Tax news · June 2026
From April 2026 the responsibility for PAYE on umbrella workers shifts up the chain to agencies and end clients. Here is what it means and what to do.
The way temporary workers paid through umbrella companies are taxed is changing. From April 2026, the legal responsibility for operating PAYE on workers supplied through an umbrella company moves up the supply chain to the recruitment agency that supplies the worker, or to the end client where there is no agency. The aim is to stamp out the non compliant umbrella companies that have cost workers and the Exchequer through tax avoidance schemes.
Until now, the umbrella company itself has been responsible for running PAYE on the worker's pay. From April 2026 that responsibility, and the liability if the tax is not paid correctly, sits with the agency or the end client further up the chain. In practice this gives agencies and businesses a strong reason to make sure any umbrella they work with is fully compliant, because they can be left carrying the cost if it is not.
Three groups are affected. Contractors and temporary workers paid through umbrellas should see fewer dodgy schemes and more reliable pay, which is good news. Recruitment agencies take on new responsibility and risk, and need to check their umbrella partners carefully. And end clients who use temporary staff through umbrellas need to understand they could be in the firing line if an umbrella in their chain does not play by the rules.
If you are a worker, it is a good moment to check that your umbrella is reputable and that your payslips show the correct tax and National Insurance, and to be wary of any arrangement promising unusually high take home pay, which is a classic sign of a scheme. If you are an agency or an end client, you should review the umbrella companies in your supply chain now, carry out proper due diligence, and make sure your contracts reflect the new responsibilities before April 2026.
We welcome this change. The umbrella market has had too many bad actors for too long, and ordinary workers have been the ones left exposed when a scheme collapses or HMRC comes calling. Putting the responsibility on the larger, better resourced businesses in the chain should clean up the market. The flip side is real risk for agencies and clients who do not check who they are dealing with, so the message is simple, which is to know your supply chain and act before the deadline rather than after.
We help contractors check that their pay arrangements are sound, and we help agencies and businesses review their supply chains and prepare for the new responsibilities. Book a free call back and we will make sure you are on the right side of the change.
The recruitment agency that supplies the worker, or the end client where there is no agency. The responsibility and the liability move up the chain from the umbrella company itself.
Review the umbrella companies in your supply chain now, carry out proper due diligence, and update contracts before April 2026, because you could be liable if an umbrella in your chain does not operate PAYE correctly.
We will help you review your arrangements and prepare for the April 2026 change. Book a free call back and we will guide you through it.