PAYE rules for labour supply chains that include umbrella companies from 6 April 2026
Source: gov.uk (2025-09-16)

What you need to know about the new rules if you're in a labour supply chain which includes an umbrella company, or any third person supplying labour.

These rules are based on draft legislation and the government’s approach to tackling non-compliance in the umbrella company market (https://www.gov.uk/government/publications/umbrella-companies-tackling-non-compliance-in-the-umbrella-company-market). They’ll be updated if there are any changes before it becomes law.

An umbrella company employs workers on behalf of either:
- an agency
- the business the employees work for (the end client)
They have the legal responsibilities as an employer for employment rights and the liability to HMRC for:
- PAYE Income Tax
- student loan repayments
- employee and employer National Insurance contributions
When we refer to an umbrella company, this includes any business supplying labour under a contract of employment.

Who the rules apply to

If you’re the end client, check if the worker is supplied to you by an agency or umbrella company.

The rules will apply to:
- new and existing labour supply chains
- money paid to workers on or after 6 April 2026
- the agency that has the contract with the end client to supply workers
- the end client, if there’s no agency involved
- the umbrella company
The agency or end client will be responsible for making sure PAYE is operated correctly, when an umbrella company employs their workers. We can recover any underpayment of PAYE from them.

If any part of the chain is non-UK based, read the Employment Status Manual ESM2420 — Umbrella companies legislation (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2420).

When the rules will not apply

The rules will not apply if the workers are:
- employed through their own personal service company, if certain conditions are met — read Understanding off-payroll working (IR35) (https://www.gov.uk/guidance/understanding-off-payroll-working-ir35)
- deemed to be employed through a managed service company — read ESM3510 — Meaning of managed service companies (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm3510)
- salaried members of a Limited Liability Partnership — read Partnership Manual PM251000 — The salaried member guidance (https://www.gov.uk/hmrc-internal-manuals/partnership-manual/pm251000)
- treated as employed by an agency — read ESM2039 — Agency and temporary workers: agency legislation (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2039)
However, there may be some circumstances when the new rules will apply in these cases — read ESM2440 — Purported umbrella companies (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2440).

What this means for you

If you’re the agency or end client

You’re responsible for making sure that the umbrella company operates PAYE correctly. If we find an umbrella company has not paid the correct amount of PAYE to us, we’ll recover it from you.

Check how to reduce your risk of using an umbrella company that does not follow the PAYE rules (https://www.gov.uk/guidance/agencies-and-other-businesses-using-umbrella-companies-who-may-be-operating-avoidance-schemes).

If you’re the umbrella company employing workers

You’re still responsible for working out PAYE for your employees correctly and paying us on time. You’ll need to provide the agency, or end client, with the information they need to check you’re doing this.

For more information, read Examples of good practice for umbrella companies in the temporary labour market (https://www.gov.uk/guidance/examples-of-good-practice-for-umbrella-companies-in-the-temporary-labour-market).

If you’re the employee of an umbrella company

The umbrella company is your employer and responsible for paying you correctly.

You can check if your payslip has the correct deduction by using the tool Work out pay from an umbrella company (https://www.gov.uk/guidance/work-out-pay-from-an-umbrella-company).