What is the difference between CIS and PAYE?
CIS is a tax deduction system used for qualifying payments from construction contractors to subcontractors. PAYE is the system used by employers to deduct tax and National Insurance from employees.
A construction worker cannot simply choose CIS instead of PAYE. The worker must actually be self-employed under the terms and circumstances of the particular engagement.
What does working under CIS mean?
CIS applies where a qualifying construction contract exists between a contractor and a subcontractor and that contract is not a contract of employment.
A registered subcontractor paid under deduction will normally have CIS deducted at the applicable rate and remains responsible for their business tax affairs.
What does working under PAYE mean?
Where the worker is an employee, the employer operates PAYE on employment income and applies the employment tax and National Insurance rules.
How is employment status decided?
HMRC says the terms of the particular engagement matter. Being registered for CIS, owning tools or having previously worked as self-employed does not by itself determine the answer.
Which factors can affect status?
Control
Who decides what work is done and how, when and where it is carried out?
Personal service
Is the worker required personally, or is there a genuine right to provide a substitute?
Financial risk
Does the worker genuinely bear business risk and responsibility for correcting defective work?
Business organisation
Is the worker genuinely operating an independent business rather than being integrated as staff?
Being on the CIS register is not an employment-status test
A contractor must still consider whether the worker is genuinely self-employed when they are engaged.
Can someone registered for CIS still be an employee?
Yes.
If the facts of a particular contract create employment, PAYE applies to that engagement despite the worker's CIS registration.
How are the tax systems different?
| CIS subcontractor | PAYE employee |
|---|---|
| Operates a self-employed business | Works under a contract of employment |
| CIS may be deducted from contractor payments | Employer deducts PAYE tax and relevant NIC |
| Reports business profit through Self Assessment | Employment income is normally reported through payroll |
| Claims allowable self-employed business costs | Employment expense rules are more restrictive |
| Bears genuine business responsibilities | Works as part of the employer's workforce |
Are expenses different under CIS and PAYE?
Yes. A genuinely self-employed subcontractor follows the self-employed business expense rules. Employees instead follow the employment-expense rules.
For example, the PAYE temporary-workplace rules should not automatically be applied to a genuinely self-employed CIS subcontractor.
Can HMRC's CEST tool help?
HMRC provides its Check Employment Status for Tax tool to give HMRC's view based on the information entered about the engagement.
HMRC says it will stand by a CEST result where the information supplied is accurate and remains consistent with its guidance.
What happens if CIS was used when PAYE should have applied?
Employment-status errors can affect who should have accounted for tax and National Insurance and may create liabilities for the engager.
If the working relationship does not reflect genuine self-employment, the status should be reviewed rather than simply continuing CIS because that is how the worker was previously paid.
Reviewed & Updated
18 August 2026
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CIS vs PAYE FAQs
Does a UTR mean I am self-employed?
No. A UTR is a tax reference. Employment status is determined separately.
Does CIS registration prove I am a subcontractor?
No. HMRC explicitly says CIS registration is irrelevant when deciding employment status for a particular engagement.
Can I be CIS for one job and PAYE for another?
Yes. Different engagements can produce different status outcomes depending on their actual terms.
Who decides whether PAYE should apply?
The engager must consider the worker's status when the worker is engaged, applying the tax status rules to the actual arrangement.
Official HMRC Sources
HMRC — CIS 340 HMRC — CIS and employees HMRC — Check Employment Status for TaxNot sure whether your work is CIS or PAYE?
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