If you work in construction, you’ve probably come across both CIS and PAYE. Maybe one contractor pays you under CIS while another offers a PAYE role. Or maybe you’ve been PAYE and are now thinking about going self-employed. Either way, it’s a fair question: which one is better?
The answer depends on how you want to work. Do you want higher pay and flexibility, or less admin and more security? Let’s break it down so you can decide what works best for you.
The truth is, it depends on what you care about most — flexibility, take-home pay, job security or admin simplicity. In this post, we’ll explain the key differences and help you figure out what suits you best.
What Is CIS?
CIS stands for the Construction Industry Scheme. If you’re a subcontractor, your contractor deducts 20 percent tax from your payments and sends it to HMRC. You’re classed as self-employed, which means you’re responsible for your own accounts and tax return.
You can also claim business expenses and potentially get a refund. You’re not tied to one contractor, and you’re free to set your rates and choose when and where you work.
What Is PAYE?
PAYE stands for Pay As You Earn. You’re employed by a company, and they handle your tax, National Insurance and pension automatically. You don’t need to file a tax return unless you have extra income.
PAYE offers stability. You get payslips, paid holidays, and sick pay. Everything is taken care of for you — tax admin is minimal, and you know what’s coming into your bank each month.
What You Get as a PAYE Employee
With PAYE, you don’t have to worry about deadlines or tax returns. Your employer sorts it all. You also get:
Paid holidays
Statutory sick pay
Workplace pension contributions
National Insurance records up to date automatically
A steady, predictable income
It suits people who want consistency or prefer not to deal with paperwork. The main downside is that you usually earn less compared to subcontractors doing the same role.
What You Get Under CIS
CIS gives you flexibility and control. You set your own rates, pick your own jobs, and claim back business costs to reduce your tax bill.
You can deduct things like:
Tools and equipment
Protective clothing
Van costs, mileage or fuel
Insurance
Use of home for admin
Mobile phone for work
Accountant or software fees
Many subcontractors end up getting a tax refund after filing their return. But you’ll need to keep records, file on time and stay on top of what you owe.
What Pays More?
CIS usually pays more than PAYE, but only if you stay organised. You can:
Claim business expenses
Offset costs against your income
Often get a refund if you overpay
PAYE gives you regular income but doesn’t allow expense claims in the same way. Most self-employed workers using CIS see a higher take-home pay overall, especially if they claim everything they’re entitled to.
Thinking About Buying a House?
If you’re planning to buy a house and need a mortgage, it’s worth considering how lenders view your income. With PAYE, you can usually provide payslips and employment records, which makes the process more straightforward. Under CIS, you’ll often need at least two years of tax returns and extra paperwork to prove your income. Both routes can get you a mortgage, but if home ownership is a near-term goal, being on PAYE might give you an easier path.
What About Umbrella Companies?
Umbrella companies are a middle ground. They employ you, pay your wages through PAYE, and handle tax and NI. You still work flexibly across different sites or contracts, but they take a fee for managing your pay.
It works for some people, but it’s not always as profitable as going fully self-employed under CIS. Make sure you understand all deductions before signing up.
Can You Switch Between PAYE and CIS?
Yes. Many construction workers switch between CIS and PAYE depending on the contract. You might be PAYE for one job and self-employed for another in the same tax year.
If you’re going CIS, you’ll need to register as a sole trader and join the Construction Industry Scheme. You’ll also need to file a tax return each year and manage your own National Insurance.
Tools That Help
If you’re going down the CIS route, using the right tools can save you hours of admin.
Some of the links below are affiliate links, which means we may earn a small commission if you sign up, at no extra cost to you.
Monzo Pro includes six months of Xero for free, so you can keep your income, expenses and invoices in one place.
GoCardless helps you collect payments automatically, perfect if you invoice contractors or private clients.
Iwoca Pay is ideal if you become a contractor yourself and want to let customers pay in instalments while you get paid upfront.
So, CIS or PAYE?
If you want steady income, no admin and the comfort of employee benefits, PAYE is the simpler route.
If you’re chasing higher day rates, more control over your schedule and the ability to claim expenses, CIS might be the better option — as long as you stay on top of your responsibilities.
Still unsure? Speak to an accountant who knows both systems. They can show you the numbers and help you decide what makes the most sense for your situation.
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