Navigating New Umbrella Company Regulation from April 2026

With umbrella company regulation set to take effect in April 2026, understanding the new landscape for umbrella companies is crucial for contractors and agencies alike. This blog delves into what you need to know and how to ensure your business stays compliant.

Understanding the Rules

The government has announced the regulation of umbrella companies which is set to come into force in April 2026. The new rules aim to ensure greater transparency, compliance, and fair treatment for contractors who work through umbrella companies. 

The ultimate aim is to crack down on non-compliant umbrella companies that engage in unethical practices such as tax avoidance, misrepresentation of contractor earnings or operate mini-umbrella schemes. By understanding these new regulations, both contractors and businesses can better navigate the evolving landscape and avoid potential pitfalls.

Key Changes Impacting Agencies

The government intends to move liability for accounting for PAYE from the umbrella company to the agency, effectively making the agency the employer for tax and the umbrella the employer for employment rights purposes. Where there are multiple agencies in the supply chain, the agency that holds the contract with the end hirer will be deemed liable, and if no agency is in the chain, the end hirer will be deemed as such.

Now that the government has signaled its intended policy direction, it is now up to HMRC to determine the actual mechanism and process by which this goal may be achieved. We anticipate that HMRC policy teams will be liaising heavily with industry to determine this in time for the legislation and technical guidance to be delivered in the summer (June or July).

Which much still to be determined, what is clear is that compliant umbrella companies, which agencies rely on to support their contractors, given the growing complexity and cost of employment, will still be hugely in demand. 

Industry Response

In the coming months, there will be redoubled effort from industry bodies such as; the FCSA, REC, APSCo, TEAM, IPSE, SafeRec, Professional Passport and other organisations, who are spearheading efforts to lobby HMRC policy teams and policy makers in Whitehall to get to an outcome that supports the aim of stamping out non-compliance but not impacting the UK's flexible workforce.

Our software providers, My Digital, have also joined forces to establish the Temp Labour Initiative, which supports compliant umbrella operations and advocates for governmental reform. More information is available at: https://www.templabourinitiative.co.uk/.

The Importance of Compliant Umbrella Companies

Using compliant, well-established umbrella companies is now more important than ever. With the transfer of PAYE responsibility, agencies must look at their supply chains to ensure they only work with the most established and compliant umbrella companies, like NASA. If there is uncertainty as to how some contractors are engaged, or there are non-PSL or other providers who don't have accreditation's, this should be addressed as soon as possible.

NASA's reputation is built on our longstanding commitment to compliance through our FCSA accreditation. We've supported 1,000's of agencies in the UK (including many of the largest such as Hays, Adecco, Reed, Impellam, LA International, Sanderson & Alexander Mann) and have employed well over 100,000 contractors in our almost 20 year history.  Our stringent compliance standards ensure all tax and national insurance contributions are correctly calculated and paid to HMRC, protecting contractors and agencies from unexpected liabilities.

Compliant umbrella companies also offer additional benefits to contractors such as business insurance, statutory payments (SMP/SPP/SSP etc), continuous employment (important for mortgages), employee rewards and well being programs and salary sacrifice for pension contributions. Many of these benefits are simply not available to those with worker status on agency payrolls.

Steps to take now

To ensure compliance and avoid risk, agencies should conduct thorough due diligence when selecting an umbrella company, or on their own supply chain if working with umbrellas already. They should verify the Umbrella Company's compliance history and accreditations. Not only should you confirm that the Umbrella supports genuine employment of the contractors, but confirm the money flow and payroll deductions are accurate and correct along with confirmation of PAYE being paid to HMRC. This can now be completed using intuitive payslip checking solutions.

If you are engaged with mini-umbrella companies or other umbrella companies that have no accreditations (as a bench mark look for FCSA, SafeRec and/or Professional Passport) then we suggest talking to NASA or other compliant providers for no obligation discussion about how to protect your business. Change is coming and HMRC will be stringent in their enforcement. 

Want to discuss the changes, and what this could mean for your agency? Leave your details below, and one of our Agency Directors will be in touch.