Back
Let us sort your Self Assessment online. £119, all in. Learn more

Contractor

A contractor is someone who provides services to a client (usually, a company).

In most cases, contractors are self-employed and need to file a Self Assessment tax return – but not always:

  • you can also be a contractor working for your client through an agency or umbrella company – in this case you’re an employee of your agency, and they sort out your taxes through PAYE
  • or you can be a contractor working for your client through your own limited company – in this case you’re a company director and you can either pay yourself through salary, dividends, or both. If you pay yourself a salary, then you must also pay tax on it through PAYE. If you use dividends, then you’d need to file a Self Assessment and pay dividend tax.

There is also one special situation: in the construction industry, a contractor is usually a company that is hired (“contracted”) to build a project. This company can then hire construction workers either as employees or as self-employed workers (“subcontractors”).

If you’re a self-employed worker in the construction industry, then your contractor takes 30% of your pay and gives it to the HMRC.

This isn’t the same as PAYE – this is just a scheme called the Construction Industry Scheme (CIS), and it’s meant to reduce tax evasion.

However, if you register for CIS, you can have this reduced to 20% and also be able to claim some of your tax back in April of the next tax year. The average CIS rebate is £2,000 – you can use this CIS tax rebate calculator to see how much you could get.

Hey there! We really hope this article helped you. Tax matters can be a dreadful topic at times. We know. That's why we started TaxScouts.
A stress-free way to getting your taxes done.

Have a minute? See how it works

More guides & useful information

Related terms

Let us sort your Self Assessment online. £119, all in.

That’s right. No matter how complicated it gets or why you need to do a return in the first place, it’ll cost £119 to get it done. That includes VAT, last-minute changes and all the support you may need.

How it works

1. Answer a few simple questions

And we mean a few. After a couple of minutes of answering questions online we’ll have everything we need to start working on your tax return.

2. Then get paired with a tax accountant

That’s right, you’ll be matched with a real accountant who is best suited to prepare your return. Plus, they’re on hand for questions whenever you need.

3. We file your Self Assessment for you

Once you’ve signed off your return, your TaxScouts accountant will file your return online with HMRC. That’s it! We told you it was simple.