Hiring Your First Subcontractor as a Sole Trader
There comes a point in many freelance businesses when you have more work than hours. Hiring a subcontractor lets you say yes to bigger projects without becoming an employer, but it also makes you responsible for someone else's work, someone else's invoices and your client's data in someone else's hands. This guide walks UK sole traders through the decisions and paperwork, step by step. It is general information, not legal or tax advice, so check GOV.UK, HMRC or an accountant for your situation.
Key takeaways
- A subcontractor runs their own business. If the relationship looks like employment, HMRC may treat it as employment, whatever you call it.
- You stay responsible to your client for the finished work, so quality control and clear briefs are your job.
- Put the arrangement in writing: scope, deadlines, fees, payment terms, confidentiality and who owns the work.
- Sharing client personal data with a subcontractor brings UK GDPR duties for both of you.
- Subcontractor fees paid wholly and exclusively for your business are normally an allowable expense.
Most sole traders reach for a subcontractor for one of three reasons. You have a project that is too big for one person, you need a skill you do not have, or you want to free up time for higher-value work. All three are good reasons. The risk is treating the hire like a favor between friends and skipping the basics, then discovering a problem halfway through a client project.
The steps below assume you are a sole trader in England, Wales, Scotland or Northern Ireland bringing in another self-employed person or small business for a defined piece of work.
Check that you can subcontract at all
Before you look for anyone, reread your client contracts. Some contracts say you must do the work personally, or that you need the client's written consent before passing any part of it to someone else. Others are silent. If your contract requires consent, ask for it in writing and explain who will do what. Most clients are happy as long as you remain their single point of contact and stay accountable for the result.
Also check any confidentiality or non-disclosure terms you signed. If you promised not to share project details with third parties, you may need the client's permission and a matching confidentiality promise from your subcontractor.
Common mistake
Quietly handing work to a subcontractor when your contract says the services are personal to you. If the client finds out, you may be in breach of contract, and the trust you spent years building can disappear in one email. Ask first.
Subcontractor or employee? Get the status right
This is the part that matters most for tax. Calling someone a subcontractor does not make them one. HMRC looks at the real working relationship, and if it looks like employment, you could be treated as an employer with PAYE and National Insurance obligations.
Factors that generally point toward genuine self-employment include:
- They decide how, when and where to do the work, within the brief you agree.
- They can send someone else to do the work, or hire help themselves.
- They work for other clients and market their own services.
- They use their own equipment and carry their own business risk.
- They quote a fixed price or rate per project and fix mistakes in their own time.
Factors that point toward employment include setting their hours, supervising them closely day to day, paying a regular wage regardless of output and having them work only for you over a long period. No single factor decides it; the overall picture does.
HMRC's Check Employment Status for Tax (CEST) tool can help you think through the answers for a specific engagement. Keep a copy of the result with your records. If the person works through their own limited company, the off-payroll working rules (IR35) may be relevant; see our IR35 guide for how those rules work.
Pro tip
Write a brief that describes outcomes, not hours. "Design six social graphics in our brand style, delivered by Friday" supports a business-to-business relationship far better than "work on our graphics from 9 to 5 this week."
Find and vet the right person
Your best subcontractors often come from your own network: people you have worked alongside, peers in online communities or freelancers recommended by clients. You can also search on platforms such as LinkedIn, Upwork, PeoplePerHour or YunoJuno for UK creative and tech contractors.
Whoever you find, vet them the way a careful client would vet you:
- Review real work. Look at a portfolio or past deliverables that match the job you have in mind, not just their best showcase piece.
- Talk to them. A short call tells you a lot about how they communicate, ask questions and handle feedback.
- Ask for a reference. One conversation with a previous client is worth more than a page of reviews.
- Start small. Give a paid trial task with a short deadline before trusting them with a large project.
- Check their setup. Ask whether they are registered as self-employed or trade through a company, and whether they carry their own professional indemnity insurance.
Put the agreement in writing
A written subcontractor agreement protects both of you. It does not have to be long, but it should cover the points below. A solicitor can draft or review a template you can reuse.
| Clause | What it should cover |
|---|---|
| Scope | Exactly what they will deliver, in what format, and what is not included |
| Deadlines | Draft and final delivery dates, and how changes to the timeline are agreed |
| Fees | Fixed price or rate, what counts as extra work, and how extras are approved |
| Payment terms | When they invoice you and how many days you have to pay |
| Intellectual property | That rights in the work pass to you (or your client) on payment, so you can pass them on |
| Confidentiality | No sharing of client details, files or project information |
| Data protection | How any personal data is handled, stored and deleted |
| Non-solicitation | Whether they can approach your client directly for a set period |
| Status | That they are an independent business responsible for their own tax and National Insurance |
Match the terms to your client contract. If your client owns all rights in the work on payment, you need to own those rights first, which means your agreement with the subcontractor must transfer them to you. If your client gives you 30 days to fix defects, make sure your subcontractor will help you meet that promise.
