How accurate is this CIS vs PAYE calculator?

The calculator uses HMRC's 2026/27 income tax bands, Class 1 employee National Insurance rates (8% primary, 2% upper) and Class 2 plus Class 4 National Insurance for self-employed subcontractors, with the standard £12,570 personal allowance. It does not model student loan repayments, pension contributions, salary sacrifice, the high-income child benefit charge or the additional rate taper of personal allowance above £100,000 of income. For a personalised projection including all factors, book a free consultation with an AccTek accountant.

CIS vs PAYE Tax Calculator UK (2026/27) | Subcontractor vs Employee Take-Home

How this calculator works

The calculator runs two parallel tax computations on the same gross income figure:

CIS subcontractor path

Treats you as self-employed. Starts with gross labour income, subtracts allowable business expenses to give taxable profit, applies the £12,570 personal allowance, then computes income tax (20% / 40% / 45% bands), Class 4 National Insurance (6% / 2%), and Class 2 National Insurance if profit exceeds £6,725. Compares total tax + NIC to the CIS deductions already taken at source — the difference is your Self Assessment refund.

PAYE employee path

Treats you as an employee. Starts with gross salary, applies the £12,570 personal allowance, then computes income tax (20% / 40% / 45% bands) and Class 1 employee National Insurance (8% / 2%). No allowable expenses against employment income — but adds back the value of employment benefits (holiday pay, employer pension, sick pay) which CIS does not provide.

Tax rates used (2026/27)

Personal allowance: £12,570 (tapered to zero above £125,140 of income)
Basic rate (20%): £12,571 to £50,270
Higher rate (40%): £50,271 to £125,140
Additional rate (45%): above £125,140
Class 1 employee NI: 8% on £12,571 to £50,270, 2% above
Class 4 NI: 6% on £12,571 to £50,270, 2% above
Class 2 NI: £3.45/week if self-employment profit exceeds £6,725

When CIS makes more sense

You have significant business expenses (mileage between sites, tools and equipment, PPE, public liability insurance, accountancy fees)
You work for multiple contractors and the engagement is genuinely self-employed under HMRC's employment-status tests
You want flexibility over working pattern and the ability to substitute another worker
You can plan around the cash-flow impact of CIS deductions and the timing of your Self Assessment refund

When PAYE makes more sense

You work primarily for one engager in an employee-like manner (controlled hours, no right of substitution, integrated into the team)
You value the employment rights package: holiday pay, sick pay, statutory redundancy, employer pension contributions
You have low or no allowable business expenses to offset
You prefer the simplicity of having tax handled at source without a Self Assessment return

For most genuine construction subcontractors with expenses above approximately £3,000 per year, CIS produces materially better net take-home. For workers whose role is functionally that of an employee, the HMRC compliance risk of operating under CIS usually outweighs the tax saving — and the engaging business shares that risk.

Frequently asked questions

Which is better — CIS or PAYE?

Neither is universally better. CIS subcontractors typically take home more cash because they claim allowable expenses and the standard 20% deduction often over-collects tax. PAYE employees pay tax precisely but receive holiday pay, sick pay, employer pension contributions and statutory protection. The right choice depends on your expense profile, income level and whether the working relationship genuinely qualifies as self-employed.

What CIS deduction rate applies to me?

Registered subcontractors have 20% deducted from labour. Unregistered subcontractors have 30% deducted. Gross payment status holders receive payments without any deduction. Materials are never subject to CIS — only labour.

How accurate is this calculator?

It uses HMRC's 2026/27 income tax bands and National Insurance rates with the standard £12,570 personal allowance. It does not model student loans, pension contributions, salary sacrifice, the high-income child benefit charge or the personal allowance taper above £100,000. For a full projection including these factors, book a free consultation.

Can a CIS subcontractor get a refund?

Yes. Because CIS deducts a flat 20% (or 30%) from gross labour but your actual tax is calculated on profit after expenses and personal allowance, most subcontractors over-pay through CIS and reclaim the difference via Self Assessment. A typical CIS contractor earning £40,000 with £6,000 of expenses reclaims approximately £2,600.

Should I switch from PAYE to CIS to save tax?

Only if the working relationship genuinely qualifies as self-employed under HMRC's employment-status tests (control, substitution, mutuality of obligation, financial risk, integration). Switching purely for tax saving while continuing in an employee-like role is high risk — HMRC can recover unpaid PAYE tax and NI from the engaging business and the worker. Use HMRC's CEST tool or consult an accountant before switching.

CIS vs PAYE Tax Calculator 2026/27

Your details

CIS Subcontractor

PAYE Employee