Two options, not five
Search for free CIS payroll software and you will find lists of six or seven products. Read them carefully and most are free only for a trial period, free only up to one employee, or free without CIS300 filing capability. The Construction Industry Scheme sets a specific bar: a contractor needs software that calculates deductions on the labour element of each payment, generates payment and deduction statements, and files the CIS300 monthly return with HMRC. In 2026/27, only two tools clear that bar at zero cost.
The first is Employment Hero's free tier. The second is HMRC's own CIS online service. This guide covers what each does, what each cannot do, and the point at which paying for something more capable becomes the more sensible choice.
Option 1: Employment Hero (free tier)
Employment Hero's free tier covers unlimited employees, direct CIS300 filing, subcontractor verification, payslip generation and auto-enrolment, all at zero cost and with no time limit. There is no employee count ceiling on the free plan and CIS functionality is not restricted to a paid tier. Employment Hero is HMRC-recognised.
The free plan is a genuine payroll-plus-CIS product. It handles RTI submissions for any PAYE employees you have as well as the contractor-side CIS obligations: setting up subcontractors with the correct verification status (0% GPS, 20% registered, 30% unregistered), calculating deductions on the labour element, issuing deduction statements, and filing the CIS300.
The April 2026 nil-return reinstatement is handled automatically: Employment Hero prompts nil returns for months with no payments, which removes the risk of missing a £100 penalty through simple oversight. Our full CIS payroll software guide sets out how Employment Hero compares against the paid alternatives.
The one practical note on Employment Hero is platform weight. It is an HR-and-payroll platform, and the interface reflects a broader use case than a sole-trader contractor with two or three regular subcontractors needs. The free tier does not expire and is not limited, but a small sole-trader contractor may find the onboarding process more involved than HMRC's simpler service.
Option 2: HMRC's CIS online service
HMRC's CIS online service (Government Gateway at gov.uk) allows any registered CIS contractor to file CIS300 monthly returns, verify subcontractors, and access their CIS account, all free of charge. It is not software in the usual product sense: there is no automation, no payslip generation, no integration with bookkeeping records, and no auto-enrolment handling.
Each month you log in, enter the subcontractor details and payment figures manually, and submit. For nil returns in months with no payments, you log in and submit a nil return. The service is always available and requires no installation or subscription.
For a contractor who pays one or two regular subcontractors, knows their figures well, and does not need payslips or payroll for employees, HMRC's service is genuinely sufficient. The monthly filing process takes around ten minutes once you are familiar with it. For a contractor with five or more subcontractors, manual entry starts to take longer and the risk of transcription error grows, particularly when the same figures need to go into both HMRC's service and a separate bookkeeping record.
What HMRC Basic PAYE Tools cannot do for CIS contractors
HMRC Basic PAYE Tools is a separate product from the CIS online service. It is free payroll software for PAYE purposes: it calculates wages, handles National Insurance and income tax, processes auto-enrolment and files RTI submissions for employees. It is a legitimate PAYE tool.
For CIS purposes, Basic PAYE Tools has one specific use: a limited company that operates as a CIS subcontractor can use it to record CIS deductions the company has suffered on its Employer Payment Summary (EPS). This allows the company to offset those deductions against its PAYE liability in real time, which is the in-year recovery route for limited company subcontractors. That is a useful function for the right use case.
What Basic PAYE Tools does not do is file the CIS300 monthly return that a contractor uses to report payments made to its own subcontractors. If you are a contractor as well as a subcontractor, Basic PAYE Tools does not satisfy your CIS300 obligation. You need HMRC's CIS online service or third-party software for that filing.
| Tool | CIS300 contractor filing | Deduction statements | Subcontractor verification | PAYE payroll | Payslips | Auto-enrolment | Nil returns |
|---|---|---|---|---|---|---|---|
| Employment Hero (free tier) | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| HMRC CIS online service | Yes (manual entry) | No | Yes (manual) | No | No | No | Yes (manual) |
| HMRC Basic PAYE Tools | No | No | No | Yes | Yes | Yes | N/A |
Where free software breaks: four scenarios
Free options are sufficient for straightforward CIS situations. Four scenarios push contractors toward paid software.
