Is a CIS subcontractor employed or self-employed?

A CIS subcontractor must be self-employed under the terms of the job. If those terms make you an employee, HMRC says CIS does not apply and PAYE should. HMRC's CEST tool, updated 30 April 2025, checks it.

The Construction Industry Scheme (CIS) is a tax collection system, not a status. HMRC's CIS 340 guide says a contract is only within the scheme if it is not a contract of employment. It also says that having worked as self-employed before is irrelevant. What matters is how this particular engagement works in practice.

Employed or self-employed: the usual signs

The table is based on the signs GOV.UK lists for employees and for the self-employed. No single one decides it. The overall picture does.

Many site workers sit somewhere in the middle, especially labourers on day rates working under a foreman. That is where the CEST tool helps.

What this means for you

If you are genuinely self-employed, CIS applies. Contractors deduct 20% if you are registered and verified, and you claim back any over-deduction through your tax return, after taking off your business costs.

If you are really an employee, you should be on the payroll. Your employer deducts Income Tax and National Insurance through PAYE. You get employment rights such as Statutory Sick Pay, paid holiday and protection against unfair dismissal. GOV.UK says you do not need to register for CIS if you are an employee.

GOV.UK says individuals and their employers may have to pay unpaid tax and penalties, or lose entitlement to benefits, if status is wrong. It also says the contractor can be fined up to £3,000 for giving the wrong employment status for a subcontractor on its monthly return.

A third category exists in employment law: a worker. Workers get some rights, such as the National Minimum Wage and paid holiday, without being employees. Employment law status and tax status can differ, so you can be self-employed for tax and still be a worker for employment rights.

Steps to check your status

1. Look at how the job really runs, not what the paperwork calls it. Use the table above as a guide.
2. Gather the details: the contract or what was agreed, who decides what work is done and how, how you are paid, and who supplies tools.
3. Run HMRC's Check Employment Status for Tax (CEST) tool. It is anonymous and you cannot save part way through.
4. Save the result. GOV.UK says HMRC stands by it if the information you gave is accurate.
5. If the result says employed, talk to the business about putting you on the payroll before you register for CIS or carry on invoicing.
6. Run the tool again if the job changes, for example if you start supervising others or move onto fixed hours.

If you are both employed and self-employed

GOV.UK says you can be both at once. For example, you might be employed by one firm in the day and take CIS work at weekends. Your wages go through PAYE and appear on the employment pages of your tax return. Your CIS pay and deductions go on the self-employment pages, never the employment pages, as CIS 340 makes clear. If your tax code gives your personal allowance against your wages, less of your CIS profit is tax-free, so your CIS refund can be smaller than a full-time subcontractor's.

Use the free MTD check to see whether Making Tax Digital applies to you from April 2027, and visit the trades section for more on CIS.