What Being a Subcontractor Really Means


A subcontractor is an individual or business which carries out construction operations for another individual or business, known as the contractor.



There are some key differences between a contractor and subcontractor. A contractor deals with the end customer directly whereas a subcontractor reports to the contractor and doesn’t tend to deal directly with the end customer.

A contractor is responsible for the completion of the entire project which includes the work carried out by the subcontractor and the materials needed for the job. A subcontractor is usually hired to complete one aspect of a project, for example electrical work, and are only responsible for this part of the project.


Tax Rates & registrations

Subcontractors are classified as being self-employed, therefore you will need to register for self-assessment. HMRC will then issue you with a Unique Tax Reference (UTR).

You will need your UTR to register for the Construction Industry Scheme (CIS). Under the scheme, contractors will use your UTR to verify your details and deduct tax from your pay. The amount that is deducted depends on if you are registered for the scheme or not.

If you are registered for the scheme, you will have 20% tax deducted from your payments, these deductions will count as payments towards your tax and National Insurance each year.

If you are not registered for the scheme, you will be liable to 30% deductions so it is definitely worth registering for CIS.

However, if you are a subcontractor with a turnover of £30,000 or more per year and you have a good tax compliance record, you can apply for gross status meaning the contractor will pay you in full rather than deducting tax. Keep in mind this means you will likely have a tax liability at the end of each year.


Benefits of being a subcontractor

There are many benefits to becoming a subcontractor, such as:

  • Control – subcontractors are self employed and therefore they are their own boss and can enjoy all the benefits that come with this
  • Opportunities – the contractor may have more client contacts so may be able to provide more opportunities for work
  • No strings – unlike employment, subcontractors aren’t tied down to work with the same contractor for long periods of time

Being a subcontractor allows you to use your skills on different projects and work across different industries, with the ability to choose the right project for you without being restricted to the same type of work over long periods of time. If you think this could be the right choice for you, get in touch to find out more.

This article is for general information only. You are recommended to seek professional advice before taking action on the basis of the contents of this article.

Donna Kelly
Accountant Technician






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