Umbrella company rules from April 2026: what construction firms need to know

What changed on 6 April 2026?

Umbrella companies employ workers and pay them through PAYE, then supply them through agencies to end clients. They are common in construction, especially for site operatives and agency labour. HMRC says some umbrellas fail to pay over the tax they deduct, then disappear.

The Finance Act 2026 added a new chapter to the Income Tax (Earnings and Pensions) Act 2003. For payments to workers made on or after 6 April 2026, if an umbrella company does not pay the PAYE income tax and National Insurance it owes, the liability can pass up the chain:

• to the agency that contracts with the end client; or
• if no agency is involved, to the end client that uses the workers.

The liability is joint and several, which means HMRC can recover the full amount from the agency or client, not just a share. It does not matter whether you knew the umbrella was non-compliant.

“Purported” umbrellas and CIS

The rules also cover arrangements that call themselves umbrella companies but pay workers in other ways, for example as self-employed or through CIS, or by splitting workers across many small “mini umbrella” companies. In construction this matters because some labour providers pay workers under CIS when they should be operating PAYE.

Who is affected in construction?

Contractors and developers who take labour from agencies, recruitment agencies supplying site workers, and trade subcontractors who hire in labour without an agency in between. If you are a worker, the rules do not make you liable, but you should check your payslips show tax and National Insurance being paid.

Higher employment costs as well

These rules sit alongside the higher employer National Insurance that applied from April 2025: 15% on earnings above £5,000 a year. That increase pushed some labour suppliers towards cheaper, riskier arrangements. If a quote looks too cheap, ask how the workers are paid.