How a UK firm pays you: CIS, PAYE, umbrella or agency
Four different arrangements hide behind "we'll pay you Friday". Each one changes who pays your tax, what comes off your money, whether you get holiday pay and what happens at the end of the tax year. Here they are side by side, with the red flags.
Checked October 2026 against GOV.UK (CIS, umbrella companies, Self Assessment) and Acas. General information, not tax advice.
- Self-employed CIS: 20% deducted if registered, 30% if not, refund via tax return
- PAYE: tax and NI come off, you get a payslip, holiday pay and sick pay
- Agency: a Key Information Document before you start; equal pay after 12 weeks
- Umbrella: you are its employee; employer costs come out of the assignment rate
- Tax year 6 April to 5 April; online return by 31 January
- Red flag: cash with no statement or payslip
The four ways, in one minute
You run your own small business and invoice the firm. Under the Construction Industry Scheme (CIS) the firm deducts tax before paying you and sends it to HMRC as an advance on your bill. You file a tax return once a year and usually get some back. Most "subbies" on day rate are here.
The firm is your employer. Tax and National Insurance are taken off through Pay As You Earn, you get a payslip, paid holiday (5.6 weeks a year for full time), sick pay and a pension. Less to sort yourself, usually a lower headline rate.
The agency finds the work and pays you. You are usually the agency's worker on PAYE, or the agency passes you to an umbrella company. The agency must give you a Key Information Document before your first assignment showing how your pay is calculated.
The umbrella employs you and hires you out to the agency or firm. It receives an "assignment rate", takes out its margin and the employer costs, then pays you as a PAYE employee. Legal and common, but the model where most pay problems hide.
A fifth route, your own limited company, exists but is uncommon for site labour and is outside this guide.
Side by side
| Self-employed CIS | PAYE employee | Agency (PAYE) | Umbrella company | |
|---|---|---|---|---|
| Who you legally work for | Yourself; the firm is your client | The firm | The agency (usually) | The umbrella company |
| Who pays your tax | You, via Self Assessment; the firm deducts 20% or 30% in advance | The firm, through PAYE | The agency, through PAYE | The umbrella, through PAYE |
| What comes off before you are paid | 20% (registered) or 30% (not registered) of labour, nothing off materials | Income tax, employee NI, pension (if enrolled) | Income tax, employee NI, pension | Employer NI, apprenticeship levy, umbrella margin and employer pension come out of the assignment rate first; then income tax, employee NI, pension |
| Holiday pay | None; price it into your rate | 5.6 weeks a year (28 days full time), paid | Yes, 5.6 weeks pro rata | Yes, 5.6 weeks: either accrued (a pot you claim from) or rolled up into each payslip. Must be shown separately |
| Sick pay | None | Statutory Sick Pay if you qualify | Statutory Sick Pay if you qualify | Statutory Sick Pay if you qualify |
| Paperwork you must receive | Monthly payment and deduction statement from the contractor | Payslip every pay day; P60 after 5 April | Key Information Document before day one; payslips; P60 | Key Information Document; payslip plus a reconciliation statement showing the assignment rate to net pay |
| At year end | Tax return by 31 January; CIS deductions set against your bill; refund if you overpaid | P60; usually nothing to do | P60; usually nothing to do | P60; check it against your payslips |
| Main risk | No safety net; 30% if unregistered; firm deducts but never pays HMRC | Lower headline rate; fewer firms offer it for short jobs | Rate confusion between agency rate and your rate | Skimming, hidden fees, "non-taxable" payments, loan schemes |
Swipe the table sideways to see all four columns.
Self-employed on CIS: UTR and registration in 5 steps
CIS is not a tax of its own. It is a way of collecting your income tax early. Until you are registered the deduction is 30%; once registered it drops to 20%. Both are advances against the tax you actually owe, which is worked out on your tax return. Our CIS explained page goes deeper; these are the steps.
- 1Register as self-employed with HMRCOnline, free. HMRC sets you up for Self Assessment and posts your UTR (Unique Taxpayer Reference, a 10-digit number). It can take a few weeks, so start before your first job if you can. Getting your UTR.
- 2Register for CIS as a subcontractorWhen you register for Self Assessment, choose "working as a subcontractor" and you are registered for both at once. If you already have a UTR, register for CIS separately online using the UTR and your National Insurance number.
- 3Give the firm your detailsFull legal name as HMRC has it, UTR, National Insurance number. The firm "verifies" you with HMRC, which tells them to deduct 20%. A spelling mismatch can push you to 30%.
