For a company subcontractor the payroll is the mechanism that turns CIS deductions back into cash. Run it every month and the offset is claimed in the month it arises.
For a company subcontractor, payroll is the mechanism by which CIS deductions turn back into cash. The company cannot claim them on its corporation tax return. It offsets them monthly through the Employer Payment Summary, against PAYE due, National Insurance due, student loan repayments due, and the CIS it has deducted from its own subcontractors.
Any excess that cannot be set off may be refunded or set against corporation tax at the end of the tax year, but no repayments or set-offs against other liabilities can be made in-year except where the company is in liquidation or administration. So the practical question is whether you have enough monthly PAYE and National Insurance to absorb what you suffer — and for a labour-only company with a small payroll the answer is usually no.
| Item | 2026/27 | Note |
|---|---|---|
| Employer NIC rate | 15% | Up from 13.8% on 6 April 2025 |
| Secondary threshold | £5,000 a year (£96 a week) | Down from £9,100 on 6 April 2025 |
| Employment Allowance | £10,500 | The £100,000 eligibility cap was removed on 6 April 2025 |
| Class 1A on benefits | 15% | Applies to the van and fuel benefit charges |
| Employee NIC | 8% from £12,570 to £50,270, then 2% | Nothing below £12,570 |
| Apprenticeship Levy | 0.5%, £15,000 allowance | Pay bills over £3m |
Employer National Insurance now starts at £5,000 while the employee pays nothing until £12,570. That gap is new since April 2025 and it changes the optimal salary for an owner-managed company, which we calculate on your figures.
| Band | Rate |
|---|---|
| 21 and over — National Living Wage | £12.71 |
| 18 to 20 | £10.85 |
| Under 18 | £8.00 |
| Apprentice | £8.00 |
The apprentice rate applies where the apprentice is under 19, or is 19 or over and in the first year of the apprenticeship. Other 2026/27 statutory rates: Statutory Sick Pay £123.25 a week, and statutory maternity, paternity, adoption and shared parental pay £194.32 a week or 90% of average earnings, whichever is lower.
Statutory Sick Pay is payable from day one of absence, for all eligible employees regardless of earnings — the Lower Earnings Limit and the waiting days have both gone. It is paid at 80% of normal weekly earnings or £123.25 a week, whichever is lower. Absences that started before 6 April 2026 follow the old rules.
For a trade business with site staff and a normal pattern of short absences, this is the single largest new payroll cost of the year. Statutory Sick Pay is not recoverable by the employer.
From 6 April 2026, where a worker is supplied through an umbrella company, the recruitment agency becomes responsible for accounting for PAYE and Class 1 National Insurance on payments to that worker — and where there is no agency, the responsibility falls on the end client. HMRC can recover PAYE underpayments from them. If you source labour through agencies or umbrellas, that recoverable risk can sit on your business. Check whether you are the agency or the end client in each chain before it matters.
More than it did. Employer National Insurance is 15% on earnings above a secondary threshold of just £5,000 a year — the rate rose from 13.8% and the threshold fell from £9,100, both on 6 April 2025. The Employment Allowance is £10,500 and the previous £100,000 eligibility cap was removed at the same time, so more employers can claim it. Note the asymmetry: employer National Insurance starts at £5,000 while the employee pays nothing until £12,570. Statutory sick pay is now payable from day one of absence as well, which for a workforce with short site absences is a new and predictable annual cost.
Not if it has a single director who is the only employee liable for secondary Class 1 National Insurance. Only one company in a group may claim. Off-payroll workers cannot be counted for Employment Allowance purposes, and nor can domestic staff other than care and support workers. A one-person trade company whose director is the only employee is caught by this restriction, so check it before you count on the allowance. Taking on a first genuine employee can unlock it, because the director then stops being the only person liable for secondary Class 1 National Insurance.
Statutory Sick Pay is now payable from day one of absence, for all eligible employees regardless of earnings — the Lower Earnings Limit and the waiting days were both removed on 6 April 2026. It is paid at 80% of normal weekly earnings or £123.25 a week, whichever is lower. Absences starting before 6 April 2026 follow the old rules. The government's own costing put the reform at around £400 million a year in extra sick pay across the economy, with most of the increase attributable to removing the waiting days. For a business with site staff and short absences, removing the waiting days is where the extra cost falls.
Because a company subcontractor's CIS offset runs through it. The company offsets CIS suffered against PAYE due, National Insurance due, student loan repayments due and the CIS it has deducted from its own subcontractors — monthly, through the Employer Payment Summary. Without a real payroll there is nothing to offset against, so the deductions accumulate until after 5 April. Claiming the offset through the payroll in the month it arises keeps the cash in the business now, with no wait for a refund.
Three months of returns and statements, a straight account of what is wrong and what it is costing, and a number on the gross payment status question.