Most people who want to start a travel agency begin by choosing a name and a niche. The decision that actually determines whether the business is viable is one they usually reach months later: whether they will hold their own financial protection or trade under somebody else’s. That single choice sets your startups capital requirement anywhere between roughly £300 and £50,000, and it is very difficult to reverse once you have built a customer base around it.
Here is the uncomfortable truth that most guides to this sector avoid. Travel is one of the few consumer businesses where you take large sums of customer money months before you deliver anything, and UK law treats that fact with appropriate seriousness. The Package Travel and Linked Travel Arrangements Regulations 2018 require you to hold security against your own insolvency, and the Air Travel Organisers’ Licensing scheme enforces that requirement for anything flight-inclusive [1]. You cannot design your way around this. You can only decide who carries it and pay accordingly.
This guide covers the three genuine routes into the market and what each costs, how to work out which regulatory regime catches you, what a Small Business ATOL actually demands of a startups, the bonding and ABTA position for non-flight packages, the reforms coming into force on 6 April 2027 that change what counts as a package, and the commission arithmetic that separates a business from an expensive hobby. I have advised more than 2,000 businesses since founding SGI in 2014, and travel is a sector where founders consistently underestimate working capital needs rather than demand.
Why the demand is real, and the margins are thinner than they look
The market is not the problem. The Civil Aviation Authority reported UK aviation seeing its strongest start to a year on record in 2026, with passenger numbers at a record high [2]. Domestic overnight tourism alone accounted for £32.9 billion of spending in 2024 [3]. People are travelling, and after a decade of do-it-yourself online booking, a meaningful segment has decided that complex, expensive, or high-stakes trips are worth handing over to someone who knows what they are doing.
The difficulty is that a travel agency earns a percentage of someone else’s price, meaning your revenue is capped by supplier commission rates you do not control. Founders routinely build projections from turnover rather than commission, and the two are separated by an order of magnitude. A business writing £500,000 of holidays a year is not a £500,000 business. At a 10 per cent supplier commission, it is a £50,000 business, and if you are on a 60 per cent split with a host agency, it is a £30,000 business before you have paid for anything. Understanding that arithmetic before you commit is the difference between a plan and a hope.
The three routes into the market, and what each actually costs
There are three viable entry structures in the UK. They are not stages of the same journey. They are different businesses with different capital requirements, risk profiles, and ceilings, and choosing the wrong one for your circumstances is the most expensive mistake you can make at this stage.
Route one: host agency or homeworking
You trade under an established company’s licences and financial protection, using their booking systems and supplier relationships, and you split the commission with them. This is how most new UK travel businesses now start. Monthly platform fees across the homeworking market typically run between £50 and £200, covering the ATOL cover, booking technology and support [4]. Entry costs are low: some operators advertise start-up fees in the low hundreds.
The trade-off is the split. Travel Counsellors, one of the largest UK homeworking networks, states that franchisees keep 60 per cent of the commission on their sales [5]. Other operators advertise higher splits. A higher headline percentage with weaker supplier rates, thinner training or poorer systems can easily produce a lower absolute income, so compare the actual commission you would receive on a real booking rather than the number on the recruitment page.
Route two: franchise
You buy into a branded network with a defined territory, a proven operating model and marketing support, paying an initial fee and ongoing royalties. Fees in the UK home-based travel franchise market sit in the mid-four figures and upwards. The distinction from route one is less about cost than about what you are buying: a franchise sells you a system and a brand; a host agency sells you access and protection.
Route three: independent with your own licences
You hold your own ATOL, your own bonding and your own supplier relationships. You keep the full commission. You also carry the full regulatory burden, the bond, and the working capital. For a flight-inclusive startups this is a serious capital commitment, and the next section sets out why.
Most founders should start on Route One and move to Route Three only once trading history exists, because the CAA assesses a start-up on projections and an established business on accounts, and accounts are considerably easier to get a licence against.
What a Small Business ATOL actually requires
If you sell flight-inclusive packages in your own name, you need an ATOL. The entry-level licence is the Small Business ATOL, and its parameters are specific.
