From 6 April 2026, new Joint and Several Liability (JSL) rules are due to change how HMRC can pursue unpaid tax and NICs liabilities from the umbrella company and the agency. If there is no agency in the chain the liability will fall to the end client. Put simply, the financial risk of non-compliance is moving up the supply chain.
In this blog, we cover what JSL means in plain English, who is affected, what it looks like in practice, and the sensible steps you must take now.
What is Joint and Several Liability (JSL)?
The JSL changes mean that umbrella companies, recruitment agencies and end clients in a contractual supply chain can be held jointly or individually responsible for unpaid tax liabilities for the workers.
In the umbrella company sector, the intention is to reduce non-compliance by making other parties in the labour supply chain responsible for PAYE tax shortfalls, where an umbrella company fails to account and make payment for PAYE correctly.
Who does this affect?
Recruitment agencies and end clients If you supply workers to end clients, and umbrella companies exist within your supply chain, JSL becomes a meaningful commercial risk.
If you engage umbrella arrangements directly, or there is no agency between you and the umbrella company model, liability may sit with the end client.
Contractors working through umbrellas
Expect tighter onboarding, more robust checks, and in some cases changes to preferred suppliers as businesses protect their supply chains. The upside is that the wider aim is to reduce harm caused by non-compliant operators and improve worker outcomes.
What does this look like in practice?
This is where it moves from a legislative change to day-to-day reality.
JSL increases the cost of getting supplier choices wrong. If PAYE is miscalculated or underpaid in a labour supply chain and HMRC identifies a shortfall, the agency, or end client in certain scenarios, may be the recovery target.
That means the questions being asked in 2026 will get sharper, such as:
- Are you confident your supply chain partners are operating PAYE correctly?
• Can you evidence how workers are paid, and what is deducted?
• Do your contracts, processes, and onboarding checks stand up to scrutiny?
• If you had to defend your supplier choices tomorrow, could you?
What should you do now?
Review your current umbrella supply chain, ensure your PSL contains financially stable umbrellas that are FCSA accredited.
- Tighten your due diligence
Move beyond surface-level checks. Ask for evidence and keep a record of what you review and when. Insist on third party independent checks like Veripaye to ensure all payment calculations are correct. Insist on proof that tax liabilities have been paid to HMRC.
- Standardise onboarding and documentation
Ensure Key Information Documents, pay illustrations, worker documentation and audit trails are consistent and accessible.
- Educate internal teams
Consultants and account managers should understand what JSL is and why “cheapest” can quickly turn into “most expensive”.
- Sense-check your model before April
If you want clarity on how exposed your current process is, now is the time to review it while you can still make changes.
How The Sterling Group can support you
Sterling has been trading for 26 years, and is owner managed by the original founders, giving stability in this ever changing sector.
Sterling is an FCSA accredited umbrella, we also work in partnership with veriPAYE who independently verify every payment made by Sterling to give clients confidence that all payments and tax workings have been correctly calculated. This illustrates our commitment to raising standards and strengthening confidence in compliant payroll processes.
We have strong relationships with our agency partners many of which span over 20 years, this is because we have built the business on strong values, always focusing on providing great customer service and ensuring compliance is at the foundation of everything we do.
We support agencies, end clients and contractors with a transparent, well-run payroll process built around clear documentation, consistent onboarding, and a customer service team that is easy to reach when you need answers.
Final thought
JSL is a line-in-the-sand moment for the market. It rewards organisations that already do things properly and forces everyone else to get serious.
If you would like to talk through what this change could mean for your business, we are here to help.
Call: 01925 626200
Email: info@thesterlinggroup.co.uk
Website: https://www.thesterlinggroup.co.uk/
Disclaimer: This blog is for general information only and does not constitute tax or legal advice. For guidance on your specific circumstances, seek appropriate professional advice.
