IR35 and umbrella companies: no new reform, but JSL is now in force
Despite continued industry calls for an "IR35 reset", the Budget makes no changes to employment status tests, Status Determination Statements (SDS), fee-payer liability or the wider off-payroll working framework. The existing rules remain central to every contractor engagement.
In practice, this means:
- Medium and large private-sector end clients, and all public authorities, must still assess the status of contractors supplied through personal service companies, take reasonable care and issue an SDS.
- For qualifying small private-sector clients, the contractor's own company generally remains responsible for applying IR35.
- Blanket IR35 determinations made without proper individual consideration continue to create avoidable compliance risk.
The umbrella company reform has now taken effect. From 6 April 2026, recruitment agencies, and in some direct-engagement arrangements end clients, can be held liable for unpaid PAYE where a non-compliant umbrella company sits in their supply chain. This was not a new Budget announcement, but it remains the most significant compliance change of the year for organizations that engage umbrella workers.
The Budget also funds a further 670 HMRC compliance officers. This is a general enforcement measure rather than an IR35-specific programme, but it signals that scrutiny of tax compliance is not easing.
Employment costs and payroll changes for businesses
Headline National Insurance rates are unchanged, and the standard employer rate stays at 15%. Main Class 1 thresholds remain frozen for 2027/28, so employer costs will still rise gradually as wages grow. Several other measures will affect workforce budgets and payroll processes:
For agencies and businesses supplying lower-paid PAYE workers, the National Living Wage rise will feed directly into assignment pricing and margins. Finance and payroll teams should also start planning for the benefits-in-kind, e-invoicing and Direct Debit changes, which will require systems updates.
What this means for businesses hiring contractors
The Autumn Budget 2026 leaves the fundamental tax treatment of contractors unchanged. Advisers and contractors had pushed for greater certainty over employment status, arguing that compliance costs and HMRC liability risk still make some businesses wary of engaging independent professionals. That certainty has not arrived.
For businesses, the key considerations are:
- IR35 processes still matter. With no reform on the table, accurate, evidence-based status determinations and clear SDS processes remain essential.
- Umbrella due diligence is ongoing. Under JSL, supply chain liability is real. Checking umbrella providers once at onboarding is no longer enough.
- Employment costs keep rising. The National Living Wage increase and frozen NI thresholds will push up the cost of PAYE workers from April 2027.
- Payroll and finance systems need updating. Payrolled benefits, VAT e-invoicing and Direct Debit requirements all land between 2027 and 2029.
As compliance expectations tighten across contractor supply chains, having a clear and reliable process for engaging contingent talent is increasingly important.
Freelancer Engagement and Management Platforms like YunoJuno help organizations manage compliance and reduce risk when working with independent contractors and freelancers.
