NI for CIS Subcontractors

Key facts

CIS subcontractors are self-employed and pay Class 2 and Class 4 NI through Self Assessment.
CIS deductions (20% or 30%) are advance payments of Income Tax only — they do not cover National Insurance.
Failing to account for NI separately is one of the most common mistakes CIS subcontractors make.
Class 4 NI is charged at 6% on profits between £12,570 and £50,270, plus 2% above £50,270.

CIS and National Insurance: The Key Distinction

The Construction Industry Scheme (CIS) requires contractors to make deductions from payments to subcontractors and pass those deductions to HMRC. However, these deductions only count towards Income Tax — they do not cover National Insurance.^[1]

This is one of the most common areas of confusion for CIS subcontractors, and failing to account for NI separately can lead to unexpected bills when Self Assessment returns are filed.

CIS deduction rates:

20% — standard deduction rate (registered subcontractors)
30% — higher deduction rate (unregistered subcontractors)
0% — gross payment status (qualifying subcontractors)

None of these rates include National Insurance. NI is always a separate obligation.^[1]

What NI Do CIS Subcontractors Pay?

As a self-employed subcontractor, you pay two classes of National Insurance:^[2]

Class	Rate (2025/26)	How It’s Paid
Class 2	£3.65 per week (flat rate)	Through Self Assessment (automatic if profits above £7,105)
Class 4 (main)	6% on profits £12,570–£50,270	Through Self Assessment
Class 4 (additional)	2% on profits above £50,270	Through Self Assessment

Worked Example

Example: A CIS subcontractor receives gross payments of £60,000 in 2025/26, with allowable expenses of £15,000, giving net profits of £45,000.

CIS deductions suffered: £60,000 × 20% = £12,000 (credited against Income Tax)
Income Tax: £45,000 − £12,570 personal allowance = £32,430 × 20% = £6,486 − £12,000 CIS credit = £0 tax to pay (with £5,514 refund due)
Class 2 NI: £3.65 × 52 = £189.80
Class 4 NI: (£45,000 − £12,570) × 6% = £32,430 × 6% = £1,945.80
Total NI bill: £189.80 + £1,945.80 = £2,135.60

Even though the subcontractor receives a tax refund, they still owe £2,135.60 in National Insurance.

The Common Mistake

Many CIS subcontractors assume that because CIS deductions are taken from their payments, everything is covered. This leads to:

Unexpected NI bills when filing Self Assessment
Potential penalties for late payment if NI isn’t budgeted for
Difficulty making payments on account (which include NI for the following year)

Budget for NI separately. As a rule of thumb, set aside approximately 8–10% of your net profits (after expenses) to cover Class 2 and Class 4 NI. This is on top of any Income Tax not covered by CIS deductions.^[3]

CIS Subcontractors Who Are Also Employed

Some construction workers have a main employment (paying Class 1 NI through PAYE) and also do CIS work on the side. In this case:

Class 1 NI continues to be deducted by your employer
Class 2 and Class 4 NI are calculated on your CIS self-employment profits
If combined NI exceeds the annual maximum, you can apply for NI deferment

Employment Status: Are You Really Self-Employed?

Not all CIS workers are genuinely self-employed. HMRC considers various factors when determining employment status:^[4]

Factor	Self-Employed	Employee
Control	You decide how, when, and where to do the work	The contractor controls the work method
Substitution	You can send a replacement	You must do the work personally
Financial risk	You risk your own money and can make a profit or loss	No financial risk — paid regardless
Equipment	You provide your own tools and equipment	Tools are provided by the contractor
Integration	You work for multiple clients	You are part of the contractor’s organisation

If HMRC determines that a CIS subcontractor is actually an employee, the contractor becomes liable for employer’s NI (15%) and must operate PAYE. The worker pays Class 1 NI instead of Class 2 and 4.

Record Keeping for NI Purposes

As a CIS subcontractor, keep records of:^[3]

All payment and deduction statements from contractors
Business expenses (materials, tools, travel, insurance)
Mileage logs if claiming vehicle expenses
Invoices issued and payments received

These records are needed to calculate your net profit accurately, which in turn determines your Class 4 NI liability.

Frequently Asked Questions

Do CIS deductions cover my National Insurance?

No. CIS deductions are advance payments towards your Income Tax liability only. National Insurance (Class 2 and Class 4) is calculated separately on your Self Assessment return and must be paid in addition to any remaining tax after CIS deductions are credited.

What NI do CIS subcontractors pay?

As self-employed individuals, CIS subcontractors pay Class 2 NI (a flat £3.65 per week) and Class 4 NI (6% on profits between £12,570 and £50,270, plus 2% above that). Both are collected through Self Assessment.

What if I’m a CIS subcontractor but also employed?

You pay Class 1 NI on your employment income through PAYE, and Class 2 and Class 4 NI on your CIS self-employment profits through Self Assessment. You can apply for deferment if your combined NI exceeds the annual maximum.

Can I be an employee under CIS instead of self-employed?

Some workers in the construction industry are actually employees despite being paid under CIS. If HMRC determines you are an employee, your contractor must deduct Class 1 NI through PAYE instead. Employment status depends on factors like control, substitution, and mutuality of obligation.

Sources

Construction Industry Scheme (CIS) — GOV.UK
Self-employed National Insurance rates — GOV.UK
CIS: subcontractors — GOV.UK
Employment status — GOV.UK