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The off-payroll rules and why they matter

Many employers engage self‑employed workers, often via a personal service company (PSC). Understanding the tax and legal issues—particularly the off‑payroll working rules—is essential to manage tax exposure and employment‑related risk.

What are the off‑payroll working rules?

The off‑payroll working rules ensure that an individual who works like an employee, but contracts through an intermediary such as a PSC, is taxed broadly as an employee. Large and medium private‑sector organisations (and all public‑sector bodies) with a UK connection must assess whether a worker engaged via a PSC would be regarded as an employee if contracted directly. If so, the engaging entity must operate PAYE and account for income tax and NICs on payments made to the PSC.

Where another entity sits between the PSC and the end‑client, the obligation to make this status determination passes to that party (for example, an agency). If there are multiple entities, responsibility sits with the fee‑payer, being the entity that pays the PSC.

Only medium and large entities must apply the rules; small entities remain exempt, meaning the responsibility stays with the PSC. From April 2025, the size thresholds increased, so fewer organisations are now within scope. An entity is medium or large if at least two of the following apply:

If in two consecutive financial years the business meets only one or none of these thresholds, it will be classed as small. Size is assessed on a group basis, so parent and subsidiary undertakings are aggregated.

Businesses should review their status annually to ensure they do not inadvertently fall within scope. Workers and PSCs should also consider their own risk exposure, particularly if they work largely for a single client, as this may be indicative of a deemed employment relationship.

Recent goalmouth action

PSCs have been the subject of several HMRC challenges in sports media.  A prominent recent case is Bryan Robson Ltd v HMRC [2025] TC09408. The tribunal held that part of the income paid to Mr Robson’s PSC for ambassadorial work carried out for Manchester United FC constituted deemed employment income and was subject to PAYE under the off‑payroll rules. However, Mr Robson successfully argued that income relating to the exploitation of his image rights fell outside the regime.

The case highlights the continued scrutiny of high‑profile individuals and the importance for both employers and workers of carefully analysing the nature of services supplied through PSCs.

Upcoming changes to the rules for umbrella companies

Umbrella companies often sit within supply chains involving PSCs. They act as the notional employer of workers whose services are supplied to an end‑client, and many workers engaged through umbrellas continue to provide their services via their own PSCs.

From 1 April 2026, new legislation will significantly affect parties who engage with umbrella companies. Where an end‑client or agency contracts with an umbrella company, liability for PAYE and off‑payroll tax compliance will become joint and several. HMRC will therefore be able to pursue not only the umbrella company but also the agency or end‑client for unpaid tax.

Umbrella companies will remain a distinct category for off‑payroll purposes, but agencies and end‑clients must review their arrangements before April 2026 to ensure visibility of compliance within their supply chain.

Don’t forget the employment law angle

Alongside tax rules, organisations must consider how employment law interacts with PSC engagements. For tax, the question is whether a worker is a de facto employee. Employment law, however, recognises three statuses: employee, worker and self‑employed. Employment status depends on the contractual terms and the practical working relationship.

To be classed as a worker or employee, there must be an express or implied contract between the organisation and the individual. If services are provided through a PSC and intermediary, a worker contract will arise only if the arrangement reflects the characteristics of an employment relationship rather than a business‑to‑business contract (as illustrated in Mr Appiah v Tripod Partners Ltd and Home Office).

Where an employment contract is found, the intermediary must pay statutory entitlements such as Statutory Sick Pay and Statutory Maternity Pay and must comply with pensions auto‑enrolment duties.

Employees and workers are entitled to different levels of protection under the Employment Rights Act 1996. Workers often operate under casual or flexible arrangements, but employees have additional statutory rights including unfair dismissal protection, parental leave, redundancy rights and the ability to make flexible working requests. Determining status can be complex, and organisations should seek legal advice where uncertain.

The Employment Rights Act 2025: What does April bring?

The Employment Rights Act 2025 ("ERA 2025") is being implemented in stages. This article will lay out a range of changes that are being implemented this April.  

Statutory Sick Pay (SSP)

Currently, employees are eligible for SSP if they have average weekly earnings at or above the Lower Earnings Limit (£125 per week). If eligible, they are only paid from their fourth working day of sickness absence. The Lower Earnings Limit will be removed from April 2026, giving all employees access to SSP from their first day of sickness absence. The rate of SSP will be 80% of an employee's earnings or the current flat rate, whichever is lower.

To prepare for the change, employers should ensure that:

Whistleblowing and sexual harassment

At present, for a sexual harassment claim to be a whistleblowing disclosure, it must fall under one of the existing categories of wrongdoings, such as danger to health and safety. On 6 April 2025, the ERA 2025 will add sexual harassment to the list of wrongdoings that can form the subject matter of a whistleblowing disclosure. Workers who "blow the whistle" on sexual harassment can benefit from whistleblowing protections against detriment and unfair dismissal.

Ahead of the change, employers should ensure that:

Voluntary action plans on gender equality and menopause support

From April 2026, employers with 250 or more employees will have the option to produce and publish a voluntary action plan alongside their gender pay gap data. These action plans will be mandatory from spring 2027, so we advise that employers get ahead of the curve and start preparing action plans sooner rather than later. In these action plans, employers should show the steps they are taking to:

On 4 March 2026 the government published a list of evidence-informed actions for employers to reduce their gender pay gap and support employees experiencing menopause. See: Action plans: list of actions for more detailed information.

