How Much Tax Will I Pay as a Self-Employed Subcontractor?
Updated: Aug 26
Key Takeaways
You pay Income Tax and Class 4 National Insurance on your profit — your income after allowable expenses — not on your turnover.
For 2026/27 the rates are 20% income tax and 6% Class 4 NI on profit between £12,570 and £50,270, rising to 40% and 2% above that.
The 20% CIS deducted from your pay is not your final tax — it's an advance, and it's usually more than you actually owe, so subcontractors are often due a refund.
Class 2 NI is no longer a bill for most subcontractors — you're treated as having paid it once your profit is above £7,105.
Your tax is settled through Self Assessment, with the first year often bringing payments on account (payments in advance) that catch people out.
As a self-employed subcontractor, you pay Income Tax and Class 4 National Insurance on your profit — what's left after your allowable expenses — rather than on everything you invoice. For 2026/27 that's 20% Income Tax and 6% Class 4 NI on profit between £12,570 and £50,270. The 20% CIS already deducted from your payments counts towards this bill, and because it's taken from your gross labour before expenses, it's usually more than you owe — which is why so many subbies get a refund.
The most important point: you're taxed on profit, not turnover
This trips up more subcontractors than anything else. You don't pay tax on the total you invoice; you pay it on your profit — your income minus your allowable business costs like tools, materials, van, insurance, and travel. So if you invoice £45,000 but have £9,000 of genuine expenses, your tax is worked out on £36,000, not £45,000.
Claiming every allowable expense directly lowers your tax bill, therefore having a construction accountant like SiteLedger is a real advantage as they know your trade better than anyone.
The taxes you actually pay
A self-employed subcontractor pays two things on their profit:
Income Tax — at the same rates as everyone else, after your £12,570 tax-free personal allowance.
Class 4 National Insurance — a second charge on your profit, on top of Income Tax.
There's also Class 2 National Insurance, but for most subbies it's no longer a bill: once your profit is above the £7,105 Small Profits Threshold for 2026/27, you're treated as having paid it (which still counts towards your State Pension) without handing over anything. Only if your profit is below that threshold might you choose to pay it voluntarily, at £3.65 a week, to protect your pension record.
The 2026/27 rates and bands
Profit band (2026/27) | Income Tax | Class 4 NI |
Up to £12,570 (personal allowance) | 0% | 0% |
£12,570 – £50,270 | 20% | 6% |
£50,270 – £125,140 | 40% | 2% |
Over £125,140 | 45% | 2% |
As with employees, only the slice of profit in each band is taxed at that band's rate. (Note that the personal allowance is gradually withdrawn once profit passes £100,000.)
A worked example
Take a registered subcontractor with £45,000 of labour income and £9,000 of allowable expenses in 2026/27:
Labour income | £45,000 |
Less allowable expenses | −£9,000 |
Taxable profit | £36,000 |
Income Tax — 20% of (£36,000 − £12,570) | £4,686 |
Class 4 NI — 6% of (£36,000 − £12,570) | £1,406 |
Total tax and NI due | £6,092 |
CIS already deducted (20% of £45,000) | £9,000 |
Refund due | £2,908 |
The subcontractor's actual tax bill is £6,092 — but £9,000 has already been taken through CIS. So rather than owing anything, they're owed £2,908 back. This is the typical position for a subbie, because CIS is deducted from gross labour before any expenses are taken into account.
At higher profits the gap narrows. A subcontractor with £70,000 of labour income and £12,000 of expenses has a profit of £58,000, a total Income Tax and NI bill of around £13,049, and £14,000 deducted through CIS — still a refund, but a smaller one of roughly £951.
Why CIS makes your tax feel different
For most self-employed people, tax is a bill they have to find at the end of the year. For a subcontractor it's usually the reverse: the 20% CIS taken from every payment is an advance on your tax, and because it ignores your expenses, it over-collects. Your Self Assessment return works out what you actually owe on your profit, sets the CIS you've paid against it, and refunds the difference. The 20% you see deducted is not your tax rate — it's a payment on account of a bill that's usually lower.
Payments on account — the January surprise
One thing to plan for. When you file your first Self Assessment, if you owe more than £1,000 and less than 80% of your tax was collected at source, HMRC asks for payments on account — advance payments towards next year's bill, due on 31 January and 31 July. Each is 50% of your latest bill, so your first January payment can be one-and-a-half times the tax due. For subcontractors whose CIS covers most of their tax, this bites less, but it's worth knowing so it doesn't catch you out.
Frequently Asked Questions
How much tax does a self-employed subcontractor pay? You pay Income Tax and Class 4 National Insurance on your profit — your income after allowable expenses — not on your turnover. For 2026/27 that's 20% Income Tax and 6% Class 4 NI on profit between £12,570 and £50,270, and 40% plus 2% above that. The 20% CIS already deducted counts towards this and is usually more than you owe.
Is the 20% CIS deduction my final tax? No. The 20% deducted under CIS is an advance towards your tax, not your final bill. Your actual liability is based on your profit after expenses, worked out through Self Assessment. Because CIS is taken from your gross labour before expenses, it usually exceeds what you owe, so most subcontractors receive a refund when they file.
Do I pay National Insurance as a subcontractor? Yes — Class 4 National Insurance at 6% on profit between £12,570 and £50,270, and 2% above. Class 2 National Insurance is no longer a bill for most people: once your profit is above £7,105 you're treated as having paid it, which still counts towards your State Pension.
How much can I earn before I pay any tax? Your first £12,570 of profit is covered by the personal allowance, so there's no Income Tax on it, and no Class 4 NI below that level either. But CIS is still deducted from your payments regardless, so if your profit is low you'll usually have overpaid and be due most or all of it back when you file.
What are payments on account? They're advance payments towards next year's tax bill, due on 31 January and 31 July, each worth 50% of your latest bill. They apply if you owe more than £1,000 and most of your tax wasn't collected at source. They often surprise people in their first year of Self Assessment, so it's worth having a construction-specialist accountant explain how they'll affect your cash flow.
Want to know exactly what you'll pay — or get back?
Your real tax bill depends on your profit and expenses, and for most subbies it's less than the CIS already taken — meaning a refund. Talk to the SiteLedger team on 01706 595 370 and we'll work out exactly what you owe, claim back any overpaid CIS, and make sure every allowable expense is counted. As construction accountants, subcontractor tax returns are what we do all day.
Written by the SiteLedger team — construction-specialist accountants. Last reviewed: July 2026. Figures and rates apply to the 2026/27 UK tax year and to England, Wales, and Northern Ireland (Scotland has different Income Tax bands). This is general guidance, not personal tax advice; your position depends on your circumstances, so speak to us about your specific situation.