If you work as a subcontractor in construction, one of the most common questions is simple: what tax do subcontractors pay?
The short answer is that most subcontractors working under the Construction Industry Scheme (CIS) will usually have 20% tax deducted at source if they’re registered with HMRC, or 30% if they’re not registered. But that is not the whole story.
A lot of tradespeople also ask: do subcontractors pay 40% tax? In most cases, no — not automatically. However, some subcontractors may end up paying tax at the 40% higher rate on part of their profits if their total taxable income is high enough.
In this guide, we’ll break down how subcontractor tax actually works in the UK, what CIS deductions mean, when 40% tax applies, and how to stay on top of your records with practical tools like SiteSamurai.
What tax do subcontractors pay under CIS?
If you’re a subcontractor working for a contractor in the UK construction industry, you will usually fall under the Construction Industry Scheme.
Under CIS, the contractor deducts money from your payments and passes it to HMRC on your behalf. These deductions count towards your tax and National Insurance bill.
The standard CIS deduction rates are:
- 20% for registered subcontractors
- 30% for unregistered subcontractors
- 0% if you have gross payment status
For most subcontractors, the answer to “what tax do subcontractors pay?” starts with that 20% deduction.
But it is important to understand that CIS is not a separate tax. It is more like an advance payment towards what you may owe at the end of the tax year.
Do subcontractors pay 40% tax?
This is where a lot of confusion comes in.
The short answer
Subcontractors do not usually pay 40% tax just because they are subcontractors.
The 40% tax rate is the higher rate of Income Tax, and it applies only when your taxable income goes above the higher-rate threshold.
So if someone asks, “do subcontractors pay 40% tax?”, the accurate answer is:
- Usually no for average earnings
- Possibly yes if total taxable profits are high enough
In other words, your tax rate depends on your profits and total income, not simply on whether you work as a subcontractor.
Why people think subcontractors pay 40%
There are a few reasons this myth keeps circulating on site:
- CIS deductions can feel high when cash flow is tight
- Some workers confuse 30% CIS deductions with an overall tax rate
- Higher earners may genuinely pay 40% Income Tax on part of their profits
- Poor record keeping can make year-end tax bills more painful than expected
For example, a bricklaying subcontractor might have 20% CIS stopped from labour payments all year, then still owe more tax if their profits are strong and expenses have not been tracked properly.
CIS deductions are not your final tax bill
This is one of the most important points for subcontractors to understand.
If a contractor deducts 20% under CIS, that does not automatically mean your final tax rate is 20%.
Your actual tax bill depends on:
- Your total income for the tax year
- Allowable business expenses
- Whether you are self-employed or trading through a limited company
- Any other work or income you have
- The amount already deducted under CIS
At the end of the year, HMRC looks at the full picture.
So, for example:
- If too much has been deducted, you may get a tax refund
- If not enough has been paid overall, you may have more tax to pay
This is why accurate records matter so much on construction jobs.
What expenses can subcontractors claim?
Your taxable profit is usually your income minus allowable business expenses. The more accurate your records, the less likely you are to overpay.
Typical allowable expenses for subcontractors can include:
- Tools and equipment
- Workwear and PPE
- Van running costs and fuel for business travel
- Public liability insurance
- Accountancy fees
- Phone and internet used for work
- Training and certifications
- Mileage to temporary sites
- Materials you have paid for yourself
For example, if a groundworker invoices £45,000 over the year but has legitimate business expenses of £9,000, they are generally taxed on the profit rather than the full turnover.
That is a big reason why subcontractors who keep poor records often feel like they are paying too much tax.
Real site example: why tax feels higher than it should
Imagine a plastering subcontractor working across three housing developments for two main contractors.
- Contractor A deducts 20% under CIS
- Contractor B also deducts 20% under CIS
- The subcontractor buys their own tools, fuel and PPE
- They do not properly log receipts or site mileage
By January, they feel like they are being hammered for tax. On paper, it may look that way. But if they have failed to capture £5,000 to £7,000 in allowable expenses, they are probably overstating their taxable profit.
Using a proper system to log jobs, site visits, variations, photos and records in one place can make year-end admin far easier. SiteSamurai helps subcontractors and small contractors keep better site records day to day, so key details do not go missing when it is time to reconcile work completed, payments received and supporting documents.
What about National Insurance?
Subcontractors may also need to pay National Insurance contributions, depending on how they operate and how much they earn.
If you are self-employed, your tax bill may include:
- Income Tax on your profits
- National Insurance based on your earnings
This is another reason why CIS deductions are only part of the picture. They help cover what you owe, but they do not always match your final liability exactly.
What if you are not registered for CIS?
If you are not registered as a subcontractor under CIS, contractors will normally deduct 30% from your payments.
That is why registration matters.
For a subcontractor on a busy commercial fit-out or housing site, losing 30% from each payment can put serious pressure on cash flow. Registering correctly with HMRC usually reduces deductions to 20%, which is the standard rate for most subcontractors.
Can subcontractors be paid with no deductions?
Yes. Some subcontractors qualify for gross payment status, which means contractors pay them without making CIS deductions.
This does not mean no tax is due. It simply means you are responsible for handling your tax payments directly through your accounts and tax return.
Gross payment status can help cash flow, especially for growing subcontractors managing multiple gangs, significant materials and tight payment cycles. But it also means bookkeeping needs to be watertight.
How SiteSamurai helps subcontractors stay tax-ready
Tax problems on construction jobs often start with poor site admin rather than poor earning.
When records are scattered across WhatsApp, paper diaries, fuel receipts, snag lists and invoice emails, it becomes much harder to prove what happened on site and what was spent getting the job done.
SiteSamurai helps subcontractors and small construction teams keep organised by making it easier to record:
- Site activity
- Photos and progress updates
- Labour and work completed
- Issues, delays and variations
- Job notes linked to specific sites
That means fewer missing details at invoice stage and a stronger audit trail when your accountant starts preparing figures for HMRC.
For a roofing subcontractor juggling reactive repairs, new-build plots and small commercial jobs, having centralised digital site records can make the difference between rushed year-end guesswork and accurate reporting.
Key takeaway: what tax do subcontractors pay?
So, what tax do subcontractors pay?
In most UK construction cases:
- 20% CIS is deducted if you are registered
- 30% CIS is deducted if you are not registered
- 0% CIS may apply with gross payment status
- Your final bill depends on your profits, expenses and total income
- 40% tax only applies if your taxable income is high enough to enter the higher-rate band
So if you are asking, “do subcontractors pay 40% tax?”, the best answer is: not by default. Most subcontractors will mainly deal with 20% CIS deductions, then settle the actual amount due through their tax return.
The smartest move is to keep accurate records throughout the year, understand what you can claim, and use tools like SiteSamurai to stay organised on every job.
Final word
Construction tax can seem more complicated than it needs to be, especially when money is being deducted before it even hits your account. But once you understand CIS, allowable expenses and how your final tax bill is calculated, it becomes much easier to manage.
If you want to avoid surprises, protect your margins and keep your paperwork under control across multiple sites, combining solid accounting support with better site record management is a practical place to start.
This article is for general information only and is not tax advice. Always speak to a qualified accountant or HMRC for advice specific to your situation.