1. More than four or five subcontractors. Manual entry in HMRC's service becomes time-consuming and error-prone at this scale. Employment Hero's free tier automates the calculation step but still requires each subcontractor to be set up. As the number grows, the operational overhead of free tools increases. BrightPay's batch CIS300 submission is specifically useful at higher subcontractor volumes.
2. VAT-registered subcontractors and domestic reverse charge. The domestic reverse charge (DRC) has applied to construction services since March 2021. Where a VAT-registered subcontractor supplies CIS services to a VAT-registered contractor, the contractor accounts for the VAT rather than the supplier. HMRC's CIS online service handles the CIS deduction but does not help with VAT return boxes. Employment Hero's free tier focuses on payroll and CIS, not full VAT accounting. A contractor dealing with DRC invoices needs software that handles both CIS and VAT correctly in the same system, which points toward Clear Books, QuickBooks or Xero as paid options.
3. Own employees as well as subcontractors. Employment Hero's free tier handles both PAYE employees and CIS subcontractors, which is an advantage. HMRC's CIS online service does not handle employee payroll. If you have both obligations and prefer not to use Employment Hero, you need a paid platform that combines payroll and CIS.
4. Accounting integration. Free tools do not link CIS data with bookkeeping records. Each payment to a subcontractor, each CIS deduction, each deduction statement needs to be recorded in your accounts as well as filed with HMRC. Using HMRC's service or Employment Hero for filing while maintaining a separate spreadsheet for accounts doubles the data entry. A paid platform where payroll, CIS and accounting are the same product eliminates that duplication.
The cost of upgrading: what you pay and what you get
| Software | Monthly cost | What it adds over free |
|---|---|---|
| Nomi payroll module | £10 per month | Automated CIS, direct filing, accounting integration, payslips |
| Clear Books Medium | £34 per month | Full accounting, VAT, CIS300, payroll, DRC handling |
| BrightPay (cloud) | Quote required | Batch CIS300, multi-employer, strong for accountants managing multiple clients |
For a sole-trader contractor with a handful of subcontractors and no employees, the free options are a legitimate long-term choice, not just a starting point. The upgrade decision is worth making when one of the four scenarios above applies, not before. Paying for software before you need it is money spent on capability you are not using.
The April 2026 nil-return obligation: a practical check
From 6 April 2026, nil returns are mandatory for every tax month with no payments. Tax months run to the 5th: the month ending 5 May is followed by a CIS300 due by 19 May, whether you paid anyone or not.
The penalty for a nil return filed one day late is £100. For a contractor who goes quiet in January and February, forgetting to file nil returns for those two months means a £200 penalty bill for nothing happening. Employment Hero prompts these automatically. HMRC's service does not prompt: you must remember to log in and file or pre-notify HMRC of inactivity.
If you use HMRC's service as your free option, the simplest system is a monthly calendar reminder on the 15th of each month (giving you four days before the 19th deadline) to either file the return or confirm to yourself that you pre-notified HMRC. Our guide to contractors' monthly CIS responsibilities covers the full return obligation including the nil-return mechanics.
The subcontractor side: what free software does not help with
This guide focuses on the contractor's filing obligations. If you are a CIS subcontractor (you receive deductions from contractors rather than making them), the free-software question is different. As a subcontractor your main software need is income recording, expense tracking and Self Assessment filing, not CIS300 returns.
FreeAgent is free for NatWest, RBS, Ulster Bank and Mettle business customers and covers all three for sole traders. HMRC's own Self Assessment online service handles the filing if you do not want dedicated software at all. Our guide to CIS accounting software covers the subcontractor software options in more detail.
For a quick check of how much you are likely to get back as a subcontractor, our CIS refund estimator lets you input your gross income, materials and expenses and see the likely refund figure. And our CIS deduction calculator shows the deduction on any payment split between labour and materials.