As we approach the end of 2025, the year has seen many discussions, consultations and policy documents outlining intentions, but the real changes in the umbrella company market are starting in 2026.

At the Payroll Compliance Authority (PCA), we have now completed a second year as an accreditor of compliant umbrella companies and have been working hard to ensure our offering provides protection and assurance for our members, and the recruitment agencies and end clients that engage them.

Here, we take a brief look back at the past year in the sector and at the PCA.

Legislation

The PCA has campaigned for legislation and regulation of the umbrella company market to tackle the fraudulent schemes and activities by a minority of payroll suppliers. Following several consultations, response summaries and revisions, a first step towards cleaning up the sector is coming in the form of new legislation for which policy papers were first published in July 2025.

The measures will make employment agencies joint and severally liable for accounting for Pay As You Earn (PAYE) and Class 1 National Insurance (NIC) on payments made to workers that are supplied via umbrella companies. Where there is no agency, this responsibility will fall to the end client business. This shift will take effect in April 2026. Joint and several liability will allow HMRC to pursue an agency in the first instance for any payroll taxes that a non-compliant umbrella company fails to remit to HMRC on their behalf.

Throughout 2025, the PCA has continued to engage with HMRC and other sector organisations and individuals in the contracting and outsourced payroll space and will continue to do so as the industry enters its final months of preparation. We will also continue to provide and signpost guidance on how to prepare, as well as offering honest umbrella companies the means by which to demonstrate their complete compliance via PCA membership and our rigorous and ongoing audit process.

Snapshot of other important developments

As we enter the last days of the year, the much-discussed Employment Rights Bill (ERB) has received Royal Assent with its wide range of measures due to become law on a phased basis, following the previously published pathway of implementation.

Established within the ERB, the new Fair Work Agency (FWA) is due to be officially established in April 2026. The FWA will become a new single body to take on enforcement of a wide range of employment rights to protect workers from employers that flout minimum wage, statutory holiday pay and other labour laws. Over time, its responsibilities will also include overseeing future regulation of umbrella companies. The groundwork and key appointments have made progress in 2025, which we have written more about here.

Having inherited greater powers, Companies House continued to roll out new measures and checks throughout 2025 to clean up its register and ensure the businesses, directors and Persons with Significant Control (PSCs) on it are genuine and compliant. Compulsory identity verification is now legally in place and thousands of false or misleading entries, including in relation to more than 80,000 registered office addresses, have already been removed, among other steps.

Billed as the greatest shake-up at Companies House in its 180-year history, the powers have been introduced under the Economic Crime and Corporate Transparency Act. The keeper of the UK's public register of companies now has greater enforcement powers and can share information with law enforcement agencies, which will support the crackdown on unscrupulous operators. Whilst sophisticated schemes are likely to adapt, this activity will introduce hurdles for some unscrupulous umbrella companies to operate. PCA CEO Paul Newsham shares his views on these new powers here.

Throughout the year, the PCA has provided insights on the sector and signposted resources to help workers and recruitment firms navigate the umbrella market and support compliant umbrella companies. One such resource is HMRC's list of known tax avoidance schemes, promoters, enablers and suppliers. The PCA has provided regular updates when new names have been added every month, with the number of published names well exceeding 200 in 2025. HMRC has signalled no let up on its crackdown, by publicly naming a practising barrister for the first time in September, having named a struck-off solicitor earlier in the year. We explored this in our blog here.

The list is a good place to start the due diligence process for any recruitment companies and temporary workers that arrange or are paid through umbrella companies, to help them avoid non-compliant operators.

New board member

In the second half of the year, the PCA welcomed new board member Dan Eley, who has almost three decades of experience in recruitment in the construction sector working with global and national firms, as well as smaller independent agencies and running his own for 12 years. Dan says a key priority for him at the PCA is to draw his sector's attention to upcoming legislation, for which he believes it is largely unprepared.

Dan Eley says: "The construction industry is one of the country's largest, contributing billions to the UK economy every year. Thousands of these workers are paid by umbrella companies and for the sake of the sector, it's vital that these suppliers are vetted and compliant, or else the sector's scaffolding may crumble from underneath once legislation is brought in."

Read more about the risks to construction in our blog here.

The PCA supporting the sector

In the run up to legislation, recruitment agencies and end clients must tighten their due diligence processes and safeguard their supply chains. Honest umbrella companies must find ways to demonstrate their complete compliance with all tax and employment laws to maintain existing partnerships.

At the PCA, we have continued to strengthen our accreditation model to offer unequivocal guarantee of compliance via a triple-audit assurance model and double legal assurance, as outlined in a previous article. In addition, the PCA takes a precautionary approach. For this reason, we also hold professional liability cover, to safeguard our members and provide fiscal reassurance to all stakeholders.

Looking ahead to 2026

Going into the new year, an important focus for the PCA will be engaging with the sector as it prepares for legislation and - most importantly - continuing to raise awareness among stakeholders that are not sufficiently aware or prepared.

We will also monitor and engage with the sector throughout the ongoing journey towards umbrella company regulation as it takes shape, under the jurisdiction of the new FWA.

As a not-for-profit accreditor of compliant umbrella companies, we will continue to do all we can to stamp out worker exploitation, protect recruitment firms from serious financial and reputational risks, and safeguard our honest umbrella company members.