What is an NDA (Non-Disclosure Agreement)? UK small business guide 2025/26

Whether you're running a small business like a takeaway, salon or anything in between – you should get to grips with Non-Disclosure Agreements (NDAs). When you hire staff, take on a new supplier or end terms with an existing partner, these legal documents can help protect one of your business’s most valuable assets – confidential information.  

But new UK legislation is coming into force in 2025 following recent debates about NDA misuse, so you may not know exactly when, why and how they should be used. 

This guide explains all you need to know. 

_{This guide is for informational purposes only and does not constitute legal advice. While every effort has been made to ensure accuracy, Bionic recommends consulting a qualified legal professional before drafting or signing any Non-Disclosure Agreement (NDA). NDA laws and insurance coverage vary depending on your specific circumstances and may change over time.} 

What is an NDA? 

An NDA, also called a confidentiality agreement, is a legally binding contract that prevents one or more parties from sharing sensitive information with others. For UK businesses, NDAs serve as a first line of defence against competitors stealing trade secrets, employees leaking confidential information, or partners misusing data. Around 63% of UK SMEs use some form of intellectual property rights, and this includes NDAs. 

What upcoming changes in laws affect the use of NDAs? 

The recent changes in UK law mean you need to understand what NDAs can and cannot be used for. More recently, the  Victims and Prisoners Act 2024 was put in place to stop people enforcing employees to stay quiet about unlawful activity. The upcoming Employment Rights Bill in October 2025, will also ban NDAs that prevent harassment and discrimination. 

How do I know if my small business needs to use NDAs? 

When running a small business, at some point, you might benefit from using an NDA, whether this is to ensure a new partnership is kept under wraps or to stop your trade secrets being leaked to competitors. The key question here isn't whether you need one, but when to use one effectively. 

Small business situations that might need an NDA 

As a small business owner, you should consider NDAs when sharing information. Some common scenarios include: 

• Employee onboarding - New hires gain access to your customer information, pricing strategies, and all your internal processes. The ACAS guidance on NDAs says that employment NDAs are generally fine to use for protecting legitimate business interests - especially if it gives you an advantage over your competitors. For example, if you’re working with engineers on a new project and you want to keep it under wraps. 
• After a dispute and someone leaves -  An NDA can act as an agreement to keep the details of the disagreement confidential, but this does not mean an NDA can be used to hide unethical practices or worse, harassment cases. 
• New partnerships or mergers - If you're looking to take on a new partner, you may share sensitive information on your operations, customers, and future plans that you’ll want to keep quiet. 
• Supplier relationships – This could be manufacturers sharing technical specifications, shop owners discussing inventory management systems, or engineers providing new API documentation – they may all need protection. In these cases, an NDA may be of use. 

What type of information needs protecting? 

Not all business information you share will need protecting with an NDA. Instead, consider using one to help protect the following information: 

• Trade secrets - Manufacturing processes, product formulas or even recipes that give you market advantages 
• Customer or client information - Customer details or client information, including purchasing history or buying patterns 
• Financial information – Anything from profit margins and pricing strategies to cost structures and revenue  
• New business plans - Plans to expand into new markets, or new products that you want to keep quiet 
• Technical information - Software code, design files, and research data that is key to running your business. 

When NOT to use an NDA 

In some situations, it’s best not to use an NDA – and in some cases, making employees sign one without good reason could make them suspicious. Avoid using one in these situations: 

• General business discussions - Don't ask potential clients to sign NDAs before you’ve given them any sales material or won their business 
• Public information - You cannot protect information that's already in the public domain or easily discoverable online. 
• Employee complaints - Following new legislation, you cannot use NDAs to prevent employees reporting harassment, discrimination, or criminal activity. 

Industry specific considerations 

Some sectors may have different uses for NDAS. For example: 

• Creative industries – Design agencies and artists may use NDAs to protect concepts, designs, and creative briefs before launching new work. 
• Technology and software - Technology businesses that own the intellectual property rights to new code, platforms or software and want to protect it. For example, a website development company owns their own platform for client websites.  
• Manufacturing - Manufacturers who want to keep processes a secret to stop people from copying them. This could include information on manufacturing methods, suppliers or even distribution methods.  
• Hospitality - To keep a step ahead of competitors, hospitality businesses may wish to keep secret recipes, formulas or concoctions under wraps to stop competitors from stealing and replicating their recipes.   
• Marketing and advertising -  Many agencies with client strategies, branding concepts, and advertising campaigns use NDAs to protect their creative assets and keep trusting client relationships.  
• Legal and professional services - Businesses like law firms, consulting agencies, and professional services use NDAs to keep client information confidential and protect sensitive information. 

What types of NDAs are there?  

