CIS explained for subcontractors

CIS is the Construction Industry Scheme. If you're a subbie, the contractor who pays you takes tax off your labour 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.

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 the labour part and pass it to HMRC in your name. You still get paid the cost of your materials in full. The deduction only comes off labour.

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 labour, 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? No. The deduction only applies to the labour part of your invoice. Materials are paid in full.

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.

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