What changed on 6 April 2026
Responsibility for operating PAYE on umbrella company workers has moved. From 6 April 2026, where a worker is supplied through an umbrella company, the recruitment agency that supplies them is responsible for accounting for PAYE. Where there is no agency in the chain, the responsibility sits with the end client.
HMRC also has joint and several liability, which means it can pursue the agency for unpaid PAYE regardless of what the umbrella did or did not do.
Why this happened
Umbrella companies became the plumbing of contracting, and a minority of them were not paying over the tax they deducted. Workers had money taken from their pay, saw it on a payslip, and HMRC never received it. Some of these were straightforward mini umbrella frauds.
The old rules left HMRC chasing the umbrella, which had frequently dissolved. The new rules move the liability up the chain to a party with assets and a reputation, which changes the incentive to check.
What it means depending on who you are
If you are a contractor working through an umbrella, this is broadly good news and requires nothing from you. Your agency now has a real financial incentive to make sure your PAYE is actually being paid over. Keep your payslips. If deductions on your payslip do not match your personal tax account, that is now a conversation with a party who has something to lose.
If you run a recruitment agency, this is a significant compliance change and it is your liability now. Due diligence on the umbrellas in your supply chain is no longer optional good practice, it is protection against a bill for someone else failure.
If you are an end client engaging workers without an agency, the liability lands on you. Many businesses in this position do not realise it.
How this sits with IR35
These are different rules and it is worth not confusing them. IR35, or off payroll working, is about whether a contractor working through their own limited company is really an employee in substance. The umbrella rules are about who accounts for PAYE when an umbrella is used.
A worker in an umbrella is already employed by the umbrella and taxed through PAYE, so IR35 does not apply to them in the same way. Plenty of contractors moved into umbrellas precisely because of IR35, which is a large part of why the umbrella sector grew as fast as it did.
Common questions
Do I need to leave my umbrella?
No. The rules do not restrict umbrella use. They change who is on the hook for the PAYE.
What if my umbrella has not been paying my tax?
Check your personal tax account against your payslips. If there is a gap, raise it with your agency, and get advice. Having deductions taken and not paid over is a serious matter and you should not sit on it.
This reflects HMRC guidance as at July 2026. If you run an agency and want to understand your exposure, or you are a contractor with a payslip that does not add up, get in touch.
Related services and guides
Payroll service Accountants for contractors Construction & CIS