IR35 & Umbrella Companies: What UK Creatives Need to Know

Working with clients through an umbrella company? You’re not alone — and there are big changes on the horizon that could affect your tax, your pay, and your rights. 

As a self-employed creative, navigating tax law is rarely your idea of fun.

You’d much rather be shooting, sketching, editing, or designing. But if you’ve ever been told to work through an umbrella company — or you’re not sure what IR35 means for your freelance status — this blog is for you. 

Let’s break down what’s changing, how it affects you, and why understanding umbrella company IR35 rules could save you from future tax drama. 

First Things First: What Is an Umbrella Company? 

An umbrella company is a third-party business that acts as your employer when you’re freelancing for clients via a recruitment agency. Instead of being paid directly as a sole trader or limited company, the umbrella company handles your payroll, taxes (like PAYE and National Insurance), and sometimes even provides benefits like holiday pay. 

Sounds simple enough — but this setup hasn’t always been kind to freelancers. That’s where IR35 comes in. 

What Is IR35 and Why Should Creatives Care? 

IR35 is a set of tax rules designed to stop "disguised employment" — that’s when someone works like an employee but bills like a business to avoid PAYE and National Insurance. 

If HMRC decides you’re inside IR35, you’re considered more like an employee. If you're outside IR35, you’re running a genuine business. 

The stakes are high: misjudging your IR35 status could mean unexpected tax bills, penalties, or worse. And many creatives — especially those doing contract work for agencies or big brands — end up caught in the middle. 

The Problem with Umbrella Companies (Until Now) 

For years, there’s been a growing concern about non-compliant umbrella companies in the UK. Some have mismanaged taxes, hidden fees in payslips, or denied basic employment rights — putting creatives at risk without them even knowing. 

But good news: the government is stepping in. 

What’s Changing with IR35 and Umbrella Companies? 

Here’s a quick rundown of the IR35-related updates that could impact creatives working through umbrella companies: 

Umbrella companies will be officially recognised as employers 

From April 2026, umbrella companies will be legally defined as employment businesses and regulated by the Employment Agency Standards Inspectorate. This means more oversight, fewer loopholes, and better protection for freelancers. 

Who’s responsible for PAYE? 

Right now, responsibility for correct tax payments often falls in a grey area. Under the new rules: 

• If a recruitment agency places you, they’re responsible for PAYE. 

• If you’re working directly with an umbrella company, they are. 

In short: you won’t be the tax middleman anymore. 

Better rights for you 

Expect holiday pay, sick pay, and clearer payslips — all standard protections that are often missing from dodgy umbrella setups. 

Why This Matters to Creatives 

As a freelancer, you’ve already got enough on your plate: chasing invoices, meeting deadlines, juggling multiple projects — the last thing you need is a confusing or risky payroll setup. 

These changes mean: 

• Less admin (no more stress about PAYE deductions) 

• More clarity (you’ll know exactly what’s being taken from your pay) 

• Better protection (no more guessing if your umbrella company is playing fair) 

Whether you're a motion designer working for an agency, a makeup artist on film sets, or a muralist doing gigs for councils — if an umbrella company is involved, this affects you. 

What Should You Do Now? 

If you’re currently working (or planning to work) through an umbrella company: 

1. Get clarity on your IR35 status. 

 Don’t assume you’re outside IR35 — check with a tax professional who understands creatives. The HMRC CEST tool has been updated, but it’s not foolproof. 

2. Keep records of who pays you and how. 

 Make sure you understand your payslip and look out for hidden fees or incorrect deductions. 

3. Choose an umbrella company carefully. 

 Stick with umbrella company services that are transparent and compliant — ask about fees, holiday pay, and how taxes are handled. 

4. Talk to an accountant who speaks your language. 

 Generic advice isn’t always helpful. At Creative & Numbers, we work exclusively with UK creatives — so we know the real-world challenges you’re facing. 

The Bottom Line for Creatives 

The IR35 shakeup and crackdown on umbrella companies in the UK is long overdue — and it’s finally offering more protection for creative freelancers. 

You should be able to focus on your craft, not paperwork or payroll nightmares. These changes are a step in the right direction: clearer responsibilities, less admin stress, and stronger rights for anyone working through umbrella companies. 

Still not sure where you stand? 

Let’s Talk IR35 — Without the Jargon 

We’re not here to scare you with tax-speak. At Creative & Numbers, we specialise in accounting for artists, designers, filmmakers, and all kinds of creatives across the UK. If IR35 rules or umbrella company services are making your head spin, let’s chat. 

👉 Book a call with a creative-friendly accountant and get clarity on where you stand — no spreadsheets required.