A new set of tax rules has arrived for UK contractors. Joint and several liability (JSL) took effect on 6 April 2026, and it completely changes how umbrella companies, recruitment agencies, and end clients handle tax compliance.
If you work through an umbrella company, this legislation affects you directly. And if you operate outside IR35, you might also see a shift in the market.
We explain what’s changing, how it impacts your daily work, and what you can do to prepare for the new rules.
JSL: what’s changing?
Joint and several liability (JSL) become Chapter 11 of the Income Tax (Earnings and Pensions) Act 200 from 6 April 2026. This means that the responsibility for unpaid taxes is shifting.
If an umbrella company fails to pay the right amount of income tax or National Insurance, HMRC can now recover that money from the recruitment agency or the end client.
Before this, the liability usually stopped at the umbrella company itself. But non-compliant companies would sometimes build up debt and close down before HMRC could collect it.
Now, every party in the labour supply chain shares the risk. And importantly, as there’s no reasonable care defence, an agency can still be fully liable even if they do thorough compliance checks.
HMRC have added guidance on how these rules affect labour supply chains on the UK government website.
Does this affect me?
If you’re a contractor working through an umbrella company, these rules affect your supply chain.
Even if you manage your own limited company outside IR35, you should pay attention. The increased risk of using umbrella companies means some clients might offer more outside IR35 contracts instead.
What is JSL?
Joint and several liability means that HMRC can pursue any party in the supply chain for 100% of an unpaid tax bill.
The government introduced this to crack down on tax avoidance in the umbrella sector. By putting agencies and end clients on the hook, HMRC hopes to raise compliance standards across the board.
This means agencies are now incredibly careful about which umbrella companies they work with.
What this means for contractors
For the most part, JSL gives contractors better protection against non-compliant umbrella companies. Because HMRC will target the agency or client for unpaid taxes, you’re less likely to face a surprise tax bill yourself.
But this extra security comes with a few practical challenges. Agencies could heavily restrict their preferred supplier lists, meaning you might have fewer umbrella companies to choose from.
If your current umbrella company doesn’t meet an agency’s new standards, you might have to switch providers. This can lead to messy tax codes or issues with your accrued holiday pay.
Frequently asked questions about JSL
Who is liable under the new JSL legislation?
HMRC can pursue both recruitment agencies and end clients for unpaid income tax and National Insurance. If an umbrella company fails to pay, any business in the chain can face the full bill.
Will agencies stop using umbrella companies?
Most agencies will continue to use them, but they could drastically reduce how many they work with. They’ll likely only partner with providers that pass strict, continuous compliance audits.
Remember that tax is a complex subject, so it’s always best to seek professional advice if you’re not sure of anything.
More guides for contractors
- How to set a freelance hourly rate: what hourly rate should I charge?
- What is IR35? A guide for the self-employed
- Predictions for freelancers: 6 things to expect in 2026
- Small business tax changes: new thresholds, rates, and allowances
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