UMBRELLA COMPANY REFORM – WHAT’S CHANGING FROM APRIL 2026

ASESA Solutions Ltd - UMBRELLA COMPANY REFORM – WHAT’S CHANGING FROM APRIL 2026

Umbrella company reform: key changes ahead

The UK government has announced plans to tackle tax non-compliance in the umbrella company market. These changes will affect recruitment agencies that engage temporary workers through umbrella companies.

From 6 April 2026, responsibility for operating PAYE and National Insurance may shift away from the umbrella company. Instead, the recruitment agency that supplies the worker (or the end client, where no agency is involved) could become legally responsible for ensuring the correct tax is paid.

The aim of this reform is to prevent tax avoidance, protect workers from unexpected tax bills, and create a fairer market for compliant businesses.

Understanding the change in responsibility hierarchy

The key change is that responsibility for PAYE and National Insurance moves up the chain. Currently, umbrella companies handle payroll and tax, but under the new rules:

• If a recruitment agency is involved, the agency becomes legally responsible for ensuring PAYE and NIC are correctly operated, even if the umbrella company processes the payroll.

• If no agency is involved, the end client takes on this responsibility.

  
  

The payment flow itself does not change — money still passes from the end client to the agency to the umbrella company to the worker — but HMRC can now hold the agency or end client accountable if the umbrella company fails to comply.

Looking ahead

Although the changes are not due to take effect until April 2026, early awareness is key. Agencies that understand the impact now will be better placed to prepare and minimise risk.