An SBA is restricted to 500 passengers and £1,000,000 of licensable revenue per year, for a minimum of three years, and requires a minimum £50,000 bond, a personal fitness and competence test, and satisfaction of the CAA’s SBA financial criteria [6]. The bond is the number that stops most start-ups. It is not a fee; it is security a bank or insurer must be willing to provide on your behalf, and providing it typically requires cash collateral or a personal guarantee.
The ATOL Protection Contribution is payable at £2.50 per licensable passenger booked, and Small Business ATOL holders must make an APC advance payment of £1,250 [7]. Process matters as much as money here. For a start-up, the CAA requires a certified opening balance sheet and financial projections; sole traders and partnerships must additionally provide a certified Statement of Personal Assets and Liabilities. One of the directors or partners must complete the ATOL Accountable Persons online course before the application is assessed, and a formal meeting with the CAA is normally required, at which cash injections may be specified [7].
The Franchise ATOL is the route most new entrants overlook, and it changes the arithmetic entirely. A Franchise ATOL is granted on the basis of membership in an approved franchise consumer protection scheme and carries no ATOL bond or financial criteria test, with an application fee of £981 for under 1,001 passengers [6]. You still face the personal fitness and competence test. What you avoid is the £50,000 security requirement. For a founder with sector knowledge but limited capital, this is usually the difference between trading in year one and not trading at all.
Work the comparison before you decide. A £50,000 bond requirement plus a £1,250 APC advance sets your minimum capital at a level that many first-time founders cannot reach without giving away equity or securing debt against a home. A franchise route at £981 plus network fees does not. Our guide to preparing a cash flow forecast sets out how to model the difference across a first trading year.
Non-flight packages, bonding and the ABTA question
If your packages do not include flights, ATOL does not apply, but the Package Travel Regulations still do. You must provide security against insolvency by bond, insurance or trust arrangement [1]. In practice, most independent operators do this through ABTA bonding, a trust account provider, or a specialist bonding scheme.
ABTA membership is a commercial decision rather than a legal requirement, and it is worth being clear-eyed about both sides. The consumer recognition is genuine and it removes a trust objection at the point of sale. Against that sits the financial test. ABTA’s financial criteria assess share capital, adjusted net assets and adjusted net current assets, all of which must show a surplus, and these apply with immediate effect to new applicants [8]. A pre-revenue company with minimal share capital will not pass. ABTA also operates a Retail Premium+ scheme for retail agent members, which replaced the Travel Agents Bond Replacement Scheme and allows eligible members to pay insurance premiums instead of providing a bond, with the transition to be completed by 1 July 2026 [8].
The practical guidance is to treat accreditation as a year-two objective rather than a launch requirement, and to build the share capital and net asset position that will pass the test rather than assuming you can join once you are trading. The financial criteria are applied to your accounts, so the structure you set up at incorporation determines whether you qualify two years later. Our comparison of sole trader and limited company structures covers the share capital point that catches founders out here.
The 2026 reforms: what counts as a package is changing
This is the part of the regulatory picture that almost no competing guide has caught up with, and it matters if you are designing a business model now.
The Package Travel and Linked Travel Arrangements (Amendment) Regulations 2026 were laid before Parliament on 2 March 2026, made on 22 April 2026, and came into force on 6 April 2027 [9]. They remove linked travel arrangements from the regulations entirely: regulation 26 and Schedules 6 to 10 are repealed, and references to linked travel arrangements are struck out throughout [9].
Two consequences follow, pulling in opposite directions.
Arrangements that currently sit as LTA Type A, broadly where a traveller books a second travel service through a targeted process at a single point of sale, are absorbed into the definition of a package. If your intended model involves a customer booking accommodation and then a transfer or an excursion through your site in the same session, that becomes a full package with full package obligations, including insolvency protection and liability for performance. The government’s own impact assessment acknowledges that businesses offering these arrangements will face higher ongoing compliance costs [10].
