Q&A: Combatting tax avoidance

As announced in the autumn Budget from April 2026 it is intended that where workers are engaged to provide services to a business via an umbrella company the agency or business contracting with the umbrella company will become legally responsible for ensuring that the umbrella company operates payroll correctly through the PAYE system and that the correct amounts of tax and National Insurance contributions (NICs) (including employer NICs) are paid to HMRC.

Why is this change being proposed?

HMRC has been concerned about tax avoidance in the umbrella company market for some time and considers that the new rules will safeguard significant amounts of tax revenue. According to analysis undertaken by HMRC between 2022 and 2023 at least 275 000 workers were engaged by umbrella companies that failed to comply with their tax obligations. During the same period HMRC contends that £500m of tax...