A buried fact worth surfacing: FreeAgent is free for millions of UK business customers
FreeAgent costs nothing for business account holders at NatWest, Royal Bank of Scotland, Ulster Bank and Mettle. That covers a significant slice of the UK's sole-trader construction workforce. The free access is permanent, carries no feature restrictions, and includes the full platform: bookkeeping, invoicing, payroll, Self Assessment, VAT returns and the CIS tools. Mettle customers need to make at least one transaction per month to qualify, but that is the only condition.
For a CIS subcontractor who already holds one of those accounts, FreeAgent is the lowest-cost entry point in the market. This guide sets out what the software actually does for CIS workers, where its limits sit, and how to decide whether it fits your situation or whether something else is worth the monthly fee.
What FreeAgent does for CIS subcontractors
A CIS subcontractor in FreeAgent gets three core pieces of functionality.
Income recording with deductions built in. When you record a payment received from a contractor, you enter the gross amount, the materials element and the CIS deducted. FreeAgent separates these correctly for your Self Assessment return: the gross income goes into your income figure, the materials are treated as an expense, and the CIS deducted is tracked as tax already paid on your behalf. This is the bookkeeping discipline that ensures your Self Assessment return uses the right gross figure rather than the net amount you actually banked.
Self Assessment preparation. FreeAgent pulls your CIS income, expenses and deductions together into a Self Assessment draft that you can review and file through HMRC's Government Gateway. For a sole-trader CIS subcontractor, filing Self Assessment is how you recover the over-deduction taken at 20% before your personal allowance and expenses were counted. Most registered subcontractors are owed money back each year precisely because the 20% is taken on the labour element at source. FreeAgent makes the mechanics easier, though you still file through HMRC's portal. Our complete guide to CIS Self Assessment sets out how the refund calculation works.
MTD for Income Tax compliance. From April 2026, sole traders and partnerships with gross income over £50,000 must use MTD-compatible software to keep digital records and submit quarterly updates. FreeAgent is MTD for Income Tax compatible and handles the quarterly submissions. The threshold drops to £30,000 from April 2027. The CIS catch, which most guides miss, is that the threshold is tested on gross income before any CIS deduction, not the net receipts. A subcontractor earning £60,000 gross who receives £48,000 after 20% CIS is tested on the £60,000 figure and is in scope from April 2026. FreeAgent's income recording captures the gross figure correctly, which is the starting point for getting this right.
What FreeAgent does for contractors who pay subcontractors
If you are a contractor using FreeAgent (sole trader or limited company), the software handles the contractor-side CIS mechanics:
- Sub-contractor deduction calculation. Set up each subcontractor with their verification status (GPS at 0%, registered at 20%, unregistered at 30%) and FreeAgent applies the correct rate to the labour element of each payment automatically. The labour-only rule is the most commonly misunderstood part of CIS: deductions apply to the labour portion of a payment, not the full invoice value. On a £1,000 payment made up of £600 labour and £400 materials, the 20% deduction is £120, not £200.
- Payment and deduction statements. FreeAgent generates the CIS payment and deduction statement that contractors must provide to subcontractors within 14 days of each payment. These can be sent directly from the software.
- Contractor monthly return data. FreeAgent produces a contractor monthly return report with all the information needed for the CIS300. This is where the significant limitation sits.
The CIS300 limitation: what you need to know before you commit
FreeAgent does not file the CIS300 monthly return directly to HMRC. It prepares the data and presents it in a report, but the actual submission must be done separately through HMRC's CIS online service. You log into Government Gateway, navigate to the CIS service, and enter the figures from FreeAgent's report.
That is a two-step process rather than one. For a contractor filing monthly returns for multiple subcontractors, it adds time and introduces a manual transfer step where errors can creep in. QuickBooks and BrightPay both submit CIS300 returns directly to HMRC from within the software, eliminating that manual step.
From April 2026 the nil-return obligation has also been reinstated: contractors must file a CIS300 return every month, including months where no payments were made, or pre-notify HMRC of inactivity. The filing obligation applies regardless of software choice, but the two-step process in FreeAgent means one extra action per month even when there is nothing to report. The penalty for a late CIS300 starts at £100 for a single day's delay and escalates to £300 or 5% of the CIS liability at six months.
CIS limitations by account type
| Business type | CIS subcontractor tools | CIS contractor tools | Self Assessment | MTD-ITSA |
|---|---|---|---|---|
| Sole trader | Yes | Yes (no direct CIS300 filing) | Yes | Yes |
| Limited company | Yes (EPS offset supported) | Yes (no direct CIS300 filing) | Via Corporation Tax module | N/A (companies not in MTD-ITSA) |
| Partnership | No | No | Partial | Yes (partners individually) |
| Unincorporated landlord | No | No | Partial | No |
If you operate through a partnership, FreeAgent is not currently an option for CIS purposes. Clear Books (Medium plan or above) and QuickBooks both handle CIS for partnerships. Our guide to CIS for partnerships covers the registration and filing obligations in detail.
