Umbrella companies: what changed for agencies on 6 April 2026

6 minute read · Updated 2026-09-09

This is the change that should decide how a new agency pays people, so it is worth stating plainly.

From 6 April 2026, where a worker is supplied through an umbrella company, the recruitment agency that supplies that worker to the end client is jointly and severally liable with the umbrella for the PAYE income tax and Class 1 National Insurance the umbrella should have paid. Where there is no agency in the chain, the liability falls on the end client. The rules sit in a new Chapter 11 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003, inserted by the Finance Act 2026.

What that means when it goes wrong

If the umbrella does not pay HMRC, HMRC can come to you for the full amount. It does not have to chase the umbrella first, and it does not have to prove you knew anything.

There is no reasonable care defence. No knowledge test, no carve out for a business that did thorough checks. You can do everything right, choose an umbrella with good references and audited accounts, and still be liable when it fails.

For an agency with twenty drivers on an umbrella, that is a number large enough to end the business.

The simplest answer

Do not use umbrella companies. Pay people PAYE yourself.

It is not the only answer and plenty of good agencies will keep using umbrellas with heavy due diligence. But if you are starting out, have no compliance department and cannot absorb a surprise assessment, the exposure is not worth the administrative saving.

Paying PAYE costs you employer's National Insurance, holiday pay and a pension contribution. Put those in your charge rate from the first quote and the client pays them, which is what happens everywhere else in the market anyway.

It is also a selling point

Workers have been badly treated by parts of this industry: mini umbrella fraud, deductions nobody explained, holiday pay that quietly disappeared. "We pay PAYE. No umbrella. No deductions you did not agree to. Holiday pay on your payslip" is a recruiting message that works in 2026, and most of your competitors cannot say it.

If you do use one anyway

• Check it is a real employer with real accounts, not a company incorporated last year with a director who is also a director of forty others.
• Get evidence that PAYE is actually being paid over, not just calculated.
• Put the liability in your contract with them, and understand that a contractual indemnity is only worth as much as the company giving it, which by definition has just failed to pay HMRC.
• Read the GOV.UK guidance on umbrella companies and keep watching it, because this area is moving.

Before you rely on this

This is a guide, not legal advice, and it is free because the law behind it is free. Every source we used is linked in the text so you can read it yourself rather than take our word for it. Where a decision turns on your own circumstances, and two of them below do, pay a solicitor once. It is cheaper than the alternative.

We are a UK job board and we are building a recruitment arm of our own, so we are working through this list ourselves. If you spot something out of date, tell us and we will fix it and say when.