- 4Collect your monthly statementsEvery month the contractor must give you a payment and deduction statement within 14 days of the end of the tax month (tax months end on the 5th). Keep them all. They are your proof that tax was deducted.
- 5File your tax return after 5 AprilDeclare your income, claim your expenses, enter the CIS deductions. If the deductions were more than the tax due, HMRC refunds the difference. CIS tax return guide and how the rebate works.
20%, 30% or 0%: what the difference costs you
On a £200 day rate, 20% leaves you £160 in hand; 30% leaves you £140. Over a 48-week year on five days a week, the difference is £4,800 held by HMRC until you file a return and wait for the refund. Registering is free and takes minutes, so there is no reason to sit on 30%.
- 20%: registered with HMRC, verified by the contractor. The standard rate.
- 30%: not registered, or the contractor could not verify you (wrong UTR, name mismatch). Not a penalty, just a bigger advance, reclaimable through your return.
- 0% (gross payment status): you have applied and HMRC trusts you to pay your own tax. Needs a turnover test and a clean compliance record. More common for small firms than individuals.
- Deductions apply to the labour part of your invoice only. Materials you bought and VAT (if registered) are not deducted from, so itemise them.
Most subbies pay too much tax during the year because CIS takes 20% of everything from pound one, while the personal allowance makes the first £12,570 tax free. That gap is the refund. The CIS rebate guide shows how to claim it and what you can deduct.
PAYE employee: what a payslip has to show
If you are employed, the firm must give you a written or electronic payslip on or before pay day. By law it shows gross pay, each deduction (income tax, National Insurance, pension, anything else), net pay, and since 2019 the hours you are being paid for if your pay varies with hours. Your tax code (for example 1257L) sets how much tax-free pay you get each month.
- You must be paid at least the National Minimum Wage: £12.71 an hour at 21 and over from 1 April 2026 (£10.85 at 18 to 20). Check the rate against hours actually worked, not just the headline day rate.
- Holiday: 5.6 weeks a year, 28 days for a full-time five-day week, including bank holidays if the contract says so. Unused holiday must be paid when you leave. See holiday pay explained.
- Statutory Sick Pay, auto-enrolment pension (if you earn enough), and protection against unfair dismissal are all part of the package.
- After 5 April you receive a P60 summarising the year. If you leave, a P45. Keep both.
Agency work: the Key Information Document
Agencies are regulated by the Conduct Regulations and the Agency Workers Regulations. Before your first assignment the agency must give you a Key Information Document (KID): a one or two page sheet showing who pays you (the agency or an umbrella), the rate, every deduction, and an example of the net pay you can expect. If you are offered agency work and no KID appears, ask for it. It is your right.
- After 12 weeks in the same role with the same hirer you are entitled to the same basic pay and conditions as a comparable direct employee.
- The agency cannot charge you a fee for finding you work.
- Agencies can only refuse to pay you for hours worked if the timesheet was not authorised and they have tried to verify you did the work. "The client hasn't paid us yet" is not a lawful reason to withhold your wages.
- Problems with an agency can be reported to the Employment Agency Standards Inspectorate through GOV.UK, as well as to Acas.
Umbrella companies: how the money moves and what to check
An umbrella company is a real employer. Working through one is legal and often fine. The problem is that the sum is complicated enough that bad operators can hide things in it. Here is the sum, in the order it happens:
- The agency or firm pays the umbrella an assignment rate, say £22 an hour. This is not your rate.
- The umbrella takes out the employer costs that any employer pays: employer National Insurance, the apprenticeship levy, employer pension contribution, and its own margin (a fixed weekly fee, typically £15 to £30).
- What is left is your gross pay. Holiday pay is either accrued from it into a pot you claim later, or "rolled up" and added to each payslip. Either way it must appear as a separate line.
- From gross pay, the umbrella deducts income tax and employee National Insurance through PAYE, plus your pension contribution, and pays you the net.
GOV.UK's guidance Check your payslip if you work through an umbrella company tells you to check the hourly rate, hours, gross and net on the payslip and on the reconciliation statement, because grouped deductions can hide what tax was actually paid. Your personal tax account on GOV.UK shows what HMRC has actually received for you: compare it with your payslips every few months.
From 6 April 2026, recruitment agencies (or in some cases the end client) are jointly and severally liable for PAYE that an umbrella company should have paid. The practical effect for you is that honest agencies now vet their umbrellas hard, and if an umbrella disappears with the tax, HMRC pursues the agency rather than you, unless you knowingly took part in the scheme.
Umbrella red flags, from HMRC's own list
- Money arriving in your bank account that is not on the payslip, or described as a loan, advance, bonus, "profit share" or anything other than pay.