LTA Type B, where a trader facilitates the booking of a second service from another trader within 24 hours, is removed outright. This frees smaller operators to refer customers to local activity providers without triggering regulations, provided they are genuinely referring rather than facilitating bookings [10].
The regulations also replace regulation 29 on third-party redress with new provisions covering a right to a refund and a right to redress, following the government’s commitment to establish a 14-day period for refund of cancelled services and to clarify that the regulation confers a right to redress rather than merely a right to seek it [10].
The commencement date does not apply retrospectively: the amendments do not affect contracts entered into before 6 April 2027 [9]. If you are launching in the next 18 months, design the booking journey against the post-2027 definition now, rather than building something you will have to unpick later.
The commission arithmetic that decides whether this is a business
Run this calculation before you do anything else, and use your own assumptions rather than those in a recruitment brochure.
Take a business booking 100 holidays a year. Assume an average booking value of £4,000, which you should verify against the actual product mix you intend to sell rather than accepting an industry average, and a supplier commission of 10 per cent. Gross commission is £40,000. On a 60 per cent host agency split, as published by Travel Counsellors [5], your share is £24,000. Deduct platform fees at the midpoint of the £50 to £200 monthly range [4], say £125 a month or £1,500 a year, and you are at £22,500 before marketing, insurance, software beyond the platform, and tax.
That is 100 holidays. Two a week, every week, with no gaps. The single most common failure in this sector is a founder who models the business on turnover, sees a large number, and never converts it into the commission they will personally receive.
The same 100 bookings on an independent licence with no split produce £40,000 of gross commission, which is why founders want route three. Against that, set the bond, the APC advance, the accountancy cost of ATOL reporting, and the fact that you carry the insolvency risk yourself. The independent route wins on volume and loses on capital, which is precisely why the sequencing matters.
Three levers change this picture, and only one of them is within your control at launch. Booking value is the strongest: a business selling £12,000 luxury itineraries earns three times the commission per transaction for broadly similar effort. The commission rate is partly negotiable at volume and largely fixed below that. Split improves as you move up the routes. Choose the first lever deliberately, and the other two matter far less. Our guide to choosing the right business model works through this trade-off in more general terms.
Choosing a specialism you can actually defend
Generalist travel agencies compete with online travel agents on price and lose. The businesses that work operate in territories where customers either cannot self-serve or do not want to.
The three categories that hold up commercially are complexity, stakes and access. Complexity covers multi-country itineraries, group travel, and anything involving connections that fail badly if mis-sequenced. Stakes cover honeymoons, milestone anniversaries, and once-in-a-lifetime trips, where the cost of getting it wrong is emotional as well as financial. Access covers products the customer cannot readily book alone: expedition cruising, specific safari operators, and villa portfolios held by specialists.
Test any proposed specialism against booking value first, because it is the lever that most improves the arithmetic above. A specialism with an average booking value of £2,000 requires three times the volume of one at £6,000 to produce the same income, and the marketing cost per booking is broadly similar. This is why luxury, cruise, and complex group travel dominate the successful end of the independent market. It is not glamour; it is unit economics.
Consider a worked example built from the figures above. An operator averaging £4,000 per booking needs 100 bookings for £40,000 of gross commission. One averaging £12,000 needs 34. The second business is not three times harder to run. It is a different business with a different customer, and the founder who identifies that at the planning stage rather than in year three saves themselves an enormous amount of unnecessary work.
The five mistakes I see most often
These account for most of the travel businesses that reach me in difficulty, and none of them is about a lack of destination knowledge.
- Modelling the business on turnover rather than commission received after the split. It produces a plan that looks funded but isn’t.
- Choosing route three for the margin without the capital to satisfy a £50,000 bond, then discovering the constraint after registering a company and building a brand.
- Overlooking the Franchise ATOL, which removes the bond and financial criteria test entirely for £981 at under 1,001 passengers [6], and assuming the choice is between a host agency and a full independent licence.