There are three main types of NDA:  

• One way - This is where one party (or business) shares confidential information with the other party. These are most commonly used in everyday business.  
• Mutal - These are two-way NDAs, so two parties share confidential information. In this case, both parties can decide how the other party will use or share their information.  
• Multiparty - This is where three or more parties are involved, and at least one will share confidential information with the others. These are often used in complex business deals where there is a lot of negotiation — a complex confidentiality agreement, for example. 

What are the restrictions for NDAs in the UK? 

You can’t legally use an NDA for everything. In fact, UK law places specific restrictions on what NDAs can and cannot cover.  

What UK NDAs can’t be used for: 

• Whistleblowing protection - The Public Interest Disclosure Act protects employees who report wrongdoing that’s in the public interest. This means if you’re business is carrying out activities it shouldn’t be - NDAs cannot be used to keep employees quiet. Learn more about whistleblowing. 
• Criminal activity reporting - You cannot prevent someone from reporting crimes or cooperating with police investigations by making them sign an NDA. 
• Regulatory compliance - NDAs cannot stop employees reporting regulatory breaches to bodies like the UK Financial Conduct Authority or Health and Safety Executive. 
• Legal proceedings - Courts can override NDAs when someone needs to provide evidence in legal cases.  

What if I work in professional services?  

The SRA (The Solicitors Regulation Authority) requires solicitors or legal professionals to follow specific rules around NDAs when advising their clients: 

• Clearly explain the restrictions on using an NDA and limitations 
• Warn clients about potential legal challenges they may face 
• Document the business justification for each NDA clause 

When you make an NDA, it’s important to get all the details and terms clear, so there is no room for debate if the contract is broken.  

When drafting an NDA, consider including the following details. 

What do I need to include in an NDA? 

• Name who is involved — Clearly name the parties (or businesses) involved and who they are, including employees, partners, clients or suppliers, for example.  
• Specify confidential information — Make sure you’ve defined what the confidential information is, so everyone is clear on what can and cannot be shared.  
• Outline who is responsible for what — Assign responsibilities to all the parties involved in the agreement and state what the receiving party can’t do once the information covered by the NDA is agreed.  
• Say why it’s being shared — Clearly state the purpose for sharing the confidential information and its uses by all parties. It could be that you have to share this information to carry out your intended business with a supplier or wholesaler, for example.  
• Define the length of the agreement — You’ll need to outline how long the agreement will last, that is, if it ends at all. All parties will have to keep to the agreement for the duration set out in the contract. Sometimes there are even post-agreement rules. 

For example, if you’re running a takeaway business, you may wish for an employee to sign an NDA to keep business matters private. This agreement may be in place for as long as they are employed but also if they leave the business, because the information could be damaging if leaked or given to competitors.   

• Write down the consequences of a breach — Include details of what happens if someone breaches the NDA. This could be from leaking information or sending private files, for example. The consequences could include any legal action or even financial penalties to either party.  
• Agree on how to dispose of the agreement — Once the agreement has ended, you may want to get rid of all evidence of it, especially if it contains confidential or sensitive information. Most businesses do this by shredding it and putting it in a confidential waste bin.  
• Clearly outline any exceptions - In some cases, there might be exceptions to the agreement. This could be because the information is widely known, and it isn’t possible to keep it confidential.   

How do I create an enforceable NDA that actually protects my business? 

Creating an NDA that does its job requires more than just downloading a free template and making someone sign it. You need clauses that back you up in court (in the unfortunate event you ever end up there) AND protect your business secrets. 

The legal jargon you need to include: 

Every UK NDA should include: 

• Clear definitions — Vague descriptions like "all business information " may not hold up in court. Instead, specifically list what's confidential. For example, customer contact details, pricing schedules dated after January 2025, and manufacturing cost analyses." 
• Information uses — Include exactly what the third party can and cannot do with the information. Include uses like "use for potential new partnerships only" and banned uses like "reverse engineering strategy or competitive analysis." 
• Time limitations — You can’t enforce an NDA forever and, a lot of business information isn’t that valuable after 5 years. Set out realistic timeframes that keep your business matters under wraps for the right amount of time.
• Destroying confidential information — Specify what happens to confidential information when the relationship ends. For example, an employee leaves, a supplier moves on or you sell your business and are no longer involved. Include what would happen to both physical documents and digital files. 
• Governing law and jurisdiction — include that the contract is governed by English law. In other words – if anything ends up in court, then it needs to be dealt with in an English court of law. 

Common mistakes business owners make with NDAs 

We all can make mistakes, but try to avoid these common errors that could weaken your NDA – if you ever end up with an issue between you and an employee, supplier or partner. 

• Including public knowledge - You can't include any information that’s public knowledge already - whether this is general marketing strategy or patents you’ve used, for example. 
• Unrealistic time periods – An NDA set out for 20 years around keeping supplier details private could fail in court - while a 3-year NDA for the same information might be more reasonable. 
• Poor quality – Badly drafted NDAs aren’t going to do you any favours if you end up in a tribunal or worse, go to court. 