Trade union changes

Collective redundancy awards

From 6 April 2026 the maximum protective award for failing to comply with the obligation to collectively consult will be doubled. It is currently 90 days' pay, and it will increase to 180 days' pay. This will apply to dismissals which happen on or after 6 April 2026.

A simplified recognition process

From April, the likely majority support test will be removed, and unions will only need to show the Central Arbitration Committee ("CAC") that they have 10% membership of the proposed bargaining unit for their application for recognition to be accepted. Additionally, the government holds the power to lower this membership threshold from 10% to 2%, but until such regulation is made, it remains at 10%.

April also brings the removal of the support threshold in recognition ballots. The change means that trade unions only need a simple majority of votes cast to obtain recognition, instead of the previous 40% required.

'Sweetheart' Unions

In 2014 the courts ruled that using a 'sweetheart' union (voluntary non-independent union) to block and independent union's application was legal and compatible with the European Convention of Human Rights, however, this is set to change in April. The government are cracking down on employers who block independent unions' voluntary recognition requests by recognising a different, non-independent union. If an employer tries to do this, the CAC will be empowered to ignore that voluntary agreement with the non-independent union and continue with the independent union's application.

With the removal of procedural barriers in the recognition process and the ban on 'sweetheart' unions, employers may see an increase in independent unions bringing, and succeeding in, recognition claims, potentially increasing unionisation in previously non-unionised workplaces.

With the additional higher financial exposure from the collective redundancy awards, employers should:

Changes to family-related employment rights

On 6 April 2026, a number of changes to family-related employment rights will come into force. These include the removal of the requirement to have 26 weeks' service for paternity leave, the entitlement to unpaid parental leave from day one of employment, the removal of the restriction on taking paternity leave after shared parental leave, and the introduction of a new right to Bereaved Partner's Paternity leave.

For detailed information and practical steps, please refer to last week's Employment Today article 'April 2026 changes to family-related employment rights' by my colleague Hannah Meehan.

Establishment of the Fair Work Agency

Finally, the Fair Work Agency (FWA) will be established on 7 April 2026. The FWA will unify existing enforcement bodies to ensure legal compliance with the national minimum wage, the regulation of employment agencies, licensing standards for gangmasters and enforcing unpaid employment tribunal awards. New powers include enforcement of an employer's failure to pay statutory holiday and SSP.

With investigative, and enforcement powers, employers need to ensure that:

As laid out, April 2026 brings yet more changes. Employers should therefore ensure that all their policies and procedures align with the upcoming changes. For support with updating your policies ahead of 6 April 2026, please contact a member of the Employment team at Michelmores.

New Home Office rules for British dual nationals travelling to the UK from 25 February 2026 

Significant changes to the UK’s border and immigration system took effect on 25 February 2026, and these will directly impact British dual nationals who travel to the UK without a British passport. The Home Office has now moved to full enforcement of its Electronic Travel Authorisation (ETA) scheme, and with it, the requirements for proving the right to enter the UK have fundamentally changed for all nationals of visa-exempt countries.

A look at what has changed

From 25 February 2026, British citizens who hold another nationality must demonstrate their right to enter the UK before boarding a flight, ferry or train. Airlines and carriers are now under strict instructions to refuse boarding if a dual national cannot provide acceptable evidence of their British citizenship.

This change reflects the Home Office’s final phase of ETA enforcement, in which non‑visa nationals (e.g., EU, US, Canadian, Australian, New Zealand etc. passport holders) must hold an ETA before travelling. However, British citizens cannot obtain an ETA. Because of this, dual nationals travelling only on their foreign passport will now be stopped at check‑in.

Key concerns

Options for British dual nationals

There are two formal options, which are:

Option 1: apply for or renew a British (or Irish) passport

A valid British passport is the simplest and most reliable way to prove the right of abode and avoid ETA issues entirely.

All British citizens are entitled to a British passport, even if they have never held one before. However, applying for a British passport for the first time can be complex, with the process generally taking significantly longer than a renewal or single nationality case due to the rigorous checks required. If applying from overseas, this will likely cause further delay, particularly if additional documents or information are required.

Option 2: apply for a Certificate of Entitlement (right of abode)

This is endorsed in the individual’s foreign passport and is a recognised exemption under the ETA provisions.

It is a more costly process than applying for a passport (£589), and can occasionally take longer than applying for a passport.

We do not recommend relying on an expired British passport as evidence of your British nationality when travelling. As noted above, acceptance of this will vary between carriers, and given that airlines now face significant penalties for permitting travel without the correct documentation under the new ETA rules, it is increasingly unlikely to be accepted.

Practical advice for travellers

British dual nationals planning travel to the UK should:

Given the immediate enforcement and the lack of a grace period, early preparation is essential. We have significant experience supporting clients with passport applications, particularly where there is a complex or unclear history, or with rejected applications. If you require our support, or wish to discuss the ETA changes further, please do not hesitate to contact us.

Q: We already have a sickness policy in place. With the SSP changes coming into force in April, do we need to do anything else?

A: Employers should ensure their sickness policies reflect the new statutory requirements. Even where a policy is already in place, updates may be needed to remain compliant, particularly in relation to the evidence needed to demonstrate sickness and the timeframes for providing this. We are currently reviewing many of our clients' absences policies for this very reason and we would strongly recommend that you similarly have your policy reviewed.  We are offering flat fee absence policy reviews to ensure our clients are protected.  Please do get in touch with us if you would like to arrange a review.