Pricing: free bank deal vs standard rates
| Account type | Standard price | NatWest / RBS / Ulster Bank / Mettle |
|---|---|---|
| Sole trader | £19 per month (after introductory period) | Free |
| Limited company | £33 per month (after introductory period) | Free |
| Partnership or LLP | £27 per month (after introductory period) | Free (but no CIS support for partnerships) |
The introductory discount is 50% for the first six months, bringing the sole trader plan to £9.50 per month and the limited company plan to £16.50 per month during that period. Prices exclude VAT at 20%.
For a NatWest or RBS business customer, the maths is straightforward: FreeAgent is free. For everyone else, the question is whether £19 or £33 per month is worth it given the CIS300 gap. If you are primarily a subcontractor and the main thing you need is income recording, expense tracking and Self Assessment preparation, FreeAgent at standard rates competes reasonably against QuickBooks Simple Start (around £16 per month, checked June 2026) and Xero Starter (around £17 per month, checked June 2026). Neither of those includes direct CIS300 filing free of charge from the entry plan either.
FreeAgent vs QuickBooks for CIS subcontractors
| Feature | FreeAgent | QuickBooks Simple Start |
|---|---|---|
| CIS income recording | Yes | Yes |
| CIS deduction tracking | Yes | Yes (included free) |
| CIS300 direct filing | No (prepares data only) | Yes |
| Deduction statements to subs | Yes | Yes |
| Self Assessment | Yes | Via payroll add-on |
| MTD-ITSA | Yes | Yes |
| Partnership CIS | No | Yes |
| Standard monthly price (sole trader) | £19 (£0 for qualifying bank customers) | Around £16 (checked June 2026) |
For a sole-trader subcontractor who banks with NatWest or RBS, FreeAgent wins on cost by a wide margin since it is free. For a contractor who needs to file CIS300 returns monthly, QuickBooks has the functional edge because it does the filing end to end without a separate HMRC login step. The full comparison of CIS software across all the main platforms is in our guide to the best CIS accounting software.
MTD for Income Tax: what FreeAgent does and the gross-income trap
From April 2026, sole traders and partnerships with gross income over £50,000 must comply with Making Tax Digital for Income Tax. FreeAgent is MTD-ITSA compatible and handles the four quarterly updates (due by 7 August, 7 November, 7 February and 7 May) as well as the year-end declaration that replaces the traditional single Self Assessment return.
The point that catches CIS workers out is the measurement. The £50,000 threshold is tested on gross income before CIS deductions, not the net amount you bank. If your contractors deduct 20% from your labour, your banked receipts could look like £45,000 when your gross is £56,250 and you are fully in scope. FreeAgent records the gross figure correctly when you enter your income as received (before deduction), so as long as you use the software as designed, the quarterly updates will report the right gross. The threshold falls to £30,000 from April 2027, bringing a much wider group of subcontractors into scope.
HMRC is not charging late quarterly-update penalty points in the first year (2026/27), but late annual returns and late payment penalties still apply. The grace is narrow. If you are approaching the £50,000 threshold on gross income, setting up MTD-compatible software now is simpler than scrambling mid-year.
Gross Payment Status and the April 2026 anti-fraud changes
FreeAgent does not have a GPS eligibility checker or a built-in GPS application workflow. If you are assessing whether your business qualifies for GPS (the route to being paid at 0% instead of 20%), you need to work through the three qualifying tests: the business test, the turnover test (£30,000 net CIS turnover for a sole trader; net excludes VAT and materials) and the compliance test (all tax filings up to date for the past 12 months). Our guide to Gross Payment Status covers the qualification criteria in full.
From 6 April 2026, Finance Act 2026 tightened the GPS regime considerably. HMRC can now revoke GPS immediately where a contractor "knew or should have known" about fraudulent connections in the supply chain. Revocation on fraud grounds triggers a five-year reapplication ban; for a subcontractor earning £500,000 a year that means roughly £100,000 a year deducted at source instead of zero. The three required due-diligence steps (re-verify the subcontractor's CIS status, run a Companies House check, carry out bank name verification before each payment) are not automated in FreeAgent and require manual action via HMRC's CIS service. This applies to all accounting software, not specifically FreeAgent.
Getting the most from FreeAgent as a CIS worker
FreeAgent works well for a CIS subcontractor whose primary needs are income recording, expense tracking, Self Assessment filing and MTD compliance. The free deal for NatWest and RBS customers makes it particularly strong for that audience. The gaps to be aware of are the absence of direct CIS300 filing (relevant if you are also a contractor), the lack of partnership CIS support, and the absence of a GPS management module.
If you are trying to work out how much you are likely to get back from CIS deductions this year, our CIS refund estimator gives you a quick figure based on your gross income, materials and expenses. And if you want to understand the full Self Assessment process that turns your FreeAgent records into a refund or a tax bill, see our CIS Self Assessment guide.