- Treating customer money as working capital. It is not yours. Trust account discipline is what stands between a normal trading dip and an insolvency that triggers a claim on your bond.
- Building a booking journey against the current linked travel arrangement rules, which will disappear on 6 April 2027 [9].
Your first 120 days: a phased implementation plan
The sequence matters because each phase produces the evidence the next one needs. Regulatory applications in this sector fail on incomplete financial information far more often than on merit.
Days 1 to 30: define the model and test the arithmetic
- Choose your specialism and establish a realistic average booking value based on actual supplier products rather than an industry average.
- Build a commission model with three volume levels, showing gross commission, your share after the split, and net position after fees and taxes.
- Decide which of the three routes the arithmetic supports with your available capital. Be honest about what you can raise against a bond.
- Confirm whether your intended booking journey creates packages under the post-April 2027 definition.
Days 31 to 60: structure and financial foundation
- Incorporate a share capital level that will support a later ABTA or ATOL financial assessment rather than the minimum.
- Open a separate client money account and establish trust discipline from the first booking, regardless of the route you take.
- Register with HMRC and the Information Commissioner’s Office for the data protection fee, because you will hold passport data, dates of birth, and, in some cases, health information.
- Obtain professional indemnity and public liability quotes, plus errors and omissions cover if you are advising on itineraries.
Days 61 to 90: licensing and accreditation
- For route one or two, complete host agency or franchise due diligence: ask for the actual commission on a specific real booking, the notice period, and what happens to your customer database if you leave.
- For route three, prepare the certified opening balance sheet and financial projections required by the CAA, and complete the ATOL Accountable Persons course early rather than at the point of assessment [7].
- Establish your bonding or trust arrangement for any non-flight package element.
- Confirm your insolvency protection statements and booking terms reflect the regime you are actually in.
Days 91 to 120: trade and prove the model
- Take your first bookings within the specialism, not outside it, so your data tells you something usable.
- Track the actual average booking value and actual commission received against your model, and revise the model rather than the ambition.
- Review at day 120 whether the route you chose still fits, and set the trigger conditions that would justify moving up a route.
The principle underneath all of this
A travel agency is a regulated financial arrangement wearing the clothes of a lifestyle business. Customers hand you thousands of pounds for something that will not happen for six months, and every rule in this guide exists because that gap has been abused before. Founders who treat the regulatory structure as an obstacle to be minimised end up either undercapitalised or non-compliant, and frequently both.
Founders who treat it as a design constraint make better decisions. They pick the route their capital supports rather than the one with the best margin. They choose a specialism for its booking value rather than its appeal. They build the share capital and net asset position that will pass an accreditation test two years before they apply for one. The travel agency that survives is the one whose founder understood, at the planning stage, that they are running a business that holds other people’s money.
Nobody fails in this sector because they do not know enough about destinations. They failed because they did not know enough about arithmetic.
Take the next step
If you are planning to start a travel agency and want the route decision, the commission model and the licensing pathway pressure-tested before you commit capital, our startup consulting service works through exactly this with founders at the pre-launch stage. Travel is a sector where the financial model and the regulatory position have to be designed together, and getting the sequence right saves considerably more than it costs.
If you need a formal document for a bank, a franchisor, or an ATOL application, our business plan writing service produces the financial projections and opening balance sheet required by these applications. You can book a consultation at https://sgi.youcanbook.me/, or start with our free business resources if you would prefer to work through the planning yourself first.
Frequently asked questions
Do I need an ATOL to start a travel agency?
Only if you sell flight-inclusive packages in your own name. If you trade under a host agency or franchise, you operate under their licence and do not need your own. If you sell only non-flight packages, ATOL does not apply, but the Package Travel Regulations still require you to provide insolvency protection through bonding, insurance or a trust arrangement [1].
How much does it cost to start a travel agency in the UK?
The range is wide because the routes are genuinely different. Homeworking under a host agency starts in the low hundreds, plus monthly platform fees typically between £50 and £200 [4]. A Franchise ATOL carries a £981 application fee for under 1,001 passengers, with no bond required [6]. A Small Business ATOL in your own name requires a minimum £50,000 bond plus a £1,250 APC advance payment [6][7], which is the point at which this becomes a capital-intensive proposition.
