Joint & Several Liability 2026: Everything You Need to Know
In a bid to eradicate non-compliance – and malpractice – from the supply chain, the new Joint & Several Liability rules will increase the risks and responsibilities of Recruitment Agencies and End Clients who engage Umbrella Companies.
Here’s everything you need to know about Joint & Several Liability, what’s changing in April 2026, and how to remain compliant and protect yourself from penalisation.
What is Joint & Several Liability and What is Changing in 2026?
The 2026 Joint & Several Liability change means that umbrella companies, recruitment agencies, and (potentially) end clients in a supply chain can be held jointly and/or individually responsible for unpaid taxes such as PAYE and National Insurance Contributions.
The UK government plans to include the new Joint & Several Liability rules in the rolling out of the upcoming Finance Bill, which will take effect in April 2026. These changes to the umbrella company legislation, known as ESM2400, will form a new section (Chapter 11) in Part 2 of the Income Tax (Earnings and Pensions) Act 2003, or ITEPA2003 for short.
Put simply, under the new rules, if an umbrella company fails to pay its tax obligations, HMRC can pursue either – or both – of the recruitment agency or the end client to recover the debt. The aim is to reduce tax losses from non-compliant umbrella companies and provide greater protection to the contractor workforce. Hence the importance – for both contractors and recruitment agencies – of partnering with established, accredited, fully compliant umbrella companies.
Who is Liable Under New JSL Rules?
When new Joint & Several Liability rules comes into force in April 2026, the risk profile a of typical contractor supply chain will look a little different. Take a look below to understand where the liability will sit.
When the new JSL rules come into force, recruitment agencies will have additional liabilities surrounding tax and NICs compliance within the supply chain. Therefore, it is critical that agencies ensure all workers paid through umbrellas exclusively use umbrella companies from their preferred supplier list (PSL). That PSL must only comprise highly compliant and fully accredited umbrella company providers.
Move the slider RIGHT to see the current supply chain or LEFT to see what will change post-April 2026.
Currently, where the end client engages directly with an umbrella company (with no recruitment agency involvement), the end client is NOT liable.
Following April’s JSL changes, though, both the end client AND the umbrella company will be jointly and severally liable.
For this reason, we suggest that all end clients who engage umbrella company contractors thoroughly vet every umbrella company they use to ensure complete compliance and reduce risk.
Move the slider RIGHT to see the current supply chain or LEFT to see what will change post-April 2026.
If you are a Managed Service Provider (MSP) involved in the supply chain, from April you will become liable where you are not currently.
For agencies, this may mean MSPs will require more oversight of the full supply chain, including the umbrella provider/s you select.
Utilising a payslip checking service – or an umbrella company that deploys one – such as veriPAYE or SafeRec will certainly help with this. It’s also crucially important to ensure all your contractors are only paid via fully compliant umbrella companies.
Move the slider RIGHT to see the current supply chain or LEFT to see what will change post-April 2026.
A ‘Connected Company’ in this context, at least, is a company that has a specific connection or relation to another organisation within the same supply chain.
For example, let’s say the end client engages ‘ABC Recruitment’ to supply contracted workers. To process their payments they then use an umbrella company from the agency’s PSL, one of which is XYZ Umbrella. ABC Recruitment and XYZ Umbrella are both owned by the same Group, with the same shareholders and registered office.
As you’d imagine, in HMRC’s eyes, this setup could create multiple accountability loopholes – however innocent the arrangement may be. These potential loopholes will be slammed shut by the new Joint & Several Liability rules.
From April 2026, if an agency uses an umbrella company that they are ‘connected’ to, the liability will extend to the end client.
Move the slider RIGHT to see the current supply chain or LEFT to see what will change post-April 2026.
'The imminent Joint & Several Liability changes significantly increase the risk within the supply chain, with a far bigger focus on transparency. It's so important for umbrella companies like us to show agencies and end clients alike that we're doing things right and on time, every time!'
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What does JSL mean for Contractors?
