How Do I Handle Mixed Income from PAYE and CIS Work

Introduction

Working in construction often means taking on different types of work. You might have a part-time or temporary PAYE job where tax is deducted automatically and also complete subcontractor work through the Construction Industry Scheme (CIS) where you manage your own taxes.

Although both incomes are taxed differently, HMRC requires you to report them together in one Self Assessment tax return each year. Understanding how to combine these income streams correctly helps you stay compliant and prevents you from overpaying tax.

Understanding PAYE and CIS income

Before combining your income, it helps to understand how each system works.

PAYE income

If you are employed, your employer deducts Income Tax and National Insurance automatically through the Pay As You Earn (PAYE) system. You receive a payslip showing your gross pay, deductions, and take-home pay.

At the end of the tax year, your employer issues a P60 summarising your total pay and tax paid, or a P45 if you left during the year. You do not usually need to calculate anything yourself for PAYE income, but you must include it on your Self Assessment return if you also earn CIS income.

CIS income

If you work as a subcontractor, contractors deduct CIS tax from your payments before you are paid, usually at 20 percent. This tax is sent to HMRC on your behalf. However, because CIS deductions are made from your gross pay before expenses, they are often higher than the tax you actually owe.

When you file your Self Assessment, you can reclaim overpaid tax once expenses are deducted.

Who needs to file a Self Assessment

If you only have PAYE income and no other earnings, you do not need to file a Self Assessment, as your employer handles your tax.

However, if you earn any income outside PAYE — such as CIS subcontracting, freelance work, or self employment — you must complete a Self Assessment tax return to report all income and claim any refunds.

This applies even if most of your income comes from a PAYE job.

How to combine PAYE and CIS income on your tax return

When filing your Self Assessment, you will report both types of income separately within the same return.

Step 1: Gather your records

You will need:

Your P60 (or P45 if you changed jobs).

CIS payment and deduction statements from contractors.

Records of your business income and expenses.

Your Unique Taxpayer Reference (UTR) number.

Having these documents ready makes completing the return faster and more accurate.

Step 2: Report PAYE income

In the employment section of your tax return, enter:

The name of your employer.

Your total pay from the P60.

The tax already deducted.

HMRC uses this information to ensure you are not taxed twice on PAYE income.

Step 3: Report CIS income

In the self employment section, include:

The total income received from contractors before CIS deductions.

The total CIS tax already deducted (as shown on your CIS statements).

Your business expenses such as tools, insurance, fuel, or protective clothing.

HMRC will calculate your total taxable profit and offset any tax already deducted through CIS against your final liability.

Step 4: Review the calculation

Once both income types are entered, HMRC’s system automatically combines them to calculate your total tax liability for the year.

If you have overpaid through CIS deductions or PAYE, you will receive a refund. If you have underpaid, you must pay the balance by 31 January following the end of the tax year.

Example

Alex works as a PAYE labourer for six months and earns £15,000. He also works as a CIS subcontractor and earns £25,000, with £5,000 tax deducted by contractors.

When Alex completes his Self Assessment, he enters both incomes. After accounting for £4,000 of business expenses and the CIS tax already deducted, HMRC calculates that Alex’s total tax liability is £6,000. Since he has already paid £5,000 under CIS and £2,000 under PAYE, he has overpaid by £1,000 and receives a refund.

How expenses affect your tax bill

As a CIS subcontractor, you can claim allowable business expenses to reduce your taxable profit. Common expenses include:

Tools and equipment.

Protective clothing and safety gear.

Travel and mileage for business journeys.

Insurance and professional fees.

Mobile phone and communication costs.

Keep receipts and records for all expenses you claim. HMRC may ask for evidence if they review your return.

Expenses are not deducted automatically, so including them in your Self Assessment can make a big difference to your refund.

How National Insurance works with mixed income

You pay National Insurance on both PAYE and CIS income, but they are calculated separately:

PAYE: Your employer deducts Class 1 National Insurance directly from your wages.

CIS/Self employment: You pay Class 2 and Class 4 National Insurance through your Self Assessment.

When HMRC processes your tax return, they calculate the correct amount based on your total earnings.

How a CIS accountant can help

Handling PAYE and CIS income can get complicated, especially if you work for multiple contractors or have irregular payments. A CIS accountant can:

Check your PAYE and CIS figures against HMRC’s records.

Ensure all allowable expenses are included.

Complete and file your Self Assessment accurately.

Claim any refund you are owed quickly.

Help you plan for future tax payments to avoid surprises.

A specialist accountant also ensures you meet all HMRC deadlines and stay compliant, reducing the risk of penalties or missed refunds.

Example

Ben works part time for a construction company under PAYE and takes on weekend CIS jobs as a subcontractor. His accountant combines both income sources in one tax return, includes all travel and tool expenses, and ensures his PAYE tax is not double-counted. Ben receives a £900 refund and avoids the stress of calculating everything himself.

Common mistakes to avoid

Forgetting to include PAYE income on your tax return.

Entering CIS income after deductions instead of before tax.

Missing out on allowable expenses.

Failing to keep accurate records of income and receipts.

Missing the 31 January deadline for Self Assessment.

Checking all figures carefully and using professional help can prevent these costly errors.

When to expect your refund

If you are due a refund, HMRC usually pays it within two to six weeks after your return is processed. You can check the status of your refund through your HMRC online account.

Submitting your tax return early in the year helps speed up the process and ensures you receive your refund sooner.

Conclusion

If you earn income through both PAYE and CIS work, you must report both on a single Self Assessment tax return. HMRC will combine your earnings, deduct the correct amount of tax, and issue a refund if you have overpaid.

Keeping accurate records of your payslips, CIS statements, and expenses makes the process simple and ensures you do not pay more tax than necessary. If you are unsure about combining PAYE and CIS income, a qualified CIS accountant can handle the paperwork, maximise your refund, and keep your finances fully compliant.