Two offers on the table: £36,000 a year on PAYE or £180 a day on CIS.
The day rate looks better by £153.85 a week. We ran both through 2026/27 tax, National Insurance, holiday pay and pension to find the real gap, and the day rate where CIS stops paying.
The £153.85 a Week That Isn't Real
Here is the trap most people fall into when comparing offers. A £180/day CIS job pays £900 for a five-day week. After the 20% CIS deduction you receive £720. The £36,000 PAYE job pays £566.15 a week after Income Tax and NI. On a Friday, CIS looks £153.85 a week better.
That comparison is broken, for four reasons:
- Holiday: the PAYE figure is paid 52 weeks a year, including 28 days off. The CIS figure is paid only in weeks you work.
- Expenses: on CIS you buy your own tools, PPE and travel. On PAYE, the employer usually does.
- Pension: the employer adds at least 3% of qualifying earnings to your pension. CIS adds nothing.
- The 20% is not your tax bill: CIS deductions are a prepayment. Your real tax is settled on your Self Assessment return, often with a refund.
So the only fair question is: over a full year, after every cost and every benefit, which offer leaves more? Let's work it out.
A higher day rate isn't higher pay until it covers the 28 days nobody pays you for.
The 2026/27 Rates Behind Every Number in This Post
| Item (2026/27) | PAYE employee | CIS subcontractor |
|---|---|---|
| Personal Allowance | £12,570 | £12,570 |
| Basic rate Income Tax | 20% up to £37,700 above the allowance | 20% up to £37,700 above the allowance |
| National Insurance | Class 1: 8% on £12,570–£50,270 | Class 4: 6% on profits £12,570–£50,270 |
| Tax taken during the year | Exact PAYE deductions each payday | 20% CIS deduction on labour (registered) |
| Paid holiday | 5.6 weeks (28 days for a 5-day week) | None |
| Sick pay | SSP from day one: £123.25/week or 80% of average weekly earnings, whichever is lower | None |
| Workplace pension | Employer minimum 3% of earnings between £6,240 and £50,270 | None |
| Expenses | Usually covered by employer | Allowable costs reduce taxable profit |
Sources: GOV.UK – Rates and thresholds for employers 2026 to 2027 · GOV.UK – Self-employed National Insurance rates · GOV.UK – Holiday entitlement · The Pensions Regulator – Earnings thresholds · GOV.UK – Construction Industry Scheme. Figures are for England, Wales and Northern Ireland. Scottish Income Tax bands differ.
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The Assumptions (Change These and the Answer Changes)
A comparison is only as good as its assumptions, so here they are in full. Same worker, same trade, same year, basic rate taxpayer, no other income, no student loan:
- Working year: 52 weeks × 5 days = 260 days, minus 28 days holiday = 232 working days on both offers.
- PAYE offer: £36,000 salary, NI category A, standard 1257L tax code.
- CIS offer: £180/day, labour only, registered for CIS (20% deduction).
- CIS expenses: £3,000 a year of allowable costs (tools, PPE, phone, business mileage, accountant's fee). This is an illustration, not a typical figure. Use your own.
- PAYE pension: employer pays the legal minimum of 3% of qualifying earnings. Your own 5% contribution is savings, not a cost, so it is left out of take-home on both sides.
Scenario by Scenario: The Full Calculation
Where CIS Starts to Pay: The Break-Even Day Rate
Under our assumptions, every extra £1 of gross CIS income leaves 74p after Income Tax (20%) and Class 4 NI (6%). That lets us solve for the day rate that matches the PAYE job exactly:
| Step | Calculation | Result |
|---|---|---|
| 1. Take-home formula | (Gross − £3,000) − 26% × (Gross − £3,000 − £12,570) | 0.74 × Gross + £1,048.20 |
| 2. Match PAYE total value | 0.74 × Gross + £1,048.20 = £30,332.40 | Gross = £39,573.24 |
| 3. Divide by 232 days | £39,573.24 ÷ 232 | £170.57/day |
| Cash only (ignoring employer pension) | 0.74 × Gross + £1,048.20 = £29,439.60 → Gross £38,366.76 ÷ 232 | £165.37/day |
How Your Costs Move the Break-Even
Expenses aren't a tax trick. They are money you spend. Every £1 of cost cuts your tax by 26p but still leaves you 74p worse off. The rule of thumb: every £232 of extra annual costs adds £1.00 to your break-even day rate. That includes an accountant's fee, which is itself an allowable expense.
| Annual CIS costs | Take-home at £180/day | vs PAYE £30,332.40 | Break-even day rate |
|---|---|---|---|
| £1,000 | £33,430.60 | + £3,098.20 | £161.95 |
| £3,000 (our example) | £31,950.60 | + £1,618.20 | £170.57 |
| £5,000 | £30,470.60 | + £138.20 | £179.20 |
Think of £170.57 as the price of giving up paid holiday and the employer pension, not a profit line. Every pound above it is your real premium for being self-employed, and it has to cover sick days, gaps between jobs and your own pension. Scenario C showed that two weeks off cost £1,332.00, so a buffer of a few pounds a day disappears quickly.
