Can I claim the cost of paying a labourer or subcontractor?

Yes. In 2026-27, money you pay a labourer or subcontractor to work for your business is an allowable expense. If your business and the work are construction, you are also a CIS contractor and usually deduct tax first.

Many tradespeople bring in help for a big job: a labourer for a week, a plasterer, a sparky for second fix. The rules below follow GOV.UK's guide to self-employed expenses, the Construction Industry Scheme (CIS) guidance, the tax return notes and HMRC's Business Income Manual, as checked on 17 October 2026.

Yes, it is a business cost

GOV.UK lists staff costs, "for example salaries or subcontractor costs", among the expenses you can claim. Its staff expenses page names subcontractors, agency fees and employee wages. The test behind every expense is in section 34 of the Income Tax (Trading and Other Income) Act 2005, which HMRC's manual calls the wholly and exclusively rule: the cost must be for your trade. Paying someone to help on a customer's job meets that test. Paying someone to work on your own house does not.

Which box it goes in

The notes to the 2025-26 full self-employment pages say box 18 includes "the total payments you made to subcontractors or any person or company for any type of construction work". Box 19 covers wages and other staff costs, and says not to include payments to yourself. Non-business work goes in the disallowable boxes, 33 and 34.

If the work is construction, CIS applies

GOV.UK says that if your business is construction and you pay subcontractors for construction work, you are a "mainstream" contractor, and it lists a builder as an example. It also says a contractor may be a sole trader, a partnership or a limited company, so a self-employed builder, roofer or plumber who pays another tradesperson can be one. As a contractor, GOV.UK says you must:

1. Register for CIS before you take on your first subcontractor. See whether you need to register as a contractor.
2. Check with HMRC that each subcontractor is registered. See how to verify a subcontractor.
3. Deduct the rate HMRC gives you when you verify: 20% for registered subcontractors, 30% for unregistered ones, or nothing if they have gross payment status, and pay it to HMRC.
4. If you made deductions, give each subcontractor a payment and deduction statement within 14 days of the end of each tax month.
5. File a monthly return by the 19th after the tax month ends. See the monthly return deadline.

The deduction is worked out on the invoice total after taking off VAT and costs the subcontractor paid for directly, such as materials, plant hire and fuel other than travel. GOV.UK says deductions count as advance payments towards the subcontractor's own tax and National Insurance, and HMRC's CIS guide says the contractor withholds them on account of the subcontractor's tax. So in our reading, the cost you claim is the full amount before the deduction, not just what reached their bank.

Cash still needs records

HMRC's CIS guide lists cash as a payment under the scheme, so paying in notes changes nothing. You still deduct, give a statement and include it on the return. GOV.UK says contractors must keep CIS records, including the gross amount of each invoice and any deductions, for at least 3 years after the end of the tax year. For your own accounts, keep a dated invoice or receipt for each payment, with the name, the job and the amount.

Labourer or employee?

CIS covers self-employed subcontractors only. HMRC's guide says a contract in the scheme must not be a contract of employment, and that the contractor decides the worker's status when they are first taken on. Each monthly return also asks you to declare that the subcontractors listed are not employees, and GOV.UK says giving the wrong status can mean a penalty of up to £3,000. If your labourer is an employee, GOV.UK says you register as an employer and pay their tax and National Insurance through PAYE. Our guide on whether a subcontractor is employed or self-employed covers the tests, and paying family is covered in paying your partner a wage.

A worked example

A self-employed builder takes on a registered labourer at £150 a day for 5 days in May 2026. Later a registered plasterer invoices £1,200: £1,000 labour and £200 of materials the plasterer bought.

The builder claims £1,950 in box 18 (£750 + £1,200), pays £350 of deductions to HMRC (£150 + £200), and reports both on the monthly returns. This is an example only.

What this means for you

Labour you pay for the business reduces your taxable profit, unless you use the £1,000 trading allowance, which GOV.UK says is instead of deducting expenses. The trap is CIS: claiming the cost is easy, but paying another tradesperson for construction work without registering, verifying and filing can bring penalties.

Steps to claim labour costs

1. List every payment to a labourer or subcontractor this tax year, cash included.
2. For construction work, check you are registered as a CIS contractor and that each subcontractor was verified.
3. Record the full invoice, before any CIS deduction, as the cost, and the deduction as paid to HMRC.
4. Take out anything for your own home or other non-business work.
5. Put construction subcontractors in box 18 and employees or other labour in box 19 of the full self-employment pages.

The free MTD check shows when MTD starts for you, and the trades section has more guides.