Working under both CIS and PAYE? You’re not alone.
Plenty of tradespeople switch between being subcontractors and employees throughout the year or even at the same time. You might be on PAYE for one site but also working under CIS for another.
It’s a common setup in construction but when tax season hits, things can get confusing fast. Which system takes priority? What can you claim? And how do those CIS deductions and PAYE taxes play together when it’s time to file?
Let’s clear that up.
Quick refresher: CIS vs PAYE
CIS (Construction Industry Scheme) applies to self-employed subcontractors. Contractors deduct 20% (or 30%) tax from your pay and send it to HMRC. You then claim it back later through your Self Assessment tax return.
PAYE (Pay As You Earn) applies when you’re employed. Your employer deducts income tax and National Insurance before paying you, so you’re usually square with HMRC automatically.
But what if you’re in both systems? That’s where the rules start to overlap.
Can you be both CIS and PAYE?
Yes and HMRC sees this all the time. You might:
- Work part-time for a company as PAYE.
- Pick up subcontracting jobs elsewhere under CIS.
- Or run your own limited company that hires both employees and subcontractors.
Each setup affects how you pay (and reclaim) tax.
What you can claim under each system
Here’s the thing, being on both PAYE and CIS doesn’t mean you can double-dip your expenses. HMRC is clear about this:
Under PAYE
You can only claim flat rate expenses (FRE) or specific work-related costs that aren’t reimbursed by your employer and only if you’re employed.
Under CIS
You can claim a wider range of business expenses like tools, travel, PPE, insurance, phone use, and more. These reduce your taxable income when you file your Self Assessment.
So, if you’re part PAYE and part CIS, you’ll have two types of income but the expenses only apply to your self-employed (CIS) income.
When you run a company with both CIS and PAYE
If you’re a limited company contractor paying subcontractors and employees, you’re dealing with both schemes at once.
Here’s how the claiming works:
- You register for both CIS and PAYE with HMRC.
- You deduct CIS tax from your subcontractors and pay PAYE/NICs for your employees.
- You can set off the CIS tax you’ve suffered (deducted from your own invoices) against your PAYE liabilities.
- If your CIS deductions are higher than your PAYE bill, you can claim a refund or carry the credit forward.
That set-off system is what keeps your cash flow balanced.
Example
You receive £10,000 from a contractor who deducts £2,000 CIS tax.
You owe £1,200 PAYE and NICs for your employees.
You can set off £1,200 from the £2,000 CIS already paid to HMRC, and only £800 remains as a credit or refund claim.
Why your records matter
If you’re working both PAYE and CIS, keeping your paperwork in order is key. HMRC will look at your records to make sure you’ve paid the right amount of tax and to confirm what you can claim back.
Here’s what you’ll need to keep tidy:
- All CIS payment and deduction statements from contractors (these show how much tax was taken off your pay).
- Payslips and P60s from your PAYE jobs, this proves how much tax you’ve already paid as an employee.
- Receipts and invoices for any expenses linked to your self-employed work.
- Bank statements showing both PAYE wages and CIS income.
Keeping everything organised means your accountant (or HMRC) can quickly separate what relates to PAYE and what belongs to your CIS self-employment, which save time and avoiding refund delays.
Using digital bookkeeping (like Tax2u Bookkeeping) helps you automatically track both sides and stay MTD-ready.
Common mistakes to avoid
1. Mixing up your income types
One of the biggest slip-ups is treating your CIS and PAYE income the same way. PAYE income is taxed at source by your employer, while CIS income is paid after tax has already been deducted by a contractor. Mixing them up can lead to an incorrect Self Assessment and a smaller refund than you deserve.
2. Forgetting to include all PAYE details
If you worked PAYE jobs during the year, always include your P60s and payslips when you file your tax return. Leaving them out means HMRC can’t see the full picture and that can delay your CIS refund.
3. Ignoring CIS over-deductions
Many tradespeople have too much CIS tax taken off their pay. Don’t leave it unclaimed, that’s your money. You can reclaim it through your Self Assessment once the tax year ends.
How to claim CIS refunds when you also have PAYE
If you’re self-employed and also on PAYE, your CIS refund is handled through your Self Assessment. Here’s how it works:
- Add your PAYE income and tax paid (from your P60 or payslips).
- Enter your CIS income and deductions (from your payment statements).
- The HMRC system automatically calculates how much tax you’ve already paid and whether you’re due a refund.
Your CIS tax deducted throughout the year is offset against your overall tax bill. If too much was taken, HMRC will refund the difference straight to your account after your return is processed.
Staying compliant with HMRC
When you earn under both systems, organisation is everything. HMRC expects clear, accurate records that show:
- All your CIS payment and deduction statements
- Payslips and P60s from your PAYE jobs
- Receipts or invoices for your self-employed expenses
- Bank statements showing both income sources
Keep everything for at least 5 years, and make sure your details match what contractors and employers report to HMRC. Even a small mismatch can hold up your refund.
When to get help
Handling CIS and PAYE at the same time can get messy, especially if you’re working for multiple contractors or changing jobs mid-year. A missed deduction or forgotten payslip can easily delay your refund or trigger an HMRC query.
That’s why many self-employed tradespeople hand the paperwork over to a bookkeeping team that specialises in CIS and PAYE refunds. They make sure every deduction, payslip, and expense is accounted for, so you get your full refund without the stress.
Talk to a Tax2u CIS Expert – we’ll help you claim what you’re owed and keep everything HMRC-compliant.
FAQs
Can I claim expenses for both CIS and PAYE income?
yes, you can claim on both but different rules apply about what’s allowable and what is not.
Can I offset CIS tax against PAYE?
No, PAYE and CIS are calculated separately for self-employed workers. PAYE tax is handled by your employer, while CIS tax is reclaimed through your Self Assessment.
Do I need to file two returns?
No. You’ll only file one Self Assessment tax return, but you’ll include both your PAYE and CIS details in it.
Final takeaway
Working under both PAYE and CIS isn’t a problem as long as your records are clear and complete. The key is to separate your income types, keep every deduction statement and payslip, and file your Self Assessment on time.
If you’d rather skip the admin, Tax2u can take care of it for you from tracking CIS refunds to keeping your PAYE details accurate.
Get started with Tax2u’s CIS Refund Service – we’ll handle your PAYE and CIS paperwork, check your deductions, and make sure your refund lands in your account fast.