Expert Opinion: Why Stockport employers must prepare now for the 2026 Umbrella Reform

Stockport recruitment agency, Grassroots, explains the upcoming Umbrella Reform, and how local employers can prepare to ensure their use of contractors and temporary workers remains compliant.

From April 2026, significant changes to contractor tax compliance will come into force in the UK – and they could have far-reaching consequences for local employers. The government’s planned Umbrella Reform is designed to tackle tax avoidance in the umbrella company market, but it will also shift the legal responsibility for ensuring PAYE and National Insurance contributions are correctly paid.

Currently, umbrella companies themselves carry the burden of compliance. Under the new system, however, that duty will move up the supply chain: recruitment agencies will be accountable, and in cases where no agency is involved, the liability will fall directly on employers.

For Stockport’s many businesses who rely on temporary and contract staff, this change represents more than just an administrative adjustment. If an umbrella provider fails to meet its obligations, HMRC could pursue the agency or client for missing payments, penalties, and interest. Beyond the financial risk, the reform raises the stakes for reputational damage and operational disruption, as organisations may need to overhaul their onboarding, payroll, and compliance processes to avoid being caught out.

The Local Picture

Stockport’s economy is diverse and growing, with a strong base of professional services, advanced manufacturing, engineering, scientific research and digital technology businesses. Many of these sectors are powered by contractor talent, whether in IT transformation projects, specialist engineering contracts, or flexible scientific research assignments.

For these employers, the upcoming reforms are more than a theoretical risk. A failure in compliance could impact supply chains, stall projects, or damage relationships with highly skilled contractors – at a time when attracting and retaining specialist talent is already challenging.

Preparing for Change

The key to navigating these changes lies in early preparation. Employers should begin by:

• Auditing their current use of umbrella companies
• Reviewing contracts to ensure liability is clearly defined
• Strengthening due diligence on payroll and compliance processes
• Building contingency plans for worst-case scenarios
• Monitoring HMRC’s technical guidance as it is published over the next 18 months

Caroline Brown, Director at technical recruitment specialists Grassroots Recruitment in Stockport, explains:

“Too often, businesses assume that by outsourcing payroll to an umbrella company, they are outsourcing compliance. From 2026, that won’t be the case. Agencies – and in some instances end clients – will carry the responsibility. For employers in Stockport and across the North-West, the safest approach is to act now: review your supply chain, tighten contracts, and where possible, simplify your arrangements.”

A Supportive Approach for Local Employers

To help Stockport organisations prepare, Grassroots has launched an Umbrella Reform Risk Review service. This practical review includes auditing contractor bases, assessing compliance procedures, and providing tailored recommendations to reduce liability and safeguard business continuity.

While the legislation is not due to take effect until April 2026, the message for Stockport employers is clear: those who rely on contractors should not wait. By acting now, organisations can protect themselves from unexpected financial and reputational shocks, while continuing to benefit from the skills and flexibility that contractors bring to the region’s economy.