Umbrella legislation is moving from headline risk to day‑to‑day reality for recruiters. Here is what changes in 2026 mean in practice, and the actions to take now.
What is changing and why it matters
From April 2026, Joint and Several Liability (JSL) rules will allow HM Revenue & Customs (HMRC) to recover unpaid Pay As You Earn (PAYE) and National Insurance Contributions (NICs) from another party in the supply chain where an umbrella sits between you and the contractor. In many cases, that means the company closest to and contracting with the end client, often the agency or Managed Service Provider (MSP).
In short, supply‑chain risk is rising. Documented due diligence and clear audit trails become essential. Expect more client scrutiny, stronger evidence requests, and a higher bar for payroll transparency and governance. Related worker‑protection measures linked to the Employment Rights Bill are also expected to land from April 2027, so policies you set now should be built to last.
What this means for recruiters
Compliance moves from “checklist” to “control framework”. You will need consistent evidence that umbrella partners run PAYE correctly, pay HMRC on time, and present itemised, easy‑to‑understand payslips. Clients will ask for proof. Your Preferred Supplier List (PSL) should show how providers are accredited, audited and monitored. Independent reporting across each payroll run gives fast assurance and reduces remediation work when something is off.
A practical action checklist
- Verify current accreditations and recent audit evidence. Ask for FCSA and SafeRec certificates, plus dates and scope of the latest audits.
- Test the payroll reality. Review sample payslips and Real Time Information (RTI) files, and confirm you have access to independent reporting on every run.
- Assess stability and service. Check Companies House filings and working capital, and review service levels, contractor feedback and issue resolution times.
- Update contracts. Add right‑to‑audit clauses and specify remediation steps and timelines.
Need help verifying suppliers? Here’s how to find a compliant umbrella company
The 90‑day plan
In the next 30 days, map your top suppliers, request evidence and book a cross‑functional review with finance and legal. By 60 days, score each provider, identify red flags and start contractual updates. By 90 days, run consultant and contractor feedback checks, finalise remediation or exit plans, and schedule a post‑live assurance review after any switch.
Red flags to watch
Non‑itemised or split payslips, frequent amended filings, missing proof of PAYE and NICs remittance, or a lack of recent independent audit evidence. If you see these, consider a transition to partners that can evidence compliance every pay cycle. If you’re considering a change in suppliers, read our article to switching umbrella partners without the pain
Our view
The JSL rules increase supply‑chain risk for agencies and MSPs, making documented due diligence and audit trails important to mitigate potential recovery of tax by HMRC. The winners will be those who treat umbrella oversight as a continuous, evidenced process, supported by independent reporting and clear supplier governance. Start now and you will protect contractors, reassure clients and reduce operational drag when the legislation takes effect.
If you want a quick PSL health check or help setting up independent reporting across payroll runs, we can support without disruption.
For more resources and guidance on umbrella compliance, visit our Umbrella Compliance Hub.
