Government’s umbrella company tax warnings not getting through to the right people
The UK government is struggling to alert temp workers and contractors to the significant risks of “dodgy” umbrella company tax schemes. Many people are unknowingly falling victim to these arrangements, resulting in financial losses and unexpected tax bills. This is largely due to a lack of awareness about the schemes themselves and the warning signs to look out for.
In this article, we discuss why the messaging isn’t getting through to enough people and what could be done about it.
Has your working-age child or anyone else, for that matter, ever asked if you’ve seen those shocking videos about umbrella tax avoidance schemes or the loan charge suicide cases? Yeah, didn’t think so.
That’s likely because the UK government isn’t reaching the millions of people most likely to be affected with its warnings of tax avoidance schemes created by umbrella companies.
Many people probably won’t even be able to tell you what an umbrella company is or does. So, when a recruitment agency or end-employer asks them to sign up for one for the first time to get paid, why would they think anything dodgy is going on? Even people who have used them before can get caught up in tax schemes. It’s a never-ending saga. Why is this still happening in 2025?
Where do most people get their news these days?
While the official guidance is out there, many contractors and agency workers – especially younger ones – are still getting caught out by complex arrangements they just don’t understand or fooled when the umbrella company says all is above board, when it clearly is not. That’s because they are not being effectively targeted and educated on social media, where most people get their news these days.
Significant amounts of tax are still being lost due to these disguised remuneration schemes, often run by umbrella companies that aren’t playing by the rules.
HM Revenue & Customs (HMRC) regularly updates its list of named tax avoidance schemes and promoters on gov.uk and works with professional bodies like the Chartered Institute of Payroll Professionals (CIPP) and the Institute of Chartered Accountants in England and Wales (ICAEW) to share information. But it seems these traditional channels just aren’t cutting through, especially to those most likely to come across these schemes.
However, for those reading this article, we share some pointers you can take on and pass on to as many people as you can through your own personal and professional networks: at the office, on social media, your kid’s sports matches or even down the pub.
How to spot a dodgy umbrella or payroll company
You can protect yourself by looking out for these key warning signs:
- Sudden company swaps: Be suspicious if you’re unexpectedly moved between umbrella companies with little notice, sign a contract with one firm but get paid by another, or are asked to sign multiple unusual agreements – for instance, anything referred to as an “annuity agreement”.
- Payslip puzzles: Always scrutinise your payslips. Watch out for unexpected changes to your PAYE reference or employer name, getting paid significantly less than you expect into your bank account compared to your payslip, or if proper deductions for Income Tax and National Insurance Contributions (NICs) aren’t clear. Also, be wary of sudden shifts from online to paper payslips, or losing access to your old payslip data after a system change.
- Fishy payments: Be cautious if your umbrella company blames a change in provider on having “too many employees” or promises everything will stay the same without proper, documented terms. Always ensure your pay is a single, fully taxed payment.
- On the blacklist? Regularly check the government’s published list of known tax avoidance schemes and the people who promote them. If a company or scheme you’re involved with shows up on this list, it’s time to take immediate action. You can find more detailed guidance on what to look out for in HMRC’s Spotlight 71: Warning for agency workers and contractors who are moved between umbrella companies
Industries at risk: Who needs this message most?
Umbrella companies are common in many sectors, especially where contract or flexible work is the norm. This includes:
- Construction
- IT and Technology
- Healthcare (e.g., nurses, locum doctors)
- Education (e.g., supply teachers)
- Finance
- Engineering
- Media
- Transport
- Social Work
Many workers, particularly young people new to contracting, might not grasp the ins and outs of tax compliance or recognise the red flags of non-compliant schemes. They might simply trust an umbrella company that assures them “all is good,” without understanding the serious risks involved.
Reaching more people: A smarter social media approach
To truly educate younger workers and a wider audience, the government needs to ditch the stuffy approach and get onto the platforms people actually use:
Instagram & TikTok: Think short, snappy video content. Use real-life scenarios in dramatised examples with explainers, “myth vs. fact” comparisons. Collaborate with popular financial influencers such as Martin Lewis, who can talk the talk in an easy-to-digest way. Jump on trending hashtags to boost visibility.
Facebook: Run targeted ad campaigns aimed at people interested in contracting, freelancing, and specific industries. Create eye-catching infographics and short articles explaining the dangers. Host live Q&A sessions with HMRC.
LinkedIn: This is where professionalism meets education. Share practical articles, case studies, and clear guides on how to find a compliant umbrella company. Partner with recruitment agencies and industry bodies to spread the word across their networks. Organise webinars on tax compliance specifically for contractors and temp workers.
X: Use concise, punchy messages with clear calls to action. Share links to official guidance and highlight the very real consequences of tax avoidance. Join relevant discussions using popular hashtags and answer user questions about umbrella companies directly.
What to do if you suspect a tax avoidance scheme
If you spot any of these warning signs or are worried about your umbrella company, it’s vital to act quickly:
Talk to your umbrella company: Ask for clear answers on anything suspicious. Be wary if they avoid putting things in writing or discourage you from contacting HMRC.
Talk to your recruitment firm or the HR contact at your end-employer: If you don’t have the answers you need from your umbrella company, contact the recruitment agency or end employer with your concerns. It’s in their interest that you are being paid the correct amount of tax.
Contact HMRC: Get in touch with HMRC as soon as you can. Catching things early can prevent huge tax bills and legal problems down the line. HMRC can work with you to set up affordable payment plans if your umbrella company has no paid the correct amount of tax on your behalf.
Get independent advice: Speak to a trusted tax professional or organisations like Tax Aid (if you’re on a low income) for impartial guidance.
Switch to a proper company: If your current umbrella company is running a tax avoidance scheme, move to a compliant provider immediately.
Report tax avoidance: You can report suspected tax avoidance schemes to HMRC, even anonymously if you prefer.
How do you find out how much you need to pay in tax?
- You can use your personal tax account, to check if the information HMRC hold matches what is shown on your payslip and report any concerns to us.
By adopting a more effective communication strategy, especially across social media, the government can empower more people to spot, avoid, and report dodgy umbrella company tax avoidance schemes, protecting both workers and the public purse.
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