How to Register as a Self-Employed Contractor - VW Taxation Ltd

How to Register as a Self-Employed Contractor

Did you know that construction has a significantly higher proportion of self-employed individuals, probably more so than any other industry?

Self-employed individuals in the construction industry can choose to work with customers directly (homeowners, e.g.) or as a subcontractor.

From roofers and bricklayers to builders and plumbers, setting yourself up as a self-employed subcontractor can have some major benefits, with more reliable work coming in being one of them. However, this will see your tax being deducted when a contractor pays you.

Self-employed contractors can have it really well in the construction industry, although it’s important to become CIS registered and also understand the benefits of doing so.

Who is classed as a self-employed contractor?

Self-employed or ‘independent contractors’ are those who provide services to other businesses or clients. They have different tax obligations than, for example, contractors hired by companies or organisations to render services to their clients.

What is the difference between a sole trader and a self-employed contractor?

The key difference between a sole trader and a self-employed contractor is that the term ‘sole trader’ describes the business structure – whereas ‘self-employed’ refers to the fact that you are not employed by another individual or organisation, or that you must pay tax through PAYE.

How do I become a self-employed subcontractor?

Setting yourself up as a self-employed subcontractor or independent contractor is easy. The process begins with registering online with HMRC.

It only takes a few minutes to fill out the online form, where your tax will be automatically deducted the next time you get paid by a contractor, as you’re a subcontractor or self-employed individual.

Do you own a limited company or work as a partner in a partnership/trust? In that case, you can still register as a subcontractor.

How do I register as self-employed and get a UTR Number?

The first step self-employed subcontractors must take is to register as ‘self-employed’ with HMRC. This means providing details like your name and address, as well as your National Insurance number (for national insurance contributions). It hardly takes a few minutes and you can do this here.

After you are registered as self-employed, you will receive a UTR (Unique Tax Reference) number which you will use to log into the HMRC self-assessment online form. This form must be completed each year to submit your tax return. You will receive your UTR via post which can take up to 10 days.

How do I register for CIS?

Got your UTR number? Excellent! Register for CIS here.

  • When you access the online form, choose between your net and gross payments. Newly self-employed subcontractors or independent contractors must tick the ‘net’ box.
  • Now enter your name and address, along with your DOB, and National Insurance number.
  • HMRC will ask when you started construction work in the UK, the type of work you do, and a few of your trading details.
  • Next, HMRC will display a summary for you to check. If the information is accurate, accept the declaration, after which you will be registered as a CIS subcontractor.

If, at any point, you experience difficulty registering for CIS online, you can ask for HMRC’s assistance via telephone: 0300 200 3210.

When you register for CIS will you have to do a self-assessment tax return?

Yes, all self-employed people (including CIS workers) must complete an annual Self-Assessment tax return.

Are CIS subcontractors classed as Self-Employed?

Yes, indeed.

Self-employed workers or subcontractors are still considered ‘self-employed’, even though their respective contractors deduct tax from payments. Some bricklayers, plasterers, and builders, for instance, work as subcontractors only, while others take on a mix of different kinds of work.

For instance, you may be working as a roofer on a homeowner’s private property, and so, you won’t be classed as a ‘subcontractor’, in this case. All the while, you may be providing services as a business to a major company handling their property development – in this case, you will be classed as a subcontractor.

Some individuals and many limited companies in the construction industry act as contractors and subcontractors, although this does not affect their self-employed status.

Do I need to register for CIS as a subcontractor?

No, subcontractors are not obliged to register for CIS (as a subcontractor) even though independent contractors in the construction industry must register with CIS.

There is a caveat, however: if you’re not registered, the amount you are taxed by a contractor will be significantly higher. Here are the tax rates that independent contractors apply:

  • 20% for subcontractors who are registered for CIS.
  • 30% for subcontractors who are not registered for CIS.

In some situations, however, subcontractors may not pay tax due to their ‘gross payment’ status.

Who doesn’t need to register as a subcontractor?

CIS certainly applies to the vast majority of construction activities, although some are excluded.

If you are a surveyor or architect, for instance, you need not register with CIS even though your work may revolve around construction. Here are a few types of businesses that do not need to register:

  • Carpet fitting
  • Scaffolding hire that isn’t supplied with labour
  • Businesses that manufacture for construction
  • Businesses that deliver materials

In addition, things that are not directly related to construction, such as running site facilities or catering, are excluded from the need to register for CIS as a subcontractor.

Looking for a CIS accounting specialist? Get in touch with VW taxation

VX Taxation provides tailored tax and accounts services for self-employed individuals, small business owners, and construction workers registered as CIS subcontractors.

One of the things our team does best is help self-employed construction workers become more tax-efficient and boost their earnings. Simple, honest, impartial, and open advice to help you earn more and keep your tax affairs in order: 02392 324587.

Closing thoughts

It’s quite easy to register as a self-employed contractor or independent contractor in the UK construction industry. While you may not be obliged to register for CIS, you will initially pay less tax in doing so. Our expert tax advisors are only a phone call away and always available to assist.

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Picture of Gary Ellis | Director | VW Taxation
Gary Ellis | Director | VW Taxation

VW Taxation are self employment tax specialists based in Portsmouth. We specialise in tax accounting for contractors, limited companies and the self-employed.

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