What is the CIS deduction rate?

There are three CIS deduction rates: 0% (gross payment status - subcontractor receives full payment), 20% (standard rate for registered subcontractors), and 30% (higher rate for unregistered subcontractors). The deduction is applied to the labour element of the payment only - materials costs are not subject to CIS deductions, provided they are separately identified on the invoice.

Who needs to register for CIS?

All contractors paying subcontractors for construction work must register as CIS contractors with HMRC. Subcontractors should also register (though it is not compulsory) to receive the lower 20% deduction rate instead of 30%. A "contractor" for CIS purposes includes anyone spending more than £3 million per year on construction, or any business whose main activity is construction.

What construction work is covered by CIS?

CIS covers most construction operations including: building, decorating, repairs, demolition, civil engineering, installing heating/lighting/power/water systems, and site preparation. It does NOT cover: architecture, surveying, carpet fitting, delivering materials, manufacturing components off-site, or work on the subcontractor's own property.

How do I reclaim CIS deductions?

If you are a subcontractor who is also an employee or sole trader, CIS deductions are offset against your Income Tax and National Insurance liability when you file your Self Assessment tax return. If you are a limited company subcontractor, CIS deductions are offset against your PAYE/NIC liability on your monthly Employer Payment Summary (EPS). Any excess is refunded by HMRC.

What is gross payment status and how do I get it?

Gross payment status allows a subcontractor to receive payments without any CIS deductions. To qualify, you must: have been in the construction industry for at least 12 months, have a good tax compliance history (all returns filed and tax paid on time), and meet a minimum annual turnover threshold (£30,000 for sole traders, or £30,000 per director for companies). HMRC reviews gross payment status annually.

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What Is CIS? — Construction Industry Scheme

A plain-English guide to the Construction Industry Scheme: registration, deductions, monthly returns, and how CIS works for UK contractors and subcontractors.

Definition

The CIS (Construction Industry Scheme) is a tax deduction scheme run by HMRC that applies to payments made by contractors to subcontractors for construction work in the UK. Under CIS, contractors must deduct tax at source from payments to subcontractors and pay it to HMRC on their behalf. The scheme was introduced to reduce tax evasion in the construction industry.

When Is It Used?

CIS applies whenever a contractor engages a subcontractor for construction operations. This includes main contractors paying subbies, property developers engaging trades, and even homeowners spending over £3 million on construction (rare but possible for large projects). Contractors must verify subcontractors with HMRC before making the first payment, make CIS deductions from each payment, and file monthly CIS returns by the 19th of each month.

Key Facts

Standard CIS deduction: 20% for registered subcontractors, 30% for unregistered
Deductions apply to labour only, not to materials (if separately identified)
Monthly CIS returns must be filed with HMRC by the 19th of each month
Late filing penalties: £100 per month for first 12 months, then higher penalties
Contractors must verify each subcontractor with HMRC before first payment
Gross payment status (0% deduction) requires clean compliance record and turnover threshold
CIS does not determine employment status - IR35 rules apply separately
CIS deductions count as advance tax payments and are offset against the subcontractor's tax liability

Related Calculators

Use the CIS Deduction Calculator to work out deductions from subcontractor payments, or the Day Rate Calculator to factor CIS into pricing. The VAT Calculator helps with combined CIS and VAT invoicing.

How We Calculate This

Frequently Asked Questions

Last updated: March 2026

All calculations are estimates. Verify with your supplier.

What Is CIS? — Construction Industry Scheme

Definition

When Is It Used?

Key Facts

Related Calculators

How We Calculate This

Frequently Asked Questions

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