to an EU supplier needs no transfer paperwork at all.
The two things that decide whether it works are unglamorous. Get the engagement model right, because that is what determines your IR35 position, not the country you pick, and because the liability for getting it wrong sits with you rather than your supplier. And interrogate the day rate, because the gap between what a supplier bills and what the engineer receives is where a promised saving most often goes missing.
