The new chapter of tax legislation affecting umbrella companies and their clients from April 6th 2026 —'JSL' (Joint & Several Liability) — has passed another milestone in parliament.
Specifically, the Finance (No.2) Bill was published on December 4th 2025, containing the new chapter, Chapter 11 ITEPA 2003.
This chapter makes recruitment agencies jointly and severally liable to pay any amount payable under PAYE when they supply workers via umbrella companies.
The publication followed the bill's "First Reading" on December 3rd 2025. And that's a formal parliamentary stage, taking place without any debate from members of the House of Commons, writes Matt Fryer, managing director of Brookson Legal.
The JSL journey so far
Contractors will likely remember that the JSL (Joint and Several Liability) legislation was originally published in its initial draft format on July 21st 2025. That was the first concrete sign of HMRC's plan to make agencies (or end-clients if agencies aren't in the chain) accountable for Pay As You Earn on payments to workers supplied through umbrella companies.
The policy objective for this HMRC measure is primarily to close the tax gap and make the tax system fairer.
Joint and Several Liability is also intended to protect contractors from large, unexpected tax bills, historically triggered by unscrupulous behaviour from non-compliant umbrellas — "payroll pirates" as they've been dubbed — who masquerade as compliant brollies.
Nobly, JSL aims to protect contractors from unexpected tax bills
While the JSL measure primarily impacts umbrella companies, recruiters and end-clients, it is important not to forget that the primary policy objective is to protect contractors from unexpected tax bills.
As a measure, JSL should therefore be well-received by contractors, as it removes the likelihood of a scenario similar to that we have seen over the last decade with the Loan Charge scandal.
How July's JSL draft compares to what just dropped this December
But to be safer than safe, many in the supply chain have been waiting until the wording of the JSL rules has been firmed up beyond a mere draft.
Well, having reviewed the original draft (of July 21st) against the current draft (of December 4th), it does not appear as though any substantial changes have been made.
There has been quite a lot of rewording and tidying up, such as at Section 61Z1, in relation to a "purported umbrella company."
These seemingly minor revisions do not appear to add anything new since July, or present differences compared to the July draft, meaning the incoming JSL legislation is broadly what was proposed by HMRC back in the summer.
Four indelible marks, starting with no delay to JSL's introduction on April 6th 2026
What contractors can take from this month's 'as you were' edition of the JSL framework is that it is now almost certain to land in time for its original April 6th 2026 commencement date.
Therefore, there'll be no delay in the introduction of Joint and Several Liability for contractor umbrella company chains.
Indeed, despite the odd concern in January this year about timing, no convincing feedback has been provided to the government since July 2024 to result in them changing tack or tweaking their original policy intentions towards umbrella companies.
To my mind, JSL being now set to become law on the date that the government intended is the first of four indelible marks that the Finance Bill passing its First Reading makes to the umbrella contracting landscape.
The second indelible: Umbrella contractors face no more tax risk
For contractors, this 'on-time' framework of Joint & Several Liability means that, legislatively speaking, umbrella company employees face no more tax risk.
In fact, as far as its wording and provisions go, JSL means that if you, as a contractor, find yourself having been employed and paid (after April 6th 2026) by a non-compliant payroll provider, you should no longer bear any risk of HMRC attempting to collect any underpaid tax or NIC from you.
HMRC will hold the payroll provider and the agency or end-client jointly and severally liable for any underpayments.
That represents good news for contractors.
Yet that's followed by less good news for contractors, and this is the third indelible mark of December's 'as you were' JSL framework:
Less choice over the umbrella company you are employed/paid by
This new HMRC risk for both parties will result in end-clients and agencies scrutinising umbrella companies in far more detail than they have previously, and they are likely to only want to work with umbrella companies that are 'more than compliant.'
By that, I mean those brollies that can prove they are compliant, well-established in the UK market (with many years of successful trading), and have strong balance sheets.
What is the incoming 'lock down' of umbrellas by agencies?
I forecast that, due to the JSL legislation, agencies will 'lock down' their umbrella suppliers to a list of only five brollies. No more than six is likely.
The impact of this agency-led umbrella 'lock down' is that many contractors are inevitably going to be asked to change the umbrella company that they are currently being employed by and paid by to a different brolly.
This 'request' to contractors is already starting to be made. And I expect it will really ramp up in Q1 2026, because agencies will want to ensure all of their temporary job candidates are working via their new, pre-vetted, JSL-ready, PSL (Preferred Supplier List).
Crucially, this ramping up will be most visible ahead of the first payments to be impacted by the JSL changes. Notably, the JSL legislation applies from April 6th 2026, with April 10th 2026 being the first impacted Friday contractor payday.
Fourth indelible: More outside IR35 roles? The door is at least open
The joint and several liability risk for agencies and end-clients makes 'inside IR35' contracts more risky than they used to be, which, coupled with the ability to offset taxes paid by a contractor and their Personal Service Company (PSC) against any potential tax arising under the off-payroll working rules, makes for an interesting shift in the tax risk balance.
It could now be argued that a blanket ban on the use of PSCs or blanket 'inside IR35' determinations, which have driven the use of umbrella companies, creates a bigger risk than it was intended to solve.
Whether this argument is understood and acted upon is yet to be seen.
However, it does point to a need for the market to maybe challenge the status quo and evolve into new or different approaches to managing risk in contractor engagements. And that might very well see more outside IR35 opportunities offered.
Where next for the Joint and Several Liability legislation?
MPs will next consider the Finance Bill at its second reading on Tuesday December 16th 2025, after which it will continue through the various stages in the House of Commons and House of Lords before receiving Royal Assent next year.
It is not anticipated that any subsequent amendments will be made.
It is a distinct possibility that even at this stage, December's JSL legislation could very well be April's JSL legislation, in terms of wording and framing.
That said, the umbrella contractor industry must continue to monitor its progress.
Introducing…JSL risk mitigation strategies
There will be lots of movement in the umbrella and PAYE contractor market over the coming months as end-clients, Managed Service Providers (MSPs) and recruitment agencies start to implement their 'JSL risk mitigation' strategies.
Be prepared.
- Some may stop using umbrella companies and mandate agency PAYE.
- Some will pick a small list of umbrella companies to work with.
- Some may encourage their clients to properly manage the off-payroll working rules and reconsider outside IR35 opportunities.
- Inevitably, some will do nothing.
The future through a JSL lens
While this blend of activity and inactivity as the JSL legislation looms may result in some disruption for contractors, it will ultimately result in a level playing field for the market, and therefore, in many ContractorUK readers being protected from tax risk and the devastating impact it can have on careers, livelihoods and families.