For contractors, the Joint & Several Liability change offers an additional layer of protection. However, it also introduces complexity. If a contractor’s umbrella company fails to meet its tax, NI, or employment obligations, their agency (and, in some cases, end-client) may also be held accountable.
While this will help ensure that contractors receive their correct pay and entitlements, it may also lead agencies to impose stricter onboarding processes or limit which umbrella companies contractors can choose to use.
What does JSL mean for Agencies?
Post-April, recruitment agencies can be held legally responsible – along with the umbrella company in their respective supply chain – for breaches such as unpaid taxes, underpaid workers, or non-compliance with employment regulations. Even if they didn’t directly cause the issue, agencies can still be pursued by the likes of HMRC for the full amount owed.
This vastly increases the importance of due diligence, as agencies must ensure the umbrella companies they work with are fully compliant and properly audited.
What does JSL mean for End Clients?
For end clients, Joint & Several Liability simply extends the chain of responsibility. If an umbrella company in an end client’s supply chain is found to be non-compliant – for example, they engage in tax avoidance or underpay their workers – the end-client could face financial or reputational consequences.
This should encourage end clients who use the services of umbrella contractors to vet their supply chains rigorously and mitigate risk by working exclusively with trusted, compliant umbrella partners.
Using an accredited Umbrella company is a strong starting point and one of the most effective ways of reducing risk.
JSL News & Updates
With the implementation of new Joint & Several Liability rules just around the corner, we're committed to keeping you completely up-to-date with everything you need to know, whether you're a Contractor, End Client, or Recruitment Agent.
WEBINAR: Upcoming Umbrella Legislation Changes: What Agencies & Consultants Need to Know
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'Here at Danbro Umbrella, we've been working extensively with both new and long-standing agency partners to help them prepare for the Joint & Several Liability changes. Many of our partners are already executing plans to drive down risk in the supply chain. Don't leave it too late!'
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Your Frequently Asked Questions about Joint & Several Liability
Are agencies now responsible for the umbrella company’s payroll?
No. The umbrella company still runs PAYE. However, if they fail to pay the correct tax or NIC, your agency can now be held liable for the unpaid amounts.
Will agencies be liable for the full tax debt, or just their part?
You could be liable for the full amount. Joint and several liability means HMRC can pursue your agency even if the umbrella company caused the non-compliance.
Is there any protection if agencies carry out due diligence checks?
Not currently. There is no safe-harbour in the draft legislation. Even thorough checks won’t automatically prevent liability if the umbrella later defaults.
What does this mean for my agency?
You’ll need to apply enhanced due diligence when choosing and managing umbrella partners. Failure to identify or address non-compliance could make your agency financially liable for unpaid taxes.
How can we mitigate liability risk?
- Maintain a preferred supplier list of vetted umbrellas
- Update contracts to include indemnities and audit rights
- Keep thorough documentation of compliance checks
- Conduct ongoing reviews rather than one-off checks
Will agencies face penalties even if they didn’t know about non-compliance?
Yes. If HMRC finds that “reasonable care” wasn’t taken to check umbrella compliance, liability may still be applied.
Will using an accredited umbrella (e.g., FCSA) be enough protection?
FCSA Accreditation is the industry gold standard, and is a great indicator that the umbrella company you are dealing with is compliant and will make the correct payments and deductions to HMRC. However, it doesn’t remove your legal responsibility. HMRC expects agencies to perform their own checks and keep records of them.
Danbro Umbrella are FCSA Accredited and veriPAYE assured, which we believe should give the supply chain confidence and assurance against tax liabilities.
How often should due diligence be repeated?
Payslip verification tools, such as veriPAYE and SafeRec, allow for monthly or even weekly checkups on tax payments. However, where there are ownership, directors, or concerns about payment practices, due diligence should be completed as needed.
What if HMRC investigates one of our umbrellas?
Cooperate fully, gather due diligence evidence, and show that your agency took reasonable steps. Documentation will be critical, so choosing umbrellas with veriPAYE or SafeRec can be helpful.
