Finance Bill 2026: strengthening action on umbrella company tax non-compliance

Background

The Finance Bill 2026, published on 4 December 2025, introduces measures aimed at addressing tax non-compliance in the umbrella company market. The legislation changes how responsibility for PAYE liabilities is allocated where workers are supplied through umbrella companies.

Where a UK agency supplies workers to an end-client via an umbrella company, the agency may be jointly and severally liable for PAYE liabilities if the umbrella company fails to operate PAYE correctly. If there is no UK agency involved, or where the agency is connected to the umbrella company, the end-client may instead be jointly and severally liable.

What has changed

The legislation largely reflects draft proposals published earlier in 2025 but extends the anti-avoidance provisions.

In particular, the rules expand the circumstances in which an entity may be treated as an umbrella company, including situations where an organisation presents itself as the employer of a worker, even if that is not the legal position. The scope of the regime has also been widened to include arrangements where a worker is not employed by an umbrella company, but where the worker’s services are supplied to an end-client in a way that would have fallen within the umbrella company rules had an employment relationship existed.

Additional provisions address labour supply chains involving more than one umbrella or umbrella-like entity, by identifying which entity is treated as responsible for PAYE purposes. The legislation also brings within scope remuneration arrangements that do not result in PAYE being paid, by treating such payments as PAYE income for these purposes.

Learning points for employers and agencies

The Finance Bill 2026 introduces revised rules governing PAYE liability in umbrella company arrangements. These changes broaden the types of arrangements that can fall within the regime and allocate PAYE liability to UK agencies or, in certain circumstances, end-clients where umbrella company arrangements are used.

For more information or advice, please contact Sharmin Chowdhury in our Employment team.