Do I need to register as a CIS contractor if I pay subcontractors?

Yes. If you pay another self-employed trade for construction work, GOV.UK says you must register as a Construction Industry Scheme (CIS) contractor before you take on your first subcontractor. In 2026-27 you do it through HMRC's new-employer registration.

It catches a lot of sole traders by surprise. You have been a subcontractor for years, you win a bigger job, and you bring in a mate to help with the second fix or the groundwork. The moment you pay them for construction work, you are a contractor for that payment, even though you are still a subcontractor to the builder who pays you.

Who has to register

GOV.UK says you must register as a CIS contractor if either applies:

• you pay subcontractors to do construction work
• your business is not construction, but you have spent more than £3 million on construction in 12 months (HMRC's manual says this is checked on a rolling basis, excluding VAT and materials)

The first group are called mainstream contractors. GOV.UK names builders, labour agencies, gangmasters and property developers. The second group are deemed contractors, such as housing associations and local authorities. A sole trader roofer, plasterer or electrician who pays another trade is a mainstream contractor, whatever the size of the job.

What this means for you

Registering as a contractor brings a monthly routine that does not exist when you are only a subcontractor. GOV.UK says you must:

• check the person should not be your employee instead; you may get a penalty if they should be
• verify each new subcontractor with HMRC before you pay them, which tells you whether to deduct 20%, 30% or nothing
• work out the deduction on their invoice after taking off VAT and materials, and pay it to HMRC by the 22nd of the month, or the 19th by post
• give each subcontractor you deducted from a payment and deduction statement, and file a monthly return, by the 19th
• keep records of payments, materials and deductions for at least 3 years after the end of the tax year

Two points matter for a small firm. First, from 6 April 2026, the CIS amendment regulations (SI 2026/289) say a contractor whose business includes construction and who has paid subcontractors before must file a nil return for any tax month with no payments, unless it told HMRC at least 14 days before that month started. A late monthly return costs £100 from the day after the deadline. Second, you cannot net off. As a sole trader, the deductions taken from you go on your Self Assessment tax return, while the deductions you take from your labourer belong to HMRC and are paid over each month.

Get the records right from the start, because GOV.UK says you could be fined up to £3,000 if you cannot show your CIS records when HMRC asks.

Steps to register as a CIS contractor

1. Check the work is construction under CIS and the person is genuinely self-employed. If they should be an employee, they go on payroll instead.
2. Register as a contractor through HMRC's process for setting up as a new employer. GOV.UK says you cannot register more than 2 months before you start paying people.
3. Wait for HMRC's letter. It gives your employer PAYE reference number and the other details you need to run CIS.
4. If you are also paid under CIS, make sure you are registered as a subcontractor too. The two registrations are separate.
5. Before the first payment, verify the subcontractor using the free HMRC CIS online service or commercial CIS software.
6. Set reminders for the 19th (statements and the monthly return) and the 22nd (payment to HMRC), every month, including months with no payments.

A worked example

Dan is a self-employed bricklayer paid by a main contractor, who deducts 20% from his labour. On a garden wall job for a homeowner he pays a self-employed labourer £1,000 for labour, with no materials. The homeowner is not a contractor, so nothing is taken from Dan's invoice. But Dan is a contractor when he pays the labourer. If HMRC's verification gives the 20% rate, Dan deducts £200, pays the labourer £800, pays £200 to HMRC by the 22nd and files his monthly return by the 19th. The £200 is the labourer's tax, not Dan's, and the CIS taken from Dan's own pay still goes on his tax return.

Read how to verify a CIS subcontractor and the CIS monthly return deadline for the next parts of the routine. Use the free MTD check to see whether and when Making Tax Digital applies to you, and the trades section has more on CIS.