CIS explained for subcontractors

CIS is the Construction Industry Scheme. If you're a subbie, the contractor who pays you takes tax off your invoice before you get it and sends it to HMRC. If you're registered for CIS they deduct 20%. If you're not registered they take 30%. It's not an extra tax. It's money paid towards your bill in advance, and you claim it back or offset it through Self Assessment.

Want your own figure? Use the free CIS deduction calculator — enter your labour, materials and plant hire and it shows exactly what the contractor should pay you, and what your invoice should say.

What CIS is and who it's for

CIS applies to construction work between contractors and subcontractors. Most of the trades fall under it: groundwork, bricklaying, joinery, plastering, roofing, decorating and plenty more.

When a contractor pays you, they don't hand over the full amount. They take a deduction off everything except the direct cost of your materials, and pass it to HMRC in your name. Genuine materials you bought are paid in full.

So say you invoice £1,000 for labour and you're registered. The contractor deducts 20%, which is £200, and pays you £800. That £200 sits with HMRC as tax you've already paid.

20% or 30%: register and save yourself the extra

The rate depends on whether you're registered with HMRC for CIS.

• Registered subcontractor: 20% deducted

• Not registered: 30% deducted

That 10% difference is a lot of your money tied up with HMRC all year for no reason. Registering is straightforward. You do it through HMRC, and you'll need your Unique Taxpayer Reference and National Insurance number. If you're not already registered as self-employed, sort that first.

Some subbies with a good record can apply for gross payment status, where the contractor takes nothing off and you handle all the tax yourself at year-end. That's worth looking into once you're established.

How you get it back

Here's the bit that matters. Those deductions are tax you've already paid, and Self Assessment is where it gets settled.

At the end of the tax year you fill in your return. You declare all your income and all your expenses to work out your actual tax and National Insurance. Then you knock off the CIS deductions the contractors already took.

Very often the deductions add up to more than your final bill, especially once you've claimed your expenses. When that happens HMRC refunds you the difference. A lot of subbies get money back every year through this.

If you owe more than was deducted, you pay the rest. Either way, the CIS money counts towards what you owe.

Expenses still cut your bill

CIS deductions come off your payments, but your expenses still reduce your taxable profit the same as any other self-employed trade. Tools, materials, van running costs, mileage, workwear and PPE, insurance and the rest all count.

This is why claiming your expenses properly matters so much under CIS. The more legitimate expenses you claim, the lower your actual tax bill, and the bigger the gap between what was deducted and what you owe. That gap is your refund.

Keep every deduction statement

Every contractor who deducts CIS from you must give you a monthly statement showing what they paid and what they took off. Keep every single one.

Those statements are your proof of the tax already paid. When you do your return, the total of your deductions has to match what you're claiming back. Lose the statements and you can't easily prove what was taken, which can hold up your refund. Store them as you get them, whether that's a photo or a saved file. Don't leave it until January to go chasing contractors for paperwork from last spring.

You can read the full CIS rules on gov.uk.

FAQ

Is CIS an extra tax on top of what I owe? No. It's an advance payment towards your Income Tax and National Insurance. You settle up at Self Assessment.

Why is 30% coming off my money? You're probably not registered for CIS. Register with HMRC and it drops to 20%.

Do I still need to do a tax return? Yes. CIS doesn't replace Self Assessment. The return is how you reconcile everything and claim any refund.

Do contractors deduct CIS from my materials? Not from genuine materials, no — the direct cost of materials you bought is taken out before the deduction is worked out. But everything else on the invoice is inside it: labour, travel, call-out charges, waste disposal and your margin. Plant you hired from someone else also comes out; plant you already own does not.

Under CIS your refund depends on two things being in order: your deduction statements and your expenses. TradePilot keeps both in one place, so you can log every job, snap every receipt and store every statement from your phone as you go. Come year-end, the numbers are already there. We're not live yet, but you can join the waiting list for early access.

What exactly is CIS deducted from?

This is where subcontractors lose the most money, and the rule is wider than most people think. CIS is not taken from "labour" alone — it is taken from the whole payment except the direct cost of materials, worked out on the figure before VAT.

That means your travel, call-out charges, waste disposal and your profit margin are all inside the deduction base. Only genuine materials come out first.

What counts as materials: things you bought that become part of the building — cable, pipe, timber, plasterboard, fittings, tiles — plus plant you hired from someone else and the fuel to run it. Fuel and consumables count either way.

What does not count: plant you already own (HMRC will not allow a notional hire charge for your own kit, although fuel for it still counts), your own travel and subsistence, general overheads, and anything you have marked up. You can only pass on what you actually paid.

If you invoice one lump sum without splitting the materials out, the contractor has no way to identify them and the deduction comes off the whole lot. On a £3,250 job with £850 of materials in it, that mistake costs you £170 in cash flow on one invoice.

If you are not VAT registered, include the VAT you paid on materials in the materials figure — you cannot reclaim it, so HMRC lets you count the VAT-inclusive cost.

CIS and Self Assessment: how subcontractors claim it back

CIS deductions are not a separate tax and they are not lost. Everything taken off you across the year goes on your Self Assessment return as tax already paid, and is offset against your Income Tax and Class 4 National Insurance bill.

For most subcontractors with real expenses, the CIS taken exceeds what they actually owe — which is why a refund is common rather than unusual. You still have to file to get it.

Three things make that go smoothly:

• Keep every payment and deduction statement. Your contractor must issue one within 14 days of the end of each tax month (tax months end on the 5th). One statement can cover several payments in that month. None is due if you hold gross payment status. Chase the ones that do not arrive — without them you are relying on your own records to prove tax you have already paid.

• Claim your expenses properly. CIS comes off before expenses, so your allowable costs still reduce the final bill and increase any refund.

• Register, if you have not. Unregistered subcontractors are deducted at 30% instead of 20%. You get the difference back either way, but at 30% you are lending HMRC an extra tenth of every labour invoice until your return catches up.

You do still need to file a return even if CIS has been deducted all year. The deductions are payments on account, not a substitute for Self Assessment — and filing is how you claim the refund.

Related tools and guides

• CIS deduction calculator — work out exactly what you will be paid, and what your invoice should say.

• Self-employed tax calculator — estimate the Income Tax and National Insurance your CIS deductions are paying towards.

• The VAT reverse charge for construction, explained — what to show on the invoice if you are VAT registered.

• What expenses can self-employed tradespeople claim?

• All four free calculators — all four in one place.

This is general information, not tax advice. Check your own situation with HMRC or an accountant.