If you work in construction, it’s easy to hear someone on site say, “Once you earn over a certain amount, all your wages get taxed at 40%.” That’s not quite how it works.
For tradespeople, subcontractors, site managers and small contractors, understanding when 40% tax applies can make a big difference to cash flow, pricing jobs and avoiding surprises at Self Assessment time.
In this guide, we’ll answer the question “At what point do people pay 40% tax?” and explain whether subcontractors pay 40% tax, in plain English.
When do you start paying 40% tax?
In the UK, most people start paying 40% Income Tax when their taxable income goes over the higher-rate threshold.
For most taxpayers in England, Wales and Northern Ireland, the 40% band starts when taxable income exceeds £50,270.
That does not mean all your income is taxed at 40%.
Instead, Income Tax works in bands:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
Personal Allowance: usually the first
£12,570 is tax-free</li><li class="ml-4 list-disc list-inside">
Basic rate: income from
£12,571 to £50,270 is taxed at
20%</li><li class="ml-4 list-disc list-inside">
Higher rate: income from
£50,271 to £125,140 is taxed at
40%</li><li class="ml-4 list-disc list-inside">
Additional rate: income over
£125,140 is taxed at
45%</li></ul>
So the answer to “At what point do people pay 40% tax?” is: once taxable income goes above £50,270, for most UK taxpayers outside Scotland.
Important: only the income above the threshold is taxed at 40%
This is where many people get caught out.
If your taxable income is £55,000, you do not pay 40% on the full £55,000.
You would usually pay:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
0% on the first
£12,570</li><li class="ml-4 list-disc list-inside">
20% on the income between
£12,571 and £50,270</li><li class="ml-4 list-disc list-inside">
40% only on the amount
above £50,270</li></ul>
In this example, only £4,730 would fall into the 40% tax band.
That’s why going into the higher-rate band doesn’t mean your whole income is suddenly taxed at a higher rate.
How much Income Tax will I pay?
This depends on your total taxable income, your trading setup, and whether you’re employed, self-employed or working as a subcontractor under CIS.
A simple example:
Example 1: PAYE site manager earning £60,000
A site manager employed on PAYE with a salary of £60,000 would usually have:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
£12,570 tax-free personal allowance</li><li class="ml-4 list-disc list-inside">
£37,700 taxed at
20%</li><li class="ml-4 list-disc list-inside">
£9,730 taxed at
40%</li></ul>
Their Income Tax would be calculated across those bands, not at one flat rate.
They would also normally pay National Insurance, which is separate from Income Tax.
Example 2: Self-employed electrician with £58,000 profit
A self-employed electrician doesn’t pay tax on turnover. They pay tax on profit.
So if they invoice £90,000 over the year but have £32,000 in allowable business expenses, their taxable profit might be £58,000.
That profit would usually be taxed as follows:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">first
£12,570 tax-free</li><li class="ml-4 list-disc list-inside">next band at
20%</li><li class="ml-4 list-disc list-inside">profit over
£50,270 at
40%</li></ul>
Again, only the slice above the higher-rate threshold attracts 40% tax.
Do subcontractors pay 40% tax?
This is one of the most common questions in construction, and the short answer is:
No, subcontractors do not automatically pay 40% tax just because they work under CIS.
A lot of confusion comes from mixing up:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
CIS deductions, and</li><li class="ml-4 list-disc list-inside">
actual Income Tax rates</li></ul>
Under the Construction Industry Scheme (CIS), contractors usually deduct money from subcontractor payments before they are paid. The standard CIS deduction rate is:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
20% for registered subcontractors</li><li class="ml-4 list-disc list-inside">
30% if the subcontractor is not properly registered</li></ul>
These CIS deductions are not the same as saying your tax rate is 20% or 30% overall. They are advance payments towards your tax bill.
If your total taxable profit goes above the higher-rate threshold, then part of your income may be taxed at 40% when your Self Assessment is worked out.
So, to answer “Do subcontractors pay 40% tax?”:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
Some do, if their taxable income is high enough</li><li class="ml-4 list-disc list-inside">
Many don’t, because their taxable profit stays within the basic-rate band</li><li class="ml-4 list-disc list-inside">
CIS deductions alone do not tell you your final tax rate</li></ul>
Why CIS can confuse subcontractors
Let’s take a realistic site example.
