A software development company in London will usually cost you two to four times what a strong offshore team costs for the same scope, and about twice a nearshore team in Poland or Romania. The price gap is real. What UK buyers underestimate is everything that is not price: which country's courts hear a dispute, whether personal data can lawfully be accessed from abroad, whether the spend qualifies for R&D tax relief, and how many working hours you share with the team.
This is a comparison for UK founders, SMEs and product owners choosing where their software gets built. It compares London agencies, nearshore teams in the EU and offshore teams in South Asia on cost, overlap, law and accountability, then sets out the hybrid many UK buyers now pick: a UK contract with offshore engineering. It does not rank named agencies, and it does not repeat our country-by-country rate tables, which are in offshore software development rates by country.
What is the difference between onshore, nearshore and offshore development?
Onshore development means a team in your own country, for UK buyers a London or regional UK agency. Nearshore means a nearby country with a small time difference, such as Poland or Portugal. Offshore means a distant, lower-cost location such as Pakistan or India. The contracting company can sit in a different country from the engineers.
That last sentence matters most. "Offshore" describes where the work happens. It does not tell you which legal entity you sign with, who is liable, or where your data goes. Those are separate questions and you should ask them separately.
Cost compared: London, nearshore and offshore in 2026
Agency rates below are hourly, for senior engineers, taken from our published 2026 rate guide linked above. The London in-house figure uses live salary data.
| Option | Typical senior cost | What the price includes |
|---|---|---|
| London in-house hire | £95,000 median salary (ITJobsWatch, 6 months to 17 Sep 2026), about £108,500 with employer National Insurance | One person. Add pension, recruitment fee, equipment, management and hiring time |
| London or UK agency | $100 to $150 an hour; £600 to £1,200 per person-day blended for a mixed team | Delivery, QA, project management, UK contract |
| Nearshore agency (Poland, Czechia) | $60 to $90 an hour | Delivery team, EU contract in most cases |
| Nearshore agency (Romania, Bulgaria) | $48 to $72 an hour | Delivery team, EU contract in most cases |
| Offshore agency (Pakistan, India) | $30 to $55 an hour | Delivery team, contract often local unless the firm has a UK entity |
The employer National Insurance figure is 15% on salary above the £5,000 secondary threshold (GOV.UK rates and thresholds 2026 to 2027). On a £95,000 salary that is £13,500 before a single pension contribution or recruiter invoice.
Rate is still the wrong unit for the final decision. A cheaper team that needs twice the hours or leaves you with a codebase nobody else can maintain is not cheaper. Compare cost per shipped feature and the landed cost of your own management time, which we worked through in the hidden cost of cheap software development.
Time-zone overlap with the UK
Overlap decides how quickly questions get answered. Below about four shared hours, each unanswered question costs a day.
| Team location | Difference from UK | Shared hours in a standard 9 to 5.30 day |
|---|---|---|
| London or regional UK | None | Full day |
| Portugal | None | Full day |
| Poland, Czechia | +1 hour | About 7 hours |
| Romania, Bulgaria | +2 hours | About 6 hours |
| Pakistan | +4 hours in summer, +5 in winter | About 4 to 5 hours, more if the team starts later |
| India | +4.5 hours in summer, +5.5 in winter | About 3.5 to 4.5 hours |
Pakistan does not change its clocks, so the gap is one hour smaller during British Summer Time. Offshore teams that serve UK clients commonly shift their working day later so that the UK morning and early afternoon are fully covered. Ask any offshore supplier for their actual core hours in UK time, in writing.
Contract and accountability: who do you sue?
This is where most comparisons stop and where UK buyers get hurt. If you sign directly with a company abroad, a dispute over non-delivery, IP or data misuse is a cross-border dispute. Winning an English judgment is one step; enforcing it where the supplier's assets are is another.
| Question | London agency | Nearshore or offshore, foreign contract | Offshore team, UK contracting company |
|---|---|---|---|
| Who you sign with | UK company | Foreign company | UK company |
| Where a dispute is heard | Usually the UK | Depends on the contract; enforcement abroad | Can be the UK; check the governing law clause |
| Can you check the company? | Companies House record | Foreign registry, often harder | Companies House record |
| Who is liable for subcontractors | The agency | The foreign company | The UK company, if the contract says so |
Whoever you choose, the contract terms matter more than the address. IP assignment on payment, source code access from day one, a clear acceptance process and an exit plan are non-negotiable. Our software development contract checklist lists the 14 clauses to check.
UK rules that follow the work abroad
UK GDPR international transfers
If engineers outside the UK can access personal data you hold, that counts as a transfer, even if no file is ever sent. The ICO's own example is a UK business that lets a supplier in India access customer data on its systems: that is a restricted transfer (ICO brief guide to international transfers). EEA countries such as Poland, Romania and Portugal are covered by UK adequacy regulations. For countries without adequacy, including Pakistan and India, you need a safeguard such as the International Data Transfer Agreement plus a risk assessment. The cleaner answer is often to keep real personal data out of development entirely.