- Anyone telling you part of your income is "non-taxable" or promising you will keep 80 to 90% of the assignment rate. Through a compliant umbrella most people keep well under that.
- A margin similar in size to your tax and NI, or far higher than other umbrellas charge.
- Payslips with different PAYE references from week to week (a sign of "mini umbrella" fraud).
- Holiday pay you cannot see, cannot claim, or that quietly vanishes when you leave.
- HMRC does not approve or endorse any umbrella company. A badge saying "HMRC approved" is itself a red flag.
Red flags whatever the arrangement
Being paid in cash is not illegal. Being paid with no record is how your tax never reaches HMRC and how you lose any proof of what you earned. Ask for the CIS statement or payslip every time.
There is no later. On CIS the firm deducts at the moment of payment; on PAYE it deducts at the moment of payment. If nothing is deducted and nothing is documented, assume nothing was paid to HMRC in your name.
£20 a week for "admin", "insurance", "PPE", "transport", with no agreement and no paperwork. Employees cannot have unauthorised deductions taken at all; self-employed workers should see every deduction on the statement or invoice.
You agreed £200 a day and £180 arrives with a story about the client's budget. Put the rate in writing before you start, even a text message, and check the first payment with Was I paid right?.
Never work under another person's UTR, CSCS card or bank account, and never lend yours. It is fraud for both of you and it means the deductions are credited to the wrong person.
A firm that will pay you should be at Companies House and should be registered as a CIS contractor. Our Check a firm tool looks it up in ten seconds.
Check your pay in 30 seconds
Days worked, rate agreed, amount received. The tool tells you whether 20%, 30% or something else came off and what to say to the office. Then it makes a correct invoice or statement request in English, free, in 7 languages.
Check my payIf the number is wrong and the office does not fix it, read Not paid for work on a UK site: what to do. Firms that use Graftum run day sheets and CIS pay runs through it, so every deduction is on a statement you can see from your phone.
Questions workers ask
Which is better for me, CIS or PAYE?
It depends on how steady the work is and what the headline rate is. CIS usually pays a higher day rate but no holiday, no sick pay and you handle your own tax. PAYE pays less per day but includes 5.6 weeks' holiday, sick pay, a pension and employment protection. For a long run on one site, PAYE at a fair rate is often worth more than it looks.
Can a firm decide I am self-employed just by calling me that?
No. Employment status depends on how the work is actually done: who controls your hours and methods, whether you can send a substitute, whether you carry financial risk. If you work set hours under a supervisor using the firm's tools for one firm only, HMRC may treat you as employed whatever the paperwork says. HMRC's Check Employment Status for Tax (CEST) tool on GOV.UK gives an indication.
Why was 30% taken instead of 20%?
Either you are not registered for CIS, or the contractor could not verify you with HMRC, usually because the name, UTR or National Insurance number did not match exactly. Register (free) or fix the details, and reclaim the excess on your tax return.
When do I get my CIS refund?
After you file your Self Assessment return for the tax year ending 5 April. File early (April or May) and HMRC typically repays within a few weeks, though it can take longer if they check the return. The online filing deadline is 31 January.
Is an umbrella company legal?
Yes. An umbrella is an employer that hires you out to agencies and firms. Problems arise with specific operators who skim, hide fees or run tax avoidance schemes. Check every payslip against the reconciliation statement and your personal tax account, and walk away from anyone promising unusually high take-home pay.
What is a Key Information Document?
A document an agency must give you before your first assignment, showing who employs and pays you, the rate, every deduction and an example net pay. If you work through an agency and have not seen one, ask for it.
Do I get holiday pay on CIS?
No. Self-employed subcontractors have no statutory holiday entitlement. Price your day rate to cover the weeks you will not work. PAYE, agency and umbrella workers all get 5.6 weeks a year pro rata.
What should I do if I think the firm never paid my CIS deductions to HMRC?
Keep your payment and deduction statements, bank records and invoices. Enter the deductions on your tax return as normal; HMRC can credit you on the strength of your evidence and pursue the contractor. If statements were never issued, ask in writing and report the contractor to HMRC's CIS helpline.
Sources and date
GOV.UK: What you must do as a CIS subcontractor (deduction rates, statements, registration); Check your payslip if you work through an umbrella company; Working through an umbrella company; Payslips; Agency workers: your rights. Acas: National Minimum Wage rates from 1 April 2026. HMRC/LITRG: umbrella company PAYE joint and several liability from April 2026. Checked October 2026. General information, not tax or legal advice. Rules change: check GOV.UK.
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