What You Need to Know: The New Umbrella Company Rules Coming in April 2026

What You Need to Know: The New Umbrella Company Rules Coming in April 2026

From 6 April 2026, the UK is introducing major changes to the way umbrella companies operate — especially around tax liability. These reforms aim to crack down on non-compliance, protect workers, and shift more responsibility up the supply chain. If you use or contract via umbrella companies, or you’re an agency or end client, you’ll want to be ready.

What’s Changing

Here are the main changes being introduced, based on the recent guidance and draft legislation:

  • Joint and Several Liability (JSL): Agencies (and sometimes end clients) will become legally responsible (alongside umbrella companies) for unpaid PAYE (tax) and National Insurance contributions (NICs) if the umbrella company fails in its obligations.
  • Which party is liable:
    • Where there is a recruitment agency in the chain, the agency with the direct contract with the end client becomes the “relevant party” for liability.
    • If there is no agency and the hiring is direct via an umbrella company, then the end client (the business using the worker) becomes liable under the new rules.
  • Umbrella company remains employer: The umbrella company will still employ the worker, operate payroll (PAYE), calculate deductions, etc. But the new rules give HMRC the power to recover unpaid liabilities from agencies or clients where non-compliance has occurred.
  • No statutory excuse: Simply doing due diligence will NOT necessarily protect agencies or clients from liability. Even if they did checks on umbrellas, they may still be held responsible if the umbrella company fails.
  • Regulation of umbrella companies: Alongside tax-liability changes, umbrella companies are expected to fall under stronger regulatory oversight. By 2027, other legislation (including the Employment Rights Bill and the future Fair Work Agency) is set to formalise definitions and regulations for umbrella providers.

Who Will Be Affected

  • Workers employed via umbrella companies — they’ll want clarity over which umbrella is used, whether deductions are correct, and that they are working via legitimate, compliant intermediaries.
  • Recruitment agencies — they’ll carry more liability under JSL, so their choice of umbrella providers will matter more than ever. Their contracts, supply chain relationships, and compliance checks will need to be tight.
  • End clients (businesses hiring through agencies or umbrellas) — where there is no agency, or where supply chains are involved, clients may also bear responsibility for unpaid tax/NIC if the umbrella doesn’t comply.
  • Umbrella companies themselves — they’ll need to be fully compliant, transparent, and provide supporting documentation and verification to agencies and clients. Any non-compliance will have knock-on effects upstream.

What the Risks Are

  • Unexpected tax bills: Agencies or clients could be on the hook for PAYE or NIC liabilities in cases where an umbrella company has failed to pay.
  • Supply chain exposure: Businesses that haven’t audited their umbrella partners may find that their risk exposure is higher than they thought.
  • Reputational risk: Workers impacted by non-compliant umbrellas may suffer, which could reflect poorly on agencies and end clients.
  • Operational disruption: Changes may require revising contracts, payroll processes, reviewing umbrella company partners, possibly switching providers.

What You Should Do Now

To prepare and minimise potential downside, here are some steps Pecunia Pro suggests:

  1. Audit your supply chain
    Map out all umbrella companies you currently use (if any), plus agencies you work with. Identify who holds the contract with the end client, and who is likely to be liable under the new rules.
  2. Check the compliance status of umbrella partners
    Ensure they are operating properly under PAYE/NIC, have up-to-date registration, good record keeping, transparent payslips, etc.
  3. Update your contracts, agreements, procurement policies
    Include clauses that protect you where possible, requiring umbrellas to certify compliance, allowing audit rights, maybe requiring indemnities or warranties.
  4. Train or inform staff / contractors
    Make sure that relevant teams (HR, finance, procurement) understand the changes and what they must do. Contractors or workers should know what questions to ask of their umbrella company.
  5. Financial modelling / risk planning
    Consider the worst-case scenarios (if a non-compliant umbrella fails) and what financial exposure you might have. Budget for potential costs or insurance.
  6. KeeTo prepare and minimise potential downside, here are some steps Pecunia Pro suggests:
    1. Audit your supply chain
    Map out all umbrella companies you currently use (if any), plus agencies you work with. Identify who holds the contract with the end client, and who is likely to be liable under the new rules.
    2. Check the compliance status of umbrella partners
    Ensure they are operating properly under PAYE/NIC, have up-to-date registration, good record keeping, transparent payslips, etc.
    3. Update your contracts, agreements, procurement policies
    Include clauses that protect you where possible, requiring umbrellas to certify compliance, allowing audit rights, maybe requiring indemnities or warranties.
    4. Train or inform staff / contractors
    Make sure that relevant teams (HR, finance, procurement) understand the changes and what they must do. Contractors or workers should know what questions to ask of their umbrella company.
    5. Financial modelling / risk planning
    Consider the worst-case scenarios (if a non-compliant umbrella fails) and what financial exposure you might have. Budget for potential costs or insurance.
    6. Keep watch on final legislation
    The draft rules have been published; some details may shift before they are final. Staying updated will allow smoother adaptation.
    p watch on final legislation
    The draft rules have been published; some details may shift before they are final. Staying updated will allow smoother adaptation.

Why This Matters for Pecunia Pro’s Clients

In the construction sector and beyond, contractors, temporary staff, and the supply chains that engage them often use umbrellas. With irregular work, multiple intermediaries, and often complex contracting, the risk of non-compliance or oversight is real.

Pecunia Pro can help by:

  • Reviewing your umbrella arrangements and advising where liability exposure lies
  • Helping you carry out due diligence on umbrella companies
  • Structuring contracts and supply-chain agreements in a way that mitigates risk
  • Modelling the financial impact of the upcoming changes on your pay, costs, cash flow
  • Supporting policy & procedural changes so that your business is ready when the rules come in