by Asim Abbas
12 November 2026 
Hiring freelancers and subcontractors as a sole trader
Hiring freelancers and subcontractors as a sole trader
As your business grows, you may bring in freelancers or subcontractors rather than employees. It’s flexible, but you need to make sure they’re genuinely self-employed.
- Payments to subcontractors are deductible
- Check they’re genuinely self-employed
- Construction work falls under CIS
- Get invoices for every payment
Payments to subcontractors are deductible, and construction work has special CIS rules.
This guide covers the tax points when a sole trader uses subcontractors.
Are they really self-employed?
If you control when, where and how someone works, they can’t substitute, and they work only for you, HMRC may treat them as your employee. You’d then owe PAYE, NI and holiday pay. Use HMRC’s CEST tool and keep evidence of their independence.
Deductibility
Fees paid to subcontractors for work in your business are allowable expenses. Keep their invoices showing their name, dates, work done and amount.
Self Assessment tax calculator
Profit after subcontractors.
Asha, a self-employed marketing consultant, pays a freelance designer £8,400 and a copywriter £5,200 during the year, both working for other clients too and invoicing her. Her turnover is £72,000, and the £13,600 is deducted from her profit, saving her about £5,712 in Income Tax and NI at 42%.
Construction
If you’re a builder or tradesperson paying subcontractors for construction work, you’re a CIS contractor. You must register, verify subcontractors, deduct tax and file monthly returns. See our CIS contractor guide.
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If your subcontractors are VAT registered, they’ll charge VAT, which you can reclaim if you’re registered. In construction, the reverse charge may apply.
IR35
The off-payroll rules only apply to medium and large clients, so a sole trader engaging a contractor’s limited company usually doesn’t need to make IR35 decisions.
Contracts
A written agreement covering scope, payment, substitution and who provides equipment helps support self-employed status and avoid disputes.
See GOV.UK guidance on employment status, our status guide and our Self Assessment service.
What should I do next?
CEST tool.
Scope and substitution.
Every payment.
Frequently Asked Questions
Can a sole trader use subcontractors?
Yes, and their fees are deductible.
How do I know if they’re self-employed?
Look at control, substitution and whether they work for others.
Do I need CIS for subcontractors?
Only for construction work.
Does IR35 apply to sole traders hiring contractors?
Usually not, as small clients are outside the off-payroll rules.
What paperwork do I need?
Invoices and ideally a written agreement.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Stephen Reynold
I’m Stephen Reynold, an accountant at Wingate Accountants. I work with sole traders and small companies, turning tax rules into clear, practical next steps.
