Umbrella Company PAYE Rules: What Employers Must Check Now
Updated: 7 days ago
A lot of Bury businesses take on agency staff at busy times, particularly in construction, care, hospitality and warehousing, and many of those workers are paid through an umbrella company rather than directly by the agency. Until recently, that was mostly background administration. Since 6 April 2026 it isn't. New rules mean the business further up the supply chain, not just the umbrella company, can end up paying unpaid PAYE tax and National Insurance. HMRC has also kept adding names to its public list of avoidance schemes linked to umbrella companies, with another entry reported as recently as early October 2026. If agency or umbrella-paid workers are part of how you staff your business, it's worth checking where you stand.
What Changed in April 2026
From 6 April 2026, new joint and several liability rules mean that if an umbrella company fails to pay the PAYE tax and National Insurance it owes on a worker's pay, HMRC can pursue the recruitment agency instead, or the end client business if there's no agency in the chain. That's a real shift in where the risk sits. Previously, an umbrella company carried that liability alone; now it can move to a business that has no direct control over how the umbrella runs its payroll. The rule isn't retrospective, so payments made before 6 April 2026 aren't affected, and it doesn't cover workers paid through their own personal service company or as deemed agency workers. For most ordinary umbrella arrangements, though, the exposure is real and ongoing.
Why HMRC's Avoidance List Keeps Growing
HMRC publishes a running list of named tax avoidance schemes, promoters and enablers, and a good number of recent additions involve umbrella companies. The list has grown from around 50 names a year ago to close to 100 now, partly because a Finance Act 2022 change lets HMRC republish a name it still has evidence against, rather than delisting it automatically after 12 months. The pattern HMRC keeps flagging is a familiar one: a worker is paid a small portion of their earnings through PAYE, often close to minimum wage level, with the rest paid without tax or National Insurance deducted and labelled as a loan, advance or discretionary payment. HMRC's position is straightforward: that balance should have been taxed, and the business further up the chain can now be asked to cover the shortfall.
Warning Signs Worth Checking For
Pay split between a low taxed salary and a larger untaxed bonus, loan or advance
A take-home pay offer that looks noticeably higher than a standard PAYE umbrella would give
Payslips that don't clearly show tax and National Insurance deducted on the full amount earned
An umbrella company that's reluctant to explain its pay structure or share compliance checks
Any provider named, or linked to a named provider, on HMRC's avoidance list
What To Check Now
If agency or umbrella-paid contractors are part of your workforce, a handful of checks are worth doing before the year's out:
Ask your recruitment agency which umbrella companies are on their approved list, and how recently that list was reviewed
Check HMRC's published list for any provider you use, bearing in mind names can reappear after being removed
Review your supply chain contracts for clauses covering compliance and indemnity
Keep a record of the checks you've carried out, in case HMRC ever asks
For some businesses, the simplest way to reduce this risk is to bring more of it in-house. Our payroll and auto enrolment service can run PAYE directly for your staff, so there's no umbrella company in the chain and you keep full visibility over what's being deducted and paid across to HMRC.
None of this means every umbrella company is a problem, most run compliant PAYE exactly as they should. But given how the liability now works, a bit of extra checking now is a lot cheaper than a tax bill later.
Need a hand with this? We're accountants in Bury, and our payroll service covers it for a fixed fee.
Talk it through with us
If this affects you, book a free, no-obligation 30-minute chat by phone, Teams or at our Bury office, or see your fixed fee online in 2 minutes. Prefer to talk now? Call 0161 327 0047.
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