Protect client data
If the work involves personal data, such as a client's customer list, staff names or email addresses, UK GDPR and the Data Protection Act 2018 apply. As the person passing the data on, you need to be confident your subcontractor will keep it secure and use it only for the job.
- Share only the data they genuinely need, and nothing more.
- Use secure shared folders with access you can revoke, rather than email attachments.
- Agree in writing that they will delete or return data when the project ends.
- Make sure they know to tell you straight away about any breach, since serious breaches must be reported to the ICO within 72 hours.
- Check that your own privacy notice reflects that you may use trusted subcontractors.
Price the work and protect your margin
When you subcontract, your client still pays you, and you pay the subcontractor. The difference is what covers your time managing the work, reviewing quality, handling the client and taking the risk if something goes wrong. Price that time honestly rather than passing the subcontractor's fee straight through.
Example
Imagine a freelance copywriter quotes a client £3,000 for a website rewrite. She asks a trusted subcontractor to draft the blog section for £800. She spends several hours briefing, editing and presenting the work, and she remains responsible for revisions. Her margin on that section has to cover those hours, so she checks that £3,000 still makes sense once the £800 and her own time are counted. These figures are made up for illustration.
Also think about cash flow. If your client pays in 60 days and you promised to pay your subcontractor in 14, you are funding the gap. Either negotiate a deposit from the client, align your payment terms or make sure you have a cash buffer to cover it. Remember that the late payment rules that protect you also protect your subcontractor: if you agree no payment date, payment is generally late 30 days after they invoice or deliver, and they can claim statutory interest and fixed compensation.
Invoices, records and tax
Your subcontractor should send you an invoice for every payment. As a minimum it should show a unique number, their name and contact details, your name and address, a clear description of the work, the supply date, the invoice date and the total owed. If they are VAT registered, VAT invoice rules apply as well.
Fees you pay a genuine subcontractor for work you sell to your clients are normally an allowable business expense, because they are incurred wholly and exclusively for your business. Record each payment in your books against the invoice, just like any other expense. If you use the cash basis, the default for most sole traders, you record the cost when you pay it.
A few extra points to watch:
- Construction work: the Construction Industry Scheme has its own registration and deduction rules for contractors and subcontractors. If you work in construction, read the CIS guidance on GOV.UK before you pay anyone.
- VAT: paying a VAT-registered subcontractor may add VAT to your costs. Whether you can reclaim it depends on your own VAT position.
- Insurance: tell your insurer if you start using subcontractors, as some policies only cover work you carry out personally.
Pro tip
Set up a simple folder per subcontractor containing their agreement, CEST result, invoices and proof of payment. If HMRC or a client ever asks how the relationship works, you can answer in minutes. Tax rules change every tax year, so check GOV.UK or ask an accountant when anything is unclear.
Manage the work so the client never notices a change
Your client hired you for consistent quality. Subcontracting succeeds when the result looks and feels like your work.
- Share style guides, examples and client preferences up front.
- Agree a check-in point early in the project so problems show up while there is time to fix them.
- Review every deliverable yourself before it reaches the client.
- Give specific, constructive feedback and pay promptly. Good subcontractors have choices, and they remember reliable clients.
- Keep client communication with you unless you have agreed otherwise with both sides.
Before your first subcontractor starts
- Check your client contract allows subcontracting, or get written consent
- Run the engagement through HMRC's CEST tool and keep the result
- Vet the person with real samples, a call and a small paid trial
- Sign a written agreement covering scope, fees, IP, confidentiality and data
- Limit the personal data you share and use revocable access
- Confirm your price still covers your management time and risk
- Tell your insurer and set up a record folder for invoices and payments
Frequently asked questions
Do I become an employer if I hire a subcontractor?
Not if the person is genuinely self-employed and in business on their own account. If the relationship looks like employment in practice, for example you control their hours and they work only for you, HMRC may see it as employment. Check the facts with HMRC's CEST tool and take advice if you are unsure.
Can I claim subcontractor fees as a business expense?
Generally yes, when the cost is incurred wholly and exclusively for your business, such as paying someone to deliver part of a client project. Keep their invoice and proof of payment, and record the cost in your books.
Who is liable if the subcontractor makes a mistake?
Your client contract is with you, so the client will usually look to you to put things right. Your agreement with the subcontractor can set out what they must do to fix errors, and their own insurance may help, but you should plan to be accountable to your client.
Do I need to tell my client I am using a subcontractor?
It depends on your contract. Some require consent, some do not mention it. Being open is usually the safer choice, especially if client data or confidential material will be shared.
Related reading
The bottom line
Your first subcontractor can be the step that lets your business grow beyond your own hours. Check that your contracts allow it, make sure the person is genuinely self-employed, agree everything in writing, protect client data and price in your own management time. Then treat your subcontractor the way you want your best clients to treat you.
This is general information, and rules on employment status, data protection and tax can change. Check the current guidance on GOV.UK, speak to HMRC, or ask an accountant or solicitor before you commit to anything significant.
