The April 2026 umbrella PAYE change, and what it means for your supply chain

On 6 April 2026 responsibility for accounting for PAYE on workers supplied through umbrella companies moved. It now sits with the recruitment agency that supplies the worker. Where there is no agency in the chain, it sits with the end client.

This is a significant change and a lot of construction firms have not looked at it closely, because umbrella working is a smaller share of construction than it is of, say, IT contracting. It still matters, and it matters most to the people who assumed it did not apply to them.

What changed

Previously, if an umbrella company failed to operate PAYE correctly, HMRC pursued the umbrella. When the umbrella was a mini umbrella or a short lived scheme structure, HMRC frequently pursued nothing at all, because the company had already dissolved. That is the loss the change is designed to stop. HMRC has estimated the measure will prevent around £2.8bn of revenue loss by 2030.

Now the agency is treated as making the payment for PAYE purposes. The liability is joint and several across the chain, which means HMRC can pursue whoever it can actually recover from.

The part that catches people out is that there is no reasonable care defence. Under the off payroll rules an end client that took reasonable care in reaching a status determination had a defence. Here there is not one. Having checked your umbrella carefully and been deceived is not, on its own, an answer to an assessment.

Why this matters in construction

Most construction temporary labour is paid on CIS against a personal UTR, not through an umbrella, so the direct exposure is narrower than in other sectors. Two things still bite.

First, mixed chains. A site can run CIS operatives, PAYE operatives and a handful of umbrella supplied specialists at the same time without anybody consciously deciding that. The umbrella exposure arrives with the specialists.

Second, tiered supply. If your agency subcontracts part of an order to a second agency that uses an umbrella, the chain is longer than you think it is. Joint and several liability does not care that you did not know.

What to ask your suppliers

Four questions, and they should be answerable in writing without a delay.

How do you pay the people you supply to me. CIS, PAYE, umbrella, or a mixture, and which people fall into which route.

Do you subcontract any of my orders to another agency. If yes, to whom, and how do those workers get paid.

Who owns the payroll entity. An agency that cannot see inside its own payroll cannot tell you whether PAYE is being operated correctly. That is the whole exposure in one sentence.

Can I see the deductions. Ask what is taken from a worker’s pay and what is charged to you. A supplier who will not answer that plainly is telling you something.

Where we sit

We pay predominantly on CIS against a personal UTR, which is the standard route for construction temporary labour and sits outside the umbrella rules entirely.

Payroll runs through Tempeo Pay, a sister company under the same ownership. It is not in house and we do not describe it as such. What matters for this change is that we own it, so we have full visibility of how workers are paid, rather than passing people to a third party umbrella we cannot see inside.

We offer PAYE as well, calculated on the live employment cost for the actual person rather than an assumed statutory maximum, with the same fixed £25 per person per day on top.

Operatives on CIS are charged £15 a week to process their payments. That is the only deduction from their pay, and it is separate from the margin you pay. We say it openly because £22 a week is common elsewhere and charges reach £35.

If you want the payroll arrangements for the people currently on your sites set out in writing, ask us and we will send them.

This is a summary written for site and commercial teams, not tax advice. If your chain is complicated, take proper advice on it.