What HMRC’s new umbrella rules mean for employers using recruitment agencies.

📘 What HMRC’s new umbrella rules mean for employers using recruitment agencies

This is a detailed article, but with HMRC preparing to introduce some of the most significant compliance changes the recruitment sector has seen in years, we believe it is important to explain what is changing and what it means for your business.

From April 2026, new measures within the Finance Bill 2025–26 will change how temporary workers are taxed when employed through umbrella companies. These reforms are designed to tackle non-compliance in the umbrella company market and increase accountability across labour supply chains.

See HMRC’s official guidance on

PAYE rules for labour supply chains that include umbrella companies from 6 April 2026

Responsibility – and potential liability – will increasingly sit with those at the top of the supply chain, including end clients.

At Platinum Resourcing, we want to reassure our clients that these changes will not affect your service.
We have never used umbrella companies at any point in our history, instead running our own secure, fully compliant in-house payroll system.

📅 What is changing from April 2026?

HMRC has confirmed that from 6 April 2026:

• Recruitment agencies – or the end client where no agency is involved – will be responsible for ensuring PAYE is operated correctly when workers are supplied through umbrella companies.
• The reforms target issues HMRC has repeatedly identified, including incorrect PAYE deductions, disguised remuneration schemes and unclear payslip practices.
• Supporting guidance has been published to help businesses prepare for the changes.

For employers using agencies reliant on umbrella companies, these changes may increase compliance obligations and potential financial exposure.

🛡️ Why Platinum Resourcing clients remain fully protected

Our operating model does not involve umbrella companies – and that removes the core risks these reforms are designed to address.

• We have never used umbrella companies
  Every temporary worker is paid directly through our in-house payroll system.
• PAYE is handled transparently by us
  We process Income Tax, National Insurance, pensions and statutory payments internally.
• No umbrella-related liability can be pushed back to you
  Because we do not use umbrella companies, the new joint liability rules do not introduce any additional risk for our clients.
• A long-standing commitment to compliance
  Doing things properly has always been central to how we operate.

⚠️ What employers using multiple agencies need to be aware of

Under HMRC’s new rules, the end client is positioned at the top of the labour supply chain.

If an umbrella company in your supply chain fails to operate PAYE correctly, HMRC can recover the unpaid
Income Tax and National Insurance from other parties – including the end client – even if you have already
paid the recruitment agency or umbrella company invoice in full.

This is a significant shift, and one employers should not overlook.

💷 Where the highest risk is typically found

HMRC and industry experts often identify higher levels of non-compliance in areas of the market where
extremely low-cost recruitment or payroll services are offered.

To operate at unsustainably low price points, some agencies rely heavily on umbrella companies or complex subcontracting chains that may not fully meet PAYE requirements.

Not every low-cost provider operates this way – but it is an area where HMRC and advisers have repeatedly flagged increased risk.

A brief review of your wider labour supply chain now can help prevent avoidable costs later.

📑 Why HMRC has introduced these reforms

The changes follow several years of concern around:

• inconsistent or incorrect PAYE deductions
• tax-avoidance schemes disguised as umbrella arrangements
• confusing or misleading payslip structures
• fragmented labour chains that made enforcement difficult

The reforms aim to increase transparency, improve compliance and ensure correct tax accountability across supply chains.

🔍 What you may wish to review next

• Confirm whether other agencies you use rely on umbrella companies
• Request clarity on who operates PAYE and how it is managed
• Review their compliance processes ahead of the 2026 reforms
• Consider whether unusually low pricing aligns with compliant payroll practices

A proactive review now can help safeguard your organisation against potential future liabilities.

🤝 Platinum Resourcing: compliance, transparency and trust

Our in-house PAYE system ensures our clients remain fully protected – and it will continue to do so when HMRC’s new rules take effect.

If you would like guidance on reviewing your wider labour supply chain, our team is here to help.