How to Hire and Manage Subcontractors in UK Trades
CIS tax, contracts, insurance, and when HMRC treats them like employees—the complete 2026 subcontracting playbook.
CIS Reality
20–30%
Deducted from every payment unless subcontractor has gross status.
Need extra hands without a £42k employee commitment? Subcontractors fill the gap—but if you get the classification wrong, HMRC backdates tax, NI, and penalties.
⚠️ Not Employment Law or HR Advice
Employment law, worker rights, and HR compliance are highly regulated and complex. This guide provides general information only and should not be used as a substitute for professional legal or HR advice.
Before hiring employees or engaging workers: Consult an employment solicitor or HR professional. Requirements for contracts, PAYE, National Insurance, holiday pay, minimum wage, and worker classification (employee vs contractor) vary by situation and change frequently.
Incorrect worker classification or employment practices can result in tribunal claims, HMRC penalties, and significant back-payments.
ACAS (Advisory, Conciliation and Arbitration Service): acas.org.uk
⚠️ Not Tax or Accounting Advice
This guide is for informational purposes only and does not constitute tax advice, accounting advice, or professional financial services. Tax laws, allowances, and HMRC requirements change frequently.
Before making any tax decisions or filing returns: Consult a qualified accountant or tax advisor who can review your specific circumstances. What's mentioned here may not apply to your situation, and regulations may have changed since publication.
Official source: HMRC (gov.uk/hmrc)
Subcontractor vs Employee: The Legal Difference
HMRC doesn’t care what you call someone; they care about the working relationship. Use this table to self-check:
| Factor | Employee | Subcontractor |
|---|---|---|
| Control | You dictate when/where/how | They decide how to complete the task |
| Equipment | You provide van/tools | They use their own gear |
| Risk | Guaranteed wage regardless of profit | They absorb overruns & delays |
| Exclusivity | Usually work only for you | Free to work for other clients |
| Substitution | Must perform work personally | Can send a qualified replacement |
| Tax treatment | PAYE + employer NI | CIS deduction, self-employed |
Important: If they work fixed hours, use your van, and you’re their only client, HMRC considers them employees. Expect backdated PAYE + penalties.
CIS Tax Checklist
- Register for CIS (contractor + subcontractor)
- Verify each subcontractor (gets deduction rate)
- Deduct 20-30% from labour payments
- Provide CIS statement each month
- Submit monthly CIS return to HMRC
- Pay deductions to HMRC by 22nd
Contracts & Insurance
Must-have contract clauses
- Scope of work and quality expectations
- Payment terms + rates
- Who supplies materials/tools
- Insurance requirements + proof
- Termination notice periods
- Confidentiality/brand standards
Insurance checklist
- £5M employers/principal contractors liability
- Public liability (protects against customer claims)
- Professional indemnity if design/consulting
- Proof of own insurance from subcontractors
- Valid UTR + company number
Pricing & Payment Terms
Rule of thumb
Charge clients 2× the subcontractor rate to cover admin, supervision, and risk.
Example: Pay subcontractor £180/day → charge client £360/day.
- Pay within 14 days (required for trust + compliance)
- Use CIS statements showing deductions clearly
- Require digital timesheets + photo proof
- Retain 5% until snagging is complete
Managing Subcontractors Day to Day
- Send job packs with scope, SM&QS, photos, client contact, access notes.
- Require start/finish check-ins via Toolfy or WhatsApp for proof.
- Quality control: before/after photos + random onsite visits.
- Late or low-quality work? Pause new jobs until they catch up.
Mistakes that Trigger HMRC Audits
× Paying cash without CIS statements
× Calling them “self-employed” but treating them like staff
× Letting subcontractors use your van/equipment full-time
× Not verifying UTR or insurance documents
When Subcontractors Make Sense
- Jobs that require specialist skills or extra hands temporarily
- Revenue spikes you cannot cover with employees
- Projects where you need to pass risk/cost to subcontractor
- Work where the customer expects multi-company collaboration
The Bottom Line
Subcontractors are perfect for specialist work and surge capacity—but only when CIS, contracts, and insurance are bulletproof.
Reminder: Document everything, keep CIS up to date, and treat subcontractors like business partners, not employees-in-disguise.
Build a pricing command center in Toolfy
- •Quote templates, emergency premiums, and deposits all in one library
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