Umbrella vs CIS — which is right for you?
Umbrella vs CIS — which is right for you?
When you start a new role through an agency like JWS, one of the first questions you’ll face is how you want to be paid — through an umbrella company or under the Construction Industry Scheme (CIS).
Both have their advantages, but the right choice depends on your circumstances, working style, and what you want from your employment setup. Here’s a clear breakdown to help you decide.
What Is the Construction Industry Scheme (CIS)?
The CIS is designed for self-employed contractors and subcontractors working in the construction industry. Under this scheme:
You’re registered with HMRC as self-employed.
Your agency or contractor deducts 20% tax at source (instead of 30% if you’re not registered).
You’re responsible for your own National Insurance, expenses, and tax returns.
You can claim allowable expenses and potentially receive a tax refund at the end of the year.
CIS suits:
Experienced self-employed tradespeople.
Those confident managing their own tax affairs.
Workers who move between projects and like flexibility.
Pros:
✅ Higher take-home pay potential.
✅ Flexibility with expenses and working patterns.
✅ Independence as a self-employed professional.
Cons:
❌ You’re responsible for your own tax submissions.
❌ No employee benefits (holiday pay, sick pay, etc.).
❌ You need to handle insurance and record keeping.
What Is an Umbrella Company?
An umbrella company acts as your employer for tax purposes. You’re technically employed by the umbrella company, which processes your pay and deducts PAYE tax and National Insurance before paying you.
Umbrella suits:
Workers who want the simplicity of being employed.
Those moving between short-term contracts but still want benefits.
People who prefer to avoid dealing directly with HMRC or self-assessment.
Pros:
✅ Holiday pay, statutory sick pay, and maternity/paternity rights.
✅ All tax handled for you — no end-of-year returns.
✅ Simpler, less admin.
Cons:
❌ Slightly lower take-home pay (due to full PAYE deductions).
❌ Limited ability to claim expenses.
❌ You’re tied to the umbrella’s terms and fees.
Key Differences at a Glance
| Feature | CIS | Umbrella |
|---|---|---|
| Employment status | Self-employed | Employed |
| Tax deductions | 20% CIS deduction | PAYE tax & NI |
| Holiday/sick pay | No | Yes |
| End-of-year tax return | Required | Not required |
| Expenses | Can be claimed | Limited |
| Simplicity | More admin | Very straightforward |
Which Should You Choose?
If you’re an independent contractor who prefers flexibility and managing your own tax, CIS may offer better take-home pay.
If you prefer ease, security, and employee benefits, an umbrella company could be the right choice — especially if you’re newer to contracting or want the peace of mind that all deductions are handled for you.
How JWS Can Help
At JWS, we work with both CIS-registered workers and umbrella employees across the construction industry. We’ll guide you through your options, explain how each works, and ensure you’re paid correctly and compliantly — every time.
Whether you value flexibility or simplicity, we’ll help you find the setup that suits your trade and lifestyle best.
Final Thought
Choosing between CIS and umbrella isn’t one-size-fits-all — it’s about what fits your situation. Understanding the pros and cons means you can make an informed decision and get on site knowing everything’s sorted.
At JWS, we’re here to make that process easy.
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