R&D tax relief
Under the merged R&D scheme, payments to contractors for R&D carried out overseas are generally excluded from qualifying expenditure. HMRC is explicit that lower cost and the availability of workers are not valid reasons for doing the work abroad (HMRC CIRD150500). If R&D relief is a big part of your funding plan, model it before choosing an offshore or nearshore team, including an EU one, because the restriction is about work outside the UK, not only outside Europe.
IR35
Buying a defined piece of work from an agency that employs its own staff is generally outside the off-payroll working rules, which apply to individuals working through their own intermediaries. HMRC warns against relabelling labour supply as "contracted out services", so the substance of the arrangement matters (HMRC off-payroll working for clients).
When each option is the right call
| Choose | When |
|---|---|
| London agency | You need people in the room every week, the buyer is public sector or heavily regulated and insists on UK-based delivery, or the budget comfortably covers £600+ per person-day |
| Nearshore EU team | You want near-full overlap at roughly half London rates and your data should stay inside the EEA |
| Offshore team, foreign contract | Cost is the deciding factor, the scope is well specified, and you are comfortable managing cross-border risk |
| Offshore team, UK contracting company | You want a UK contract, a UK point of contact and offshore pricing, and you will verify how the UK entity controls delivery and data |
| In-house hire | The product is your core business, you have a technical leader to manage engineers, and you can fund salaries for 18 months or more |
Most early-stage UK companies do not need to choose permanently. A common path is an external team for the first release, then a small in-house team that takes over. We compared those paths in agency vs in-house development team.
How to check a UK-contracted offshore supplier
- Look up the UK company on Companies House. Check incorporation date, directors and registered office, and that it matches the name on the contract.
- Ask who employs the engineers. A named affiliate that employs staff is different from a chain of freelancers.
- Get the subcontracting position in writing. The contract should name any affiliate or subcontractor and make the UK company liable for them.
- Map the data flows. Which environments can offshore engineers reach, is any personal data involved, and what transfer safeguard covers it?
- Confirm IP assignment and code access. Code in your repository from week one, IP assigned to you on payment.
- Agree core hours in UK time. Put the overlap window and response times in the statement of work.
- Meet a named UK contact. Someone accountable in your time zone who you can call and escalate to.
Frequently asked questions
How much does a software development company in London charge?
London and wider UK agencies typically charge £600 to £1,200 per person-day blended for a mixed delivery team, which is roughly $100 to $150 an hour for senior engineers. Specialist London agencies can charge more. Contractors are cheaper per day: the median London senior software engineer contract rate was £600 in the six months to 17 September 2026 (ITJobsWatch).
Is nearshore or offshore better for a UK company?
Nearshore EU teams give more overlap and simpler data protection because the EEA is covered by UK adequacy regulations. Offshore teams in Pakistan or India cost less and still give four to five shared hours if the team shifts its day. Choose nearshore when real-time collaboration or data location is the constraint, and offshore when cost matters most and scope is well defined.
Does using an offshore developer affect R&D tax credits?
Usually yes. Under the merged scheme for accounting periods beginning on or after 1 April 2024, payments for R&D carried out overseas by contractors and externally provided workers are generally excluded, and cost or staff shortages do not count as reasons to go abroad. The restriction covers any location outside the UK, including the EU. Check your position with an R&D tax adviser before you commit.
Can an offshore company have a UK contract?
Yes. Some firms register a UK company that signs the contract, invoices and holds liability, while engineers work from another country. Check the UK company on Companies House, confirm it is liable for its affiliates, and make sure data transfer safeguards cover any access to personal data from outside the UK.
What overlap do I get with a team in Pakistan?
Pakistan is four hours ahead of the UK during British Summer Time and five hours ahead in winter. A team working a standard local day shares about four to five hours with a UK 9 to 5.30 day. Teams that start later can cover most of the UK working day.
Key takeaways
- London agencies cost roughly two to four times a strong offshore team and about twice a nearshore EU team for the same scope.
- A London senior hire costs about £108,500 with employer National Insurance on the £95,000 median salary, before pension and recruitment.
- Where the engineers sit and who you sign with are separate questions. The contract decides accountability.
- Offshore access to personal data is a restricted transfer under UK GDPR, and overseas R&D is generally excluded from the merged R&D scheme.
- A UK-contracted offshore team can combine a UK contract with offshore pricing, if you verify the entity, the data flows and the IP terms.
Compare us against a London agency
If you are weighing a London quote against offshore options, send us the same brief. You will get an estimate in pounds from our UK company, with engineering by our senior team in Islamabad, a named UK contact you can call on +44 7863 374791, and a written note on how data, IP and subcontracting are handled. If a London agency is the better fit for your project, we will tell you why. See how we work on SaaS development for London companies.
Sources
- ITJobsWatch: Senior software engineer salaries, London (6 months to 17 September 2026)
- ITJobsWatch: Senior software engineer contract rates, London
- GOV.UK: Rates and thresholds for employers 2026 to 2027
- ICO: A brief guide to international transfers (January 2026)
- HMRC: CIRD150500, overseas restrictions overview
- HMRC: Off-payroll working for clients
- Red Eagle Tech: UK agency blended day rates (2026)
- Companies House: Find and update company information