What resources are available to help agencies prepare?
HMRC’s published guidance, and compliance frameworks from umbrella accreditation providers such as FCSA are both great places to look, as is our regularly updated blog!
How does this affect me as a contractor?
It shouldn’t directly affect your tax position if you’re with a compliant umbrella — but it may limit which umbrellas you can use, and agencies may introduce stricter onboarding. If you’re with an umbrella company that isn’t on your agency’s PSL, or it gets removed from the PSL, you may need to switch umbrella companies.
Will I become personally liable for unpaid tax?
No. The liability sits with businesses in the supply chain — not individual workers. However, if you knowingly join a tax avoidance scheme, you could face personal HMRC action.
Will this change how I’m paid?
Not directly, but you may see agencies restrict which umbrellas they’ll pay through. This could affect your umbrella choice.
What happens if my umbrella is non-compliant?
If it underpays tax or uses avoidance schemes, you could receive less statutory protection like holiday pay. This is because some non-compliant umbrellas have been found to be secretly pocketing contractors’ holiday pay. HMRC might also later challenge your income records and expenses.
Can I still choose my own umbrella?
That will be at your agency’s discretion. Many agencies will move to preferred supplier lists, so your choice could be limited to approved, vetted umbrellas. That’s no bad thing though, as you’ll have confidence that your umbrella is compliant and has strong benefits and support. To learn more about what Danbro Umbrella has to offer, click here!
How can I tell if my umbrella is legitimate?
Look for:
- Full PAYE on all income
- Proper payslips and deductions
- A UK-registered business
- No mention of “loans”, or “grants” as pay
- A clear employment contract and statutory benefits
For more information on how to spot non-compliance, click here.
What should I do if I suspect my umbrella isn’t compliant?
Stop using it, notify your agency, and seek advice from HMRC or a qualified accountant. Keep all payslips and correspondence as evidence.
Will this change my employment rights?
No. If anything, it will protect them, as agencies ensure their PSL only includes compliant umbrellas who accurately provide statutory rights like holiday pay, sick pay, and pension contributions.
Will compliant umbrellas mean lower take-home pay?
They might appear lower, but that’s because tax and NICs are properly deducted. In the long run, it’s safer, as it removes the risk of you getting caught up in a tax avoidance case. Remember, suspiciously high take-home pay can be a sign of non-compliance; if it seems too good to be true, it probably is.
Check out our calculator here to see how much you could take home with Danbro Umbrella!
Why is HMRC extending liability to clients?
Because end clients often drive or control the supply chain. HMRC wants everyone benefiting from contingent labour to take accountability for compliance.
What are the potential consequences for non-compliance?
HMRC could recover unpaid PAYE/NICs, charge interest and penalties, and publicly name non-compliant supply chains.
Does this apply to all contingent labour?
Yes, including workers paid via umbrella companies and other intermediaries in the supply chain.
How does this interact with IR35?
They’re separate but related. Even after an IR35 status determination, JSL can apply if the umbrella fails to meet PAYE obligations.
Should we audit our supply chain?
Yes — perform a full labour supply chain audit to identify all intermediaries and confirm their compliance procedures.
Can we rely on our agency’s assurances?
If they can demonstrate they have robust vetting, PSLs, and documentation, that’s a good start. Blind reliance won’t protect you from HMRC liability, however. So, always do your own checks where possible.
What should we do if we uncover a problem?
Act immediately — stop using the non-compliant umbrella, inform the agency, document your actions, and engage HMRC if necessary.
What are the signs of a non-compliant umbrella?
- Contractors claiming unusually high take-home pay
- Offshore or loan-based payment models
- Lack of clear payslips or PAYE evidence
- Unregistered or frequently changing umbrella entities
Are we at risk if we use multiple agencies?
Yes — risk increases with complex supply chains. You should require all agencies to meet the same compliance standard.
Get in Touch Today
Whether you’re an agency, end client, contractor or one of our existing customers, get in touch today. Let’s start the conversation about JSL.