A bricklaying subcontractor works for a principal contractor on a housing development in Manchester. Over the tax year, the contractor deducts 20% CIS from labour payments. The subcontractor sees money coming off each payment and assumes that tax is sorted.
But at the end of the year, their actual tax position depends on:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">total income received</li><li class="ml-4 list-disc list-inside">allowable expenses</li><li class="ml-4 list-disc list-inside">taxable profit</li><li class="ml-4 list-disc list-inside">any other income, such as PAYE work or rental income</li><li class="ml-4 list-disc list-inside">National Insurance contributions</li></ul>
If that bricklayer’s profits are strong and go over £50,270, some of the profit may be taxed at 40%. If they’ve only had CIS deducted at 20%, they could still owe more tax through Self Assessment.
On the other hand, if their expenses are high and taxable profit is lower, they may not reach the higher-rate band at all.
What counts as taxable income for construction workers?
For people in construction, taxable income can include:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">wages from PAYE employment</li><li class="ml-4 list-disc list-inside">self-employed business profit</li><li class="ml-4 list-disc list-inside">subcontracting income after allowable expenses</li><li class="ml-4 list-disc list-inside">bonuses</li><li class="ml-4 list-disc list-inside">rental income</li><li class="ml-4 list-disc list-inside">interest or dividends in some cases</li></ul>
For subcontractors and sole traders, the key figure is usually profit, not turnover.
That’s why accurate record-keeping matters. If you don’t properly track fuel, tools, plant hire, protective clothing, mileage, software, insurance and other allowable costs, your profit can look higher than it really is, and you may pay more tax than necessary.
What happens if you earn over £100,000?
There’s another threshold worth knowing about.
Once your income goes over £100,000, your Personal Allowance starts to reduce. This can create an effective tax rate higher than 40% on part of your income, because you’re not only paying higher-rate tax but also losing some tax-free allowance.
For higher-earning construction professionals such as directors, commercial managers or successful subcontractors running strong margins, this is an area where tax planning becomes especially important.
Common myth on site: “If I go over the threshold, I’m worse off”
This is false.
You won’t be worse off for earning more just because you move into the 40% tax band. Only the income above the threshold is taxed at the higher rate.
For example, if a drylining subcontractor takes on an extra package of work that pushes profits slightly over £50,270, they still keep more money overall. They just pay 40% on the portion above that threshold.
Understanding that point can help with pricing and deciding whether to take on additional work.
How SiteSamurai helps subcontractors stay on top of tax
For subcontractors, labour-only gangs and small construction firms, tax problems often start with poor records rather than high earnings.
If you don’t have a clear handle on:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">invoices raised</li><li class="ml-4 list-disc list-inside">CIS deductions suffered</li><li class="ml-4 list-disc list-inside">labour costs</li><li class="ml-4 list-disc list-inside">job expenses</li><li class="ml-4 list-disc list-inside">plant and materials spend</li><li class="ml-4 list-disc list-inside">project profitability</li></ul>
then it becomes much harder to know whether you’re heading towards the higher-rate tax band.
Using SiteSamurai, construction businesses can keep better control of site paperwork, job records and operational data in one place. That makes it easier to understand what each project is actually delivering and helps support cleaner handovers to your accountant or bookkeeper.
For example, if you’re running multiple jobs across groundwork, fit-out or residential refurbishments, SiteSamurai gives you a clearer operational view of what’s happening on site. That visibility helps reduce the end-of-year scramble that catches many subcontractors out.
Final answer
So, at what point do people pay 40% tax?
For most people in England, Wales and Northern Ireland, you start paying 40% Income Tax on taxable income above £50,270.
And do subcontractors pay 40% tax?
Only if their taxable income or profit is high enough to enter the higher-rate band. CIS deductions do not automatically mean a subcontractor’s final tax rate is 20%, 30% or 40%.
The most important things are:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">know your taxable profit</li><li class="ml-4 list-disc list-inside">understand the tax bands</li><li class="ml-4 list-disc list-inside">don’t confuse CIS deductions with final tax liability</li><li class="ml-4 list-disc list-inside">keep accurate records throughout the year</li></ul>
If you want fewer surprises at tax time, better job visibility and stronger control of construction admin, using a system like SiteSamurai can make the process far more manageable.
Tax rules can change, and individual circumstances vary, so always check current HMRC guidance or speak to a qualified accountant for advice specific to your business.