HMRC has confirmed a major change to how umbrella labour will be treated in the UK. Starting 6 April 2026, recruitment agencies and, in some cases, end clients, will be jointly and severally liable for PAYE and National Insurance where a worker is supplied through an umbrella company.
This isn’t just a policy tweak. It fundamentally reshapes where risk sits in the labour supply chain and puts full visibility on how umbrella payroll is being operated.
“The companies in the strongest position next year will be the ones taking time now to review and clean up their supply chains. A clear, well-documented process will do more to protect you than any last-minute scramble in 2026.” - Aneta Basiuk, Director of Compliance Programs at Worksome
What HMRC Has Set Out
The new framework targets long-running non-compliance in the umbrella market. The key points:
- When a worker is paid through an umbrella company, the supplying agency becomes liable for PAYE and NIC.
- Where no agency is involved, liability transfers to the end client.
- HMRC can recover any unpaid PAYE/NIC directly from the agency or client, bypassing the umbrella entirely.
- The change applies to payments made from 6 April 2026, giving organisations a transition window to prepare.
Why It Matters
Umbrella collapses and non-compliant schemes have repeatedly left workers exposed and created large PAYE debts that HMRC struggles to collect. From 2026 onwards, those debts don’t disappear; they transfer.
Agencies and end clients will carry the payroll risk created by their chosen suppliers. As a result, enhanced due diligence moves from being a “best practice” to a critical control.
Get Prepared During The Transition Window
The period between now and April 2026 gives businesses space to tighten their setup. Many are already taking steps that make a meaningful difference:
1. Reducing the number of umbrella companies they work with
Consolidating suppliers reduces risk and makes it easier to monitor compliance.
2. Refreshing contracts
Clear liability clauses, real-time visibility obligations, and the right to inspect payroll processes are becoming standard.
3. Moving contractors onto safer engagement models
Many organisations are actively reducing reliance on umbrella companies where possible.
4. Strengthening onboarding and monitoring
Simple checks, such as validating PAYE registration and reviewing sample payslips, can prevent serious downstream issues once the reforms go live.
What This Means Going Forward
This reform moves accountability closer to the organisations that set the work in motion. Agencies and end clients that invest now in cleaning up their freelance channels will head into 2026 with stronger protection and confidence in their supply chain and far fewer surprises.
How Worksome Helps
Worksome removes the complexity and exposure associated with umbrella arrangements. Contractors are engaged directly, payroll is handled through compliant and transparent processes, and there’s no multi-step chain where liabilities can get lost.
If you want support reviewing how your current contractor model lines up with the new rules, our team can walk you through the risks and the quickest path to a cleaner and compliant operating model.
Book a call with us to review your arrangements and get ready well before April 2026.
