Umbrella Company Contractors: What you need to know about the Autumn Budget 2025

Chancellor of the Exchequer Rachel Reeves announced a series of tax-raising measures worth up to £26 billion in the recent Autumn Budget.

Here we take a look at some of the Budget highlights that will impact you as an umbrella company contractor.

Umbrella Companies and tackling non-compliance

From the 6^th of April 2026, the government will introduce measures to tackle non-compliance within the umbrella industry.

The Joint and Several Liability (JSL) legislation will mean that there will now be equal responsibility for an umbrella company’s tax obligations amongst the multiple parties within the supply chain.

Recruitment agencies will also be responsible for accounting for PAYE and Class 1 NICs on payments made to workers that are supplied via umbrella companies.

Where there is no agency, the responsibility will fall to the end client business.

JSL will not only help to tackle non-compliance, but will also protect contractors, who can face huge unexpected tax bills from working with non-compliant umbrella companies.

Our page, Everything You Need to Know About Joint and Several Liabilities, will provide further information on this and how it will affect you.

National Living Wage and National Minimum Wage

National Living Wage (NLW) and National Minimum Wage (NMW) rates are set to increase from the 1^st of April 2026.

• For those aged 21 and over – increasing from £12.21 to £12.71
• For those aged 18 to 20 – increasing from £10.00 to £10.85
• For those aged under 18 – increasing from £7.55 to £8.00

For apprentices – increasing from £7.55 to £8.00

Tax bands and personal allowance

The tax bands will remain the same at:

Basic rate – £37,700

Higher rate – £50,270

Additional rate – £125,140

These rates are to be frozen until April 2031, meaning many people will pay extra tax over the next few years as incomes rise with inflation.

The Income Tax personal allowance will also remain frozen at £12,570 until April 2031.

Salary sacrifice for pensions

From April 2029, there will be changes to salary sacrifices made for increasing investment in pension pots.

Just the first £2,000 of employee pension contributions paid as part of a salary sacrifice will be exempt from NICs.

Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements. However, any employee contributions above this amount will be subject to employer and employee NICs, like other employee workplace pension contributions.

• Employers will need to report the total amount sacrificed through their existing payroll. All employer pension contributions will continue to be free of NICs.
• Employees, as well as employers, will pay NICs on the amount above £2,000 for employee contributions through salary sacrifice.

For a more detailed breakdown of the Autumn Budget 2025, take a look at our Budget page.

To find out more about contracting, please contact Lauren on 01206 591 000 or email lauren.monks@contractorumbrella.com.