If you have anything to do with the UK’s temporary workforce, and unless you’ve been living under a rock, you will know that things will be changing in April 2026. For the better…..
A new hand on the tiller
The impact of the first Labour budget in over 14 years (and the first by a female Chancellor of the Exchequer) has now had time to be understood and absorbed by the umbrella sector. There’s changes to Employer’s NI rates and also, startlingly, to the threshold that ERNI becomes payable and these measures will have an impact on assignment rates from April 2025.
The changes to the Employment Allowance, increasing it from £5,000 to £10,500 at the same time will also have an impact – especially in the murky world of Mini-Umbrellas.
These are the financial impacts and have been worked over at length by many industry experts who broadly agree that the budget was not really a win for contractors.
What will be a win and will level the playing field for the umbrella sector is the outcome of the Government’s consultation on non-compliance in the sector which was released on budget day.
Change is coming
At present, the responsibility for ensuring that tax and National Insurance is paid correctly by umbrella companies rests with the umbrella companies. This has led to recruitment agencies (and contractors) often working with intermediaries that were not doing things right. Many of these “dodgy” umbrellas operated, and still operate, aggressive tax planning schemes, which whilst increasing take home pay for many workers, expose contractors to potentially huge tax bills.
From April 2026 however, things will change and the responsibility for ensuring that the correct amount of tax and NI is paid on umbrella contractors’ wages will become the responsibility of the agencies themselves.
The details of the proposed changes are here: Consultation
Mandated due diligence
It has always been true that agencies should carry out their own due diligence on the umbrella companies that they engage with. This will still be the case but now with knobs on. There are a number of paid-for accreditations that provide at least some level of reassurance that at least on the day of checking, an umbrella company would be deemed compliant. However some high level cases have recently highlighted that there are “bad actors” in the sector that have managed to operate tax avoidance despite holding these badges of compliance.
The future
There are two ways for an agency to absolutely be sure that an umbrella company is operating correctly.
Truly PARTNER with an umbrella provider. The umbrella provider can share their back office tech, give access to their RTI reports so that an agency can see timesheets, payments and remittances to HMRC in real-time and reconcile them. The umbrella company becomes an extension of the recruitment agency. Meades Umbrella are more than happy to do this with any agency that works with us
Or, the agency can choose to only work with an umbrella company that holds a third-party certification that guarantees compliance by using technology to provide a real-time audit of all of their financial transactions and reports weekly to the agency. In addition, the certification will also ensure that all of the umbrella’s processes and documentation are fully compliant, in a similar way to the traditional accreditation bodies.
How can we help?
Meades Umbrella provide fully compliant umbrella and CIS payroll to UK agencies. In addition to becoming third-party certified in the coming weeks, we would love to open our doors to any recruitment agency looking to mitigate their risk in the “new world”. We want to be a genuine partner to your business.
Give us a call on 01923 729516 or email experts@meadesumbrella.co.uk