Guides · Updated 2026-10-15

CIS explained for subcontractors: rates, deductions and refunds (UK)

If you do construction work for a contractor, they'll probably take money off your payments under the Construction Industry Scheme (CIS) and pass it to HMRC. This guide explains how it works for subcontractors, using GOV.UK's guidance (checked 15 October 2026), with a free CIS calculator to check your payments.

The rates

Source: GOV.UK, what you must do as a CIS contractor. The deductions count as advance payments towards your tax and National Insurance. Registering is the simplest way to cut the deduction from 30% to 20%.

What it's deducted from

The deduction isn't taken from your whole invoice. HMRC tells contractors to start with your gross invoice and take off VAT, materials you paid for directly, consumable stores, fuel (except for travelling), plant hire for the job, and manufacturing or prefabricating materials. The rate is applied to what's left (GOV.UK). If you don't have evidence of materials costs, the contractor estimates them.

So show labour and materials separately on every invoice and keep the receipts. Example: an invoice of £2,400 before VAT with £600 of materials you bought gives a deduction of 20% of £1,800, which is £360, so you're paid £2,040 (plus VAT if it applies). Try your own figures in the CIS calculator.

Statements

Each month your contractor must give you a payment and deduction statement showing what they paid and what they deducted, within 14 days of the end of each tax month (GOV.UK). Ask for it if it doesn't arrive. You'll need them to claim the deductions back.

Claiming it back

If you're a sole trader or partner, you record your total pay before deductions as income on your Self Assessment tax return, and the total CIS deductions separately. HMRC then works out what you owe, and the deductions count towards it (GOV.UK). If more was deducted than you owe, you get the difference back.

Gross payment status

With gross payment status, contractors pay you in full and you pay your tax through your return. To qualify, HMRC looks at your construction turnover for the last 12 months, ignoring VAT and materials. For a sole trader it must be at least £30,000. There are other tests too, including being on time with your tax returns and payments, and HMRC reviews your status every year (GOV.UK).

CIS and VAT

If you and the contractor are both VAT registered, most construction services you supply under CIS use the VAT domestic reverse charge: you don't charge VAT, and the contractor accounts for it. Your invoice must say the reverse charge applies; HMRC's example wording includes "Customer to pay the VAT to HMRC". It doesn't apply to work for private homeowners (HMRC technical guide). The quote and VAT calculator has a reverse-charge option.

Work that isn't covered

GOV.UK lists some jobs as outside CIS, including architecture and surveying, scaffolding hire with no labour, carpet fitting and delivering materials (GOV.UK).

Software that helps

QuickBooks lists CIS calculation and submission in all its UK plans, and Xero lists CIS features on its pricing page (checked 15 October 2026). See the trade guides for builders, joiners, tilers and roofers.

FAQ

Is CIS always 20%?

No. It's 20% if you're registered, 30% if you're not, and 0% with gross payment status.

Do I pay 40% tax on CIS?

CIS deductions aren't your final tax bill; they're advance payments. Your actual tax depends on your total profits, worked out on your Self Assessment return.

How is CIS calculated?

Take the invoice before VAT, subtract materials and the other allowed costs, then apply your rate. The CIS calculator does it.

Is this tax advice?

No. It summarises GOV.UK's guidance; for your own situation, ask HMRC or an accountant.