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HMRC Confirms April 2026 Umbrella Company Reform

HMRC has confirmed its intention to introduce new rules governing umbrella company engagements from April 2026, with draft legislation expected in July 2025.

The proposed changes will bring joint and several liability for unpaid tax within labour supply chains where umbrella companies are involved. This means that end clients, agencies, and umbrella companies could all be held liable for any unpaid PAYE tax and National Insurance where tax obligations aren’t met.

What Has HMRC Announced?

In its latest policy update, HMRC reaffirmed its plans to legislate for greater accountability within umbrella supply chains. The key points are:

  • The new rules will take effect from April 2026.
  • Draft legislation is expected in July 2025.
  • Liability for unpaid tax debts could extend to end clients and others within the supply chain when an umbrella company is used.
  • Contracts assessed as Outside IR35 and undertaken via a contractor’s own limited company will remain outside the scope of these reforms.

What Should Businesses Do Now?

While the changes are not immediate, it’s an opportunity for businesses to review their existing contractor engagement policies and supply chain controls. Many organisations introduced blanket bans on limited company contractors or enforced umbrella-only engagements in response to the 2021 IR35 reforms. With further changes now confirmed, it would be prudent to reassess these decisions and ensure future workforce models are both compliant and commercially sustainable.

Brookson Legal advises clients to:

  • Map out contractor engagement routes and supply chains
  • Review any blanket bans or risk-averse engagement strategies
  • Identify potential areas of liability where umbrella companies are used

We’re Here to Help

As more detail becomes available in July 2025, Brookson Legal will continue to keep clients informed and provide practical guidance on how to prepare.

If you have any questions about these changes or how they might affect your business, please get in touch with our legal team.