What PAYE Gives You That Isn't on the Payslip
The numbers above only price holiday and the minimum pension. A PAYE job can also carry protections we did not put a value on, because they depend on the employer and the contract:
- Statutory Sick Pay from the first day of illness (2026/27 rules), plus any contractual sick pay.
- Employment rights such as statutory redundancy pay and notice periods, once qualifying conditions are met.
- Statutory Maternity and Paternity Pay (for example, Statutory Paternity Pay of £194.32 a week or 90% of average weekly earnings, whichever is lower).
- No Self Assessment return to file, and no waiting for a refund.
And on the CIS side, there are things we did not price either: you can claim allowable expenses, you control when and where you work, and if you reach the turnover tests you can apply for Gross Payment Status and stop the 20% deduction altogether.
Why Employers Offer Higher Day Rates on CIS
It isn't generosity. For a PAYE worker, the employer pays 15% employer National Insurance (the rate since April 2025) on earnings above £5,000 a year, funds the 3% pension minimum, covers holiday and sick pay, and pays for tools and PPE. For a CIS subcontractor, none of that applies. Part of the higher day rate is simply those costs being handed to you. The question is whether the rate covers them, which is exactly what the break-even tells you.
How to Compare Two Real Offers in 6 Steps
- Check your status first. If the CIS role has fixed hours, no right to send a substitute and the contractor supplies everything, it may be employment in disguise. That carries risk for you, not just the contractor. If you work through an agency and someone has the right to supervise, direct or control how you do the job, agency rules can put you on PAYE whatever the day rate.
- Count your real working days. Start from 260, subtract the holiday you will actually take and a realistic allowance for sickness, weather and gaps between jobs.
- List your CIS costs. Tools, PPE, phone, accountant's fee, business mileage at 55p per mile for the first 10,000 miles in 2026/27. Our CIS expenses guide lists what HMRC allows.
- Work out the PAYE total value. Take-home pay plus the employer pension contribution. Add any extra benefits in the offer letter.
- Work out CIS take-home on the full year. Gross minus expenses minus Income Tax and Class 4 NI on the profit. Ignore the 20% deduction here: it is a prepayment, not your bill.
- Compare, then stress-test. Re-run the CIS figure with two weeks fewer days. If CIS still wins, the premium is solid. If it flips, the PAYE job is the safer deal.
Quick Verdict
| Scenario (our assumptions) | Annual take-home on CIS | vs PAYE £30,332.40 |
|---|---|---|
| £160/day | £28,517.00 | − £1,815.40 (PAYE wins) |
| £170.57/day | £30,332.40 | £0.00 (break-even) |
| £180/day, 10 sick days | £30,618.60 | + £286.20 |
| £180/day | £31,950.60 | + £1,618.20 (CIS wins) |
Frequently Asked Questions
Is CIS better paid than PAYE?
Only if the day rate is high enough to cover what PAYE gives you for free: 28 days of paid holiday, a 3% employer pension contribution and Statutory Sick Pay. In our 2026/27 example, a £180/day CIS rate leaves £1,618.20 more per year than a £36,000 PAYE job. At £160/day, CIS leaves £1,815.40 less.
What day rate do I need on CIS to match a £36,000 PAYE job?
In our worked example (232 working days, £3,000 of allowable expenses, 2026/27 rates) the break-even is £170.57 per day against the PAYE take-home plus the employer pension. Every £232 of extra annual costs adds £1.00 to that figure, so run your own numbers.
Do CIS subcontractors get holiday pay?
No. A self-employed CIS subcontractor is paid only for days worked. An employee working five days a week is entitled to 5.6 weeks (28 days) of paid holiday a year, which an employer can include bank holidays in.
Do I pay less National Insurance on CIS?
Yes, on the same amount. In 2026/27 employees pay Class 1 NI at 8% on earnings between £12,570 and £50,270. Self-employed people pay Class 4 NI at 6% on profits in the same band. Class 4 is charged on profit after expenses, not on your gross pay.
Can I choose to be CIS instead of PAYE?
Not by preference alone. Your status depends on how you actually work, including control, substitution and who provides equipment. If the reality looks like employment, HMRC can treat you as an employee whatever the contract says. Check your status before comparing offers.
Do CIS subcontractors get a workplace pension?
No. Automatic enrolment applies to workers, not to the self-employed. An employer must contribute at least 3% of qualifying earnings (between £6,240 and £50,270 in 2026/27) for eligible employees. On CIS, any pension saving comes out of your own pocket.
Why does the 20% CIS deduction not equal my tax bill?
The 20% is taken from your gross labour before your Personal Allowance and expenses are applied. Your real bill is worked out on your Self Assessment return. In our £180/day example, £8,352 is deducted but the real Income Tax and Class 4 bill is £6,809.40, so £1,542.60 comes back as a refund.
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