A UK annual leave policy should cover the leave year, entitlement, treatment of bank holidays, request and approval rules, carry-over, sickness during leave, family-related leave, what happens at termination, and record keeping. The Working Time Regulations 1998 set the floor (5.6 weeks); your policy fills in the practical detail. From 6 April 2026, employers must also keep records of leave and holiday pay under the Employment Rights Act 2025.
Why every UK business needs a written leave policy
Most disputes about annual leave are not about the law. They are about what was agreed. An employee thought they had 25 days plus bank holidays; the contract said 25 days inclusive. A new starter thought they could carry forward unused leave; the policy said they could not. A manager refused a request a week before someone's wedding; nobody had written down the notice rules.
A clear written policy stops this happening. It also does three other useful things at once:
- It satisfies the legal duty under the Employment Rights Act 1996 to give every employee and worker a written statement of holiday entitlement and how it is calculated.
- It gives line managers a single place to look up the rules so they apply them consistently.
- From 6 April 2026, it provides the foundation for the new statutory duty under the Employment Rights Act 2025 to keep records of annual leave and holiday pay.
Holiday entitlement and bank holiday inclusion must be in the written statement of particulars (the contract). Most other rules - notice, carry-over, capacity limits, sickness during leave - sit best in a separate policy that the contract refers to. That keeps the policy easy to amend without having to vary every employment contract.
What must be in the policy (legally)
Strictly, UK law does not require a separate document called an "annual leave policy". What it does require is that certain things are in writing somewhere - either in the contract, the staff handbook, or a standalone policy. The table below splits the must-haves from the should-haves.
| Topic | Required by law? | Source |
|---|---|---|
| Holiday entitlement and how it is calculated | Yes - day one | Employment Rights Act 1996, s.1 |
| Whether bank holidays are included or additional | Yes - day one | Employment Rights Act 1996, s.1 |
| Leave year (start and end dates) | Best practice | ACAS guidance |
| Notice rules for requesting leave | Default rules apply | Working Time Regulations 1998, reg.15 |
| Carry-over rules (statutory minimums) | Yes - by law | Working Time Regulations 1998, reg.13/13A/15B |
| Records of leave and holiday pay | Yes - from 6 April 2026 | Employment Rights Act 2025 |
| Capacity limits, clash handling, shutdown rules | Optional but advisable | ACAS guidance |
The simple rule: if a topic is "yes" or has a default in law, write it down explicitly so there is no ambiguity. The clauses below cover all of them and a few more.
The 16 clauses of a complete leave policy
Below are the sections that appear in our free template. They are based on current ACAS guidance, the Working Time Regulations 1998 (as amended in 2024), and the upcoming changes from the Employment Rights Act 2025. Each clause is numbered to match the template.
Open with a one-sentence statement of what the policy is for and who it applies to (typically all employees and workers, including part-time, fixed-term and zero-hours, but not self-employed contractors). Make clear whether the policy is contractual or non-contractual - most employers choose non-contractual so they can amend it without each employee's individual consent.
State the dates your leave year runs from and to. Common options are 1 January to 31 December (calendar year), 1 April to 31 March (financial year), or aligned to the company's anniversary. ACAS confirms that if no leave year is set, it begins from each worker's start date - which makes record-keeping a nightmare. Set a fixed leave year and put it in writing.
State the full-time entitlement (the statutory minimum is 5.6 weeks - 28 days for someone working five days a week). Confirm that part-timers receive a pro-rata amount calculated by multiplying their weekly working days by 5.6, and that mid-year joiners or leavers receive a pro-rata entitlement. For a deeper dive on the calculations, see our guide to calculating annual leave entitlement.
State explicitly whether bank holidays are included in the entitlement set out in clause 3 or are in addition. Both are legal under the Working Time Regulations, but the policy must say which. If your team includes workers in Scotland or Northern Ireland, also state which regional bank holidays apply. See our UK bank holidays calendar for the dates.
The Working Time Regulations default is that a worker must give notice at least twice as long as the leave they are requesting. So a 5-day request needs at least 10 days' notice. State whether you want to vary that, and how requests should be submitted - through your leave system, line manager, or another route.
This is optional but useful. Set a default rule for how many people from a team can be on leave at the same time, and how the company handles two requests for the same dates. First-come first-served is the most common approach; some employers rotate priority year on year to keep it fair.
Set out your discretionary carry-over rule (5 days is common, with a 3-month deadline to use it). Also acknowledge the statutory carry-over rights that cannot be excluded: long-term sickness (up to 4 weeks of statutory leave, used within 18 months), statutory family leave (full 5.6 weeks can be carried), and where the employer prevented the leave being taken (up to 4 weeks). For the full detail, see our guide to UK annual leave carry forward rules.
State that the statutory 5.6 weeks cannot be paid in lieu except on termination. Any contractual leave above that minimum can be paid in lieu only with prior written agreement.
Set out what an employee should do if they fall ill before or during booked leave - typically notify their manager promptly, follow the sickness reporting procedure, and provide a fit note if absence exceeds seven calendar days. If those conditions are met, the affected days are reclassified as sick leave and credited back to the allowance.
Confirm that statutory annual leave continues to accrue during sickness absence, however long. Cross-reference clause 7 for the carry-over rights when long-term sickness has prevented leave being taken.
Confirm that leave continues to accrue during maternity, paternity, adoption, shared parental, parental and parental bereavement leave. State that annual leave cannot be taken during a statutory family leave period, but can be agreed before or after by arrangement with the line manager.