Alex McCloy – Legal Counsel at Bionic states, “Sometimes in business, being ambiguous has its advantages – but when it comes to NDAs – it's best to be specific – especially on what you don’t want disclosed and for how long. In most cases, it might be a good idea to get a legal professional to draft your NDA, so you can focus on running your small business” 

What happens if someone breaks my NDA, how do I enforce it? 

NDA breaches can cause bad issues in your small business, especially if a competitor gets hold of information you want kept quiet. But it’s not always easy or straightforward to enforce it. Understanding your options can help you respond if a breach occurs. 

Legal action  

If you sign an NDA with another business and have a dispute about breaking it, don’t be surprised if legal action comes your way. It’s a good idea to have insurance in place to help protect you in the event of the claim. You could face legal action or even thousands to pay in fines or damages, not to mention hefty lawyer fees on top.  

Firing employees  

If an employee of yours breaks an NDA under the contractual terms, your employee may have to face disciplinary action or even be fired. Always make sure your employees understand what they’re signing. Or, if your small business is stated in the NDA and you share information with your employees, make sure they know they are bound by the terms of the NDA and do not share the information with anyone!  

Large penalties  

In most cases, breaking an NDA isn’t a crime, but it is still a contract, and this means the “breaching party” may have to pay a hefty sum to the other as specified. Even worse, you can also end up with legal costs to pay if the dispute ends up in court.  

Criminal charges  

In extreme cases, NDA violations may result in criminal charges for theft of trade secrets or intellectual property. In these cases, you could be looking at paying hefty fines in compensation, legal costs and criminal charges — and this could be enough to cripple most small business owners in the UK! 

NDA issues for real UK business owners 

We looked at some Reddit forums to see what kind of issues UK business owners run into with NDAs... 

A contractor was confused about signing under his name 

Problem: A UK contractor with a limited company was asked to sign an NDA that referred to him as a "freelancer" rather than acknowledging his Ltd company as the service provider. 

What went wrong:

• The contractor worried this could affect IR35 compliance and create confusion about who was actually bound by the agreement. 

Outcome: This was sorted when he asked them to change the wording to include the name of his company before he signed it.  

Lesson: Many small business owners – whatever the industry - don't always understand how to use NDAs and the legal complications that can come with them. 

An abusive boss uses NDAs to hide payment issues 

Problem: A retail worker's boss wanted them to sign an NDA specifically to prevent discussing the company's late payment problems. 

What went wrong: 

• The boss had "trouble" paying staff on time consistently 
• They demanded signing to keep payment delays secret 
• The boss tried to use an NDA as a tool to hide potentially illegal employment practices 

Outcome: Using an NDA like this is unlikely to be enforceable since a business owner can’t legally hide illegal activities like wage theft or delays. 

Lesson: Some UK business owners may misuse NDAs, thinking they can hide dodgy practices that violate employment law. 

A freelance writer was threatened over a bad review 

Problem: A 19-year-old UK freelance writer was threatened with legal action after writing a negative Trustpilot review about a company they'd worked for under an NDA. 

What went wrong: 

• A writer worked for a suspicious company that never paid them 
• They posted a Trustpilot review warning other freelancers 
• The company's lawyer demanded the review was removed within 24 hours otherwise they would take legal action 

Outcome: In this case, the NDA was used in an unlawful way as it can't actually prevent honest reviews about business practices, and the threats were likely empty. 

Lesson: Small business owners sometimes use empty NDA threats to keep criticism quiet and protect their reputation. 

Can insurance help when it comes to NDAs? 

Depending on your business, taking out the right insurance could help in certain situations like if you’ve been asked to sign an NDA or issued one yourself. 

• Professional indemnity insurance – This type of cover may help to cover professional negligence if you're taken to court for alleged NDA breaches that were an accident. Deliberate or purely contractual breaches are likely to be excluded under a policy. Most policies will have a ‘contractual liability exclusion’ within them, this is where they would not cover something because this was agreed to in a contract. 
• Legal expenses insurance –  Sometimes known as legal protection insurance, this could help protect businesses as they may be able to claim for defence costs if accused or claim for some of the legal costs for pursuing others, if they breached the NDA. Again, most policies will also have a ‘contractual liability exclusion’. 

Policies will vary per provider and terms and conditions apply. Always check the small print in your policy to see what it and isn’t covered. 

How Bionic can help protect your business 

If you need to issue NDAs or you run into trouble with one you’ve signed as a business owner, it’s a good idea to have some protection in place to help.  

At Bionic, we can help support your business with sorting out the right insurance cover for your business. Get in touch today or compare business insurance online by starting a quote today. 

Interested in more content from us? Explore our business insurance guides for practical guides, from health and safety in your workplace to understanding GDPR and everything in between.