What CIS is, what you lose and gain against being on the books, how much tax you really pay, and the list of things you now have to do yourself. Or WhatsApp me and I'll do the list.
Here's the two side by side. Nothing on the CIS side is a trick, it's just that every one of them is now your job rather than the firm's.
| PAYE (on the books) | CIS (self-employed) | |
|---|---|---|
| Who works out your tax | The firm, every payslip | You, once a year on a tax return |
| What comes off before you're paid | Tax + National Insurance on all of it | 20% off the labour only (30% if you're not registered) |
| Holiday pay | 5.6 weeks a year, paid | None — a day off is a day unpaid |
| Sick pay | Statutory sick pay at least | None |
| Pension | Firm pays in as well as you | Only what you put in yourself |
| Van, fuel, tools, phone | Yours to pay, not claimable | Claimable against your profit |
| Tax return | Usually none | Self Assessment every year, and quarterly MTD updates once you're over the threshold |
| Refund in April | Rare | Usual — the 20% is taken on turnover, the bill is on profit |
| Who pays the employer's NI | The firm (15% on top of your pay) | Nobody — that's the saving the firm's after |
So is it better? Depends what you're getting for it. Being CIS costs you the holiday pay, the sick pay and the pension, and the firm saves itself 15% employer's National Insurance on every pound they pay you, which is why so many of them push it. If the day rate's the same as your old wage, you've been given a pay cut with extra paperwork. If it's a good chunk higher and you're genuinely picking your own jobs, it can work out really well, you're claiming your van, your tools and your fuel and there's usually a refund in April. One thing though. It's not the firm's choice or yours, it's a matter of fact. If you turn up when they say, do what they say, on their tools, with no say in it, HMRC would call you an employee whatever the invoice says, and there's a tool on gov.uk that gives you their answer in ten minutes.
HMRC's own checker: Check employment status for tax (CEST) — anonymous, ten minutes, and HMRC stand by the answer. The rules in plain English: gov.uk employment status.
The 20% that comes off isn't your tax bill, it's a deposit against it. Your actual bill gets worked out on your profit after your expenses and your tax-free allowance, and it's nearly always less than what's been taken. Here's a typical first year.
| A first year on CIS, registered at 20% | |
|---|---|
| Labour invoiced over the year | £35,000 |
| Deducted by contractors (20%) | £7,000 |
| Expenses — van, fuel, tools, phone, insurance | −£5,000 |
| Profit | £30,000 |
| Tax-free personal allowance | −£12,570 |
| Income tax — 20% of £17,430 | £3,486 |
| Class 4 National Insurance — 6% of £17,430 | £1,046 |
| Total bill | £4,532 |
| Already paid through CIS | £7,000 |
| Refund | £2,468 |
HMRC's rates, the same for 2025/26 and 2026/27. No Class 2 National Insurance to pay on a profit like this. Same year unregistered at 30%: £10,500 taken, £5,968 back — eventually. Run your own numbers →
That's the whole reason subbies get refunds. The 20% is taken off your turnover, before a single expense has come off, and the bill's worked out on what's left after them. Put your own numbers in the refund calculator and you'll see roughly where you'd land, and if you're on 30% because you haven't registered, that gap is bigger, but it's also money you're not seeing till next April.
On the books, this all happened somewhere in the office without you knowing. Now it's you. Not hard, but it has to be done, and in this order.
You don't have to wait for April, most people switch mid-year and it's fine. Your P45 from the firm shows what you earned and what tax you've already paid through PAYE, and that goes on the same tax return as your CIS months. Both get added up, both lots of tax count, and the bit that's usually a nice surprise is that your tax-free allowance was probably only half used up on the payroll, so the CIS deductions have often covered more than they needed to.
Registering, the invoices, the statements, the return in January, all of it. You photograph what the contractor gives you and send it to me, I keep it straight, and by April your refund's already worked out. First month's free on the £149 plan, no card, nothing to cancel, and after that it's from £69 a month. If it's not for you after the month, that's cool.
WhatsApp me — I'll reply today See what your refund might beFinancially, only if the day rate is a fair bit higher than the wage it replaces, because you're giving up holiday pay, sick pay and the employer's pension contribution, and the firm's saving 15% National Insurance on you. Where CIS wins is expenses, you claim the van, fuel, tools and so on against your profit, and there's usually a refund in April. If the rate's the same and the work's the same, PAYE was better and you've been moved for the firm's benefit, not yours.
No. Self-employed is your status, CIS is a tax deduction scheme that applies to self-employed people doing construction work for a contractor. Everyone on CIS is self-employed (or a limited company), but not everyone self-employed is on CIS. A plumber doing jobs for homeowners is self-employed and CIS never comes into it, the same plumber doing a week for a building firm is CIS for that week.
The 20% is a payment on account, not the bill. Your real tax is 20% income tax on profit above the £12,570 allowance, plus 6% Class 4 National Insurance on the same band, and profit means what's left after expenses. On £35,000 invoiced with £5,000 of expenses that's about £4,500 of tax against £7,000 already deducted, so around £2,500 comes back. Over £50,270 of profit it's 40% and 2% on the extra.
Construction Industry Scheme. It's HMRC's system for collecting tax from self-employed people in construction at source, so the contractor takes 20% (or 30% if you're not registered) off the labour part of what they pay you and sends it to HMRC in your name. In your accounts it shows up as tax already paid, and it's set against your bill when your return goes in.
Yes, and it's common. Keep the P45 from the firm, it shows your pay and the tax already taken through PAYE. When your Self Assessment goes in it has an employment section for those months and a self-employment section for the CIS months, and the two lots of tax both count against one bill. Register as self-employed straight away, don't wait for April, because you need the UTR before a contractor can verify you at 20%.
Next: register for CIS · your first CIS statement · what your refund might be · CIS start to finish · what it costs from £69 a month