What qualifications do I need to become a travel agent?
None are legally required, and no professional body licenses the role. What the CAA does assess, for anyone holding their own licence, is personal fitness and competence, which examines the history and conduct of the people controlling the business rather than any qualification [6]. Commercially, sector experience and supplier relationships matter far more than certificates.
How much commission do travel agents earn?
Supplier commission on package holidays commonly sits around 10 per cent of booking value, though it varies by product and volume. What you personally receive depends on your split: Travel Counsellors publishes a 60 per cent share to the franchisee [5], and other operators advertise higher. Model your income from commission received rather than from turnover, because the two differ by roughly an order of magnitude.
What is changing in the package travel rules?
The Package Travel and Linked Travel Arrangements (Amendment) Regulations 2026 come into force on 6 April 2027 and remove linked travel arrangements from the regulations entirely [9]. Arrangements resembling the current Type A become full packages with full obligations, while Type B arrangements disappear, allowing referrals to local providers without triggering the regulations [10]. The changes do not affect contracts entered into before that date.
Should I join ABTA?
It is a commercial choice, not a legal requirement, and most new entrants cannot join immediately. ABTA’s financial criteria require that share capital, adjusted net assets, and adjusted net current assets all show a surplus, applied immediately to new applicants [8]. Treat it as a year-two objective and structure your company at incorporation so that your accounts will pass the test when you apply.
Can I run a travel agency alongside a job?
Yes, and the host agency route exists largely for this reason. The constraint is responsiveness rather than hours: travel enquiries convert poorly when replies take days, and disruption events require attention during working hours. Founders who succeed part-time usually pick a specialism with longer decision cycles, such as complex itineraries or group travel, rather than short-lead-time bookings.
References
[1] Department for Business and Trade, Government response to ‘Package travel: updating the framework 2025’ consultation, December 2025. https://www.gov.uk/government/consultations/package-travel-legislation-consultation-on-proposed-amendments
[2] UK Civil Aviation Authority, UK aviation sees strongest start to the year as passenger numbers hit record high, May 2026. https://www.caa.co.uk/
[3] House of Commons Library, Tourism: statistics and policy, research briefing SN06022. https://researchbriefings.files.parliament.uk/documents/SN06022/SN06022.pdf
[4] Your Travel Consultant, Comparing UK travel agency franchises, April 2026. https://yourtravelconsultant.co.uk/blog/comparing-uk-travel-agency-franchises-what-to-look-for-before-you-join
[5] Travel Counsellors, Start your own travel business. https://people.travelcounsellors.com/gb/start-your-own-travel-business/
[6] UK Civil Aviation Authority, Types of ATOL. https://www.caa.co.uk/atol-protection/atol-requirements-for-the-travel-industry/types-of-atol/
[7] UK Civil Aviation Authority, Small business ATOL. https://www.caa.co.uk/atol-protection/atol-requirements-for-the-travel-industry/air-travel-organisers-licensing-atol/small-business-atol/
[8] ABTA, Membership costs and requirements. https://www.abta.com/industry-zone/become-a-member/membership-costs-and-requirements
[9] The Package Travel and Linked Travel Arrangements (Amendment) Regulations 2026, SI 2026/455. https://www.legislation.gov.uk/uksi/2026/455/made
[10] Department for Business and Trade, Explanatory Memorandum to the Package Travel and Linked Travel Arrangements (Amendment) Regulations 2026. https://www.legislation.gov.uk/ukdsi/2026/9780348280005/memorandum/contents <
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Kurt Graver is the founder and CEO of SGI Consultants, a business consultancy that has helped over 2,000 entrepreneurs establish successful startups using systematic business development methodologies. An accountant with an MBA and 25 years of commerce and consultancy experience, Kurt specialises in strategic planning, market analysis, and sustainable business growth