Navigating the 2025 Umbrella Company Reforms: Understanding Joint and Several Liability
3 minutes to read
The Government’s draft legislation, published on 21st July 2025, as part of the Finance Bill 2025-26, marks a pivotal step in reforming the umbrella company sector with the introduction of Joint and Several Liability (JSL) set to take effect from 6th April 2026.
The Purpose of the Umbrella Company Reforms
The UK government’s reforms, detailed in the Finance Bill 2025-26, aim to address longstanding issues of tax non-compliance in the umbrella company market.
The introduction of JSL is designed to:
Enhance Accountability: By making recruitment agencies (or end clients, where no agency is involved) jointly liable for any unpaid PAYE liabilities should the Umbrella company fail to meet its obligations.
Eliminate Rogue Operators: By targeting non-compliant Umbrella companies engaging in tax evasion and other opaque payroll structures, compliant businesses like ours can operate within a level playing field that fosters transparency, fairness and trust across the sector.
Protect Contractors: The reforms shield contractors from the financial risks of non-compliant umbrella companies that fail to accurately report or pay taxes to HMRC.
Promote Transparency: Encourage agencies to partner with trusted, accredited providers to promote a more transparent and fair labour market.
What is Joint and Several Liability?
Joint and several liability, as established in the draft legislation, amends Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) by introducing a new Chapter 11.
From 6th April 2026, recruitment agencies supplying workers through umbrella companies will be jointly liable with the Umbrella company for any unpaid PAYE taxes. If no agency is involved, this liability shifts to the end client. Future amendments to the Social Security Contributions and Benefits Act 1992 will extend similar liability for National Insurance Contributions.
In practical terms, JSL means that if an umbrella company fails to pay the correct taxes to HMRC, the agency (or end client) could be pursued for the entire tax shortfall.
This “absolute liability” comes with no statutory excuse, making robust compliance processes essential.
Looking Ahead: A Stronger, Fairer Umbrella Sector
These umbrella company reforms with JSL at their core, are a decisive step toward a more transparent and accountable labour market. While the changes introduce new responsibilities for recruitment agencies, they also create opportunities to build stronger, more compliant supply chains.
As a long-standing FCSA accredited umbrella provider, we pride ourselves on our unwavering commitment to compliance, transparency, and contractor welfare.
Proven Compliance: Our FCSA accreditation, backed by rigorous annual audits, ensures we meet the highest standards for PAYE and NIC compliance.
Real-Time Transparency: We provide auditable proof of tax calculations, RTI submissions, and HMRC payments, giving you peace of mind and a watertight audit trail.
Contractor Support: We empower our contractors with clear, easy-to-understand payslips and access to tools like HMRC’s Umbrella Company Pay Tool, ensuring they understand their pay and deductions.
Industry Leadership: With years of experience navigating legislative changes, we are strategically poised to support and guide you through these reforms.
Our business has been built on the strength of our agency partnerships and the reputational values we share and uphold. By partnering with us, you can navigate these new regulations with confidence, knowing that your obligations are met, your contractors are protected and your business is safeguarded.
Contact us today to discuss how we can help you prepare for April 2026.