Cover three scenarios at termination: any unused leave is paid in the final salary; any leave taken in excess of accrual may be deducted from final pay (if the contract permits it); and the company can require the employee to take outstanding leave during their notice period. For the calculation detail, see our guide to unused annual leave when an employee leaves.
State that the company will keep accurate records of each employee's entitlement, leave taken, leave carried forward, and holiday pay paid. Records should be retained for at least six years. This clause becomes a statutory duty from 6 April 2026 under the Employment Rights Act 2025 - include it now even if you have not historically.
If you close between Christmas and New Year, or for any other period, set out the rule. The statutory default is that you must give at least twice as much notice as the length of the closure. Many employers reserve a fixed number of days every year for a Christmas shutdown - if so, say so.
Tell employees who to speak to first (line manager), what happens if that does not resolve the issue (grievance procedure), and provide an external reference for independent advice. The ACAS helpline number is 0300 123 1100.
Annual review is best practice. The Employment Rights Act 2025 is rolling out reforms through 2026 and 2027 (paternity leave, bereavement leave, unpaid parental leave) and your policy should be checked against current law every year. Set the next review date in the document.
Four key decisions only you can make
The template gives you the structure. These are the four substantive choices you will need to make as you fill it in. There is no single right answer - the right choice depends on your business.
It is far easier to tighten a policy than loosen one. If you are unsure on bank holiday treatment or carry-over, start more generous; you can revisit the policy at the annual review and tighten if needed. Tightening from "extra" to "inclusive" or "5 days" to "0 days" usually requires individual employee agreement and feels like a takeaway.
Common mistakes to avoid
Five recurring issues we see when reviewing client policies:
There is no legal requirement to give bank holidays as paid leave. They can be included in the 5.6 weeks or given on top, but the policy must say which. Vague wording is the single most common cause of holiday disputes at SMEs.
A clause saying "no leave can be carried forward in any circumstances" is unenforceable. The statutory carry-over rights for long-term sickness, statutory family leave, and employer-prevented leave cannot be removed by contract or policy. Include them explicitly so managers do not refuse them by mistake.
If an employee has taken more leave than they have accrued by the time they leave, you can only recover it from final pay if the right to deduct is agreed in writing in advance - usually in the contract. Adding it only to the policy is not enough.
If a part-timer does not normally work Mondays, they will miss most bank holidays under a strict interpretation. The Part-time Workers Regulations require you to give part-timers a pro-rata bank holiday entitlement they can take on any day. See our part-time holiday entitlement guide for the calculation.
UK employment law has been changing every year - 2024 brought the carry-over and irregular hours reforms; 2026 brings record-keeping and paternity leave changes; 2027 brings bereavement leave, day-one rights and more. A policy without a scheduled annual review will quickly drift out of compliance.
Download the free template
UK Annual Leave Policy Template (Word)
The full 16-clause policy as an editable Word document. Drop your details into the bracketed fields, read the drafting notes, then delete them before issuing.
- 16 clauses covering everything Acas recommends
- Sample wording for every section
- Blue placeholders show where to add your details
- Drafting notes explain the decisions only you can make
- Document control panel and signature block included
The fields you need to fill in are in blue square brackets. The italic blue paragraphs are drafting notes explaining the choices to make - delete them before issuing the policy. The clauses are numbered to match the 16 sections in this guide, so you can come back here for the rationale on any one of them.
Rolling it out in your business
Once you have a draft you are happy with, the rollout is straightforward:
- Have it reviewed. Send the draft to your HR adviser or employment solicitor for a final read. The template is a starting point reflecting current law; your specific situation may need additional clauses (for example, a TUPE clause, or terms specific to your sector).
- Sign and date it. The policy should have an effective date and an approver's signature. We have included a signature block in the template.
- Communicate it. Share the policy with all employees, ideally with a covering note explaining the key changes from any previous version. Save a record of who has received it.
- Update the contract reference. If your contracts mention the leave policy by name, make sure the new version's title matches. If you have changed any contractual term (such as the leave year), you may need individual employee agreement.
- Set a review date. Calendar the next annual review now. If you skip this, the policy will drift out of date as the law changes.
Sources
Every claim above is sourced to UK government, ACAS, or primary legislation. The following pages were used:
| Source | Topic |
|---|---|
| Employment Rights Act 1996 (legislation.gov.uk) | Right to written statement of employment particulars (s.1) |
| Working Time Regulations 1998 (legislation.gov.uk) | Statutory 5.6 weeks, notice rules, carry-over framework |
| ACAS - How much holiday someone gets | Statutory minimum entitlement and pro-rata calculation |
| ACAS - Asking for and taking holiday | Leave year, notice rules, refusing or cancelling holiday |
| ACAS - Carrying over holiday | Statutory carry-over rights and 18-month rule |
| ACAS - Bank holidays and Christmas | Bank holiday treatment, shutdown notice rules |
| ACAS - Employment Rights Act 2025 | April 2026 record-keeping duty, upcoming reforms |
| GOV.UK - Written statement of employment particulars | Day-one requirement to set out holiday entitlement |
| GOV.UK - Holiday entitlement | Statutory minimum, holiday pay basics |
Frequently asked questions
This guide and the accompanying template are general information for UK employers. They do not constitute legal advice and should not be relied on without professional review for your specific situation. For free independent guidance, contact the ACAS helpline on 0300 123 1100 or visit www.acas.org.uk.