Umbrella company rules from April 2026.

What changed on 6 April 2026

For payments made to workers on or after 6 April 2026, new rules apply to labour supply chains that include umbrella companies. They apply to new and existing supply chains. If an umbrella company does not pay the correct PAYE, HMRC can recover the underpayment from another business in the chain.

What joint and several liability means

When more than one party is liable for the same debt, HMRC can recover it from any of them. In practice, if the umbrella company fails to pay, the agency (or the end client) can be asked to pay instead.

Who can become liable

• The recruitment agency that has the contract with the end client.
• The end client, where no agency is involved.

The umbrella company remains responsible for calculating PAYE correctly and paying HMRC on time. The amounts covered include income tax, student loan repayments, and employee and employer National Insurance contributions.

HMRC's guidance lists situations the rules do not apply to, including some workers employed through their own personal service company, workers treated as employed through a managed service company, salaried members of a limited liability partnership, and workers already treated as employed by an agency.

How exposure can arise: examples

These scenarios are simplified illustrations. Whether liability arises in a real case depends on the facts and the legislation.

What umbrella companies are responsible for

• Employing workers under a contract of employment.
• Calculating income tax and National Insurance correctly and paying HMRC on time.
• Paying all earnings through PAYE, without loans, advances or other schemes that move pay outside PAYE.
• Providing clear payslips that show employer costs and deductions.

Due diligence and verification

Due diligence will not remove liability, but it is how you avoid choosing a provider that creates it. Practical checks include:

1. Independent accreditation, and when it was last renewed.
2. Payslip verification: check a sample of payslips against payment records, for example through veriPAYE.
3. Company checks: registration, accounts, directors and how long the business has traded.
4. HMRC registrations: PAYE and VAT.
5. Insurance: the limits and the period of cover.
6. Take-home pay: be wary of any provider promising more take-home pay than PAYE allows.

The role and limits of accreditation

Accreditation such as Professional Passport is independent evidence that a provider's processes have been reviewed. It is not a government guarantee and it does not transfer or remove your liability. Use it as one part of your due diligence, alongside your own checks.

Questions to ask any payroll provider

1. Is all pay processed through PAYE, with nothing paid as loans, advances or bonuses outside it?
2. Which independent body accredits you, and when were you last reviewed?
3. Can we verify your workers' payslips?
4. Can you show us a sample payslip with the margin and employer costs set out?
5. What insurance do you hold, and at what limits?
6. How do you decide whether someone can be paid under CIS?
7. How will you tell us if anything changes in your compliance status?

Practical preparation for agencies

What has changed since the rules took effect

HMRC updated its guidance on 19 June 2026 to reflect that the rules are now in force, and has run webinars for businesses in labour supply chains. We review this page when HMRC publishes new guidance.

Joint and several liability FAQs

Official sources

• HMRC: PAYE rules for labour supply chains that include umbrella companies from 6 April 2026
• HMRC policy paper: PAYE changes for the umbrella company market
• GOV.UK: Working through an umbrella company

Last reviewed 9 October 2026. This page is general information, not legal or tax advice.