If you work in construction as a self-employed subcontractor, you're subject to the Construction Industry Scheme (CIS). This means the contractor you work for is required to deduct tax from your payments and pass it to HMRC — before you even see the money. Here's a complete guide.
What Is CIS and Why Does It Exist?
CIS was introduced because HMRC found it difficult to collect tax from self-employed construction workers who received large cash payments. Under CIS, the contractor becomes responsible for deducting tax at source and passing it to HMRC monthly — similar in concept to how employers handle employee PAYE.
The Two CIS Deduction Rates
- Registered CIS worker (standard): 20% deduction on labour (not materials). If you invoice £1,000 (£700 labour, £300 materials), the contractor deducts 20% of £700 = £140 and pays you £860.
- Unregistered worker: 30% deduction on labour. The higher rate is HMRC's way of incentivising registration.
- "Gross" status: 0% deduction. If you have gross payment status (granted if you meet HMRC's turnover and compliance tests), no deduction is made and you handle your tax entirely through Self Assessment.
Is the 20% Deduction Your Final Tax Bill?
Almost certainly not. CIS deductions are payments on account toward your end-of-year Self Assessment tax bill. Most CIS subcontractors overpay during the year and receive a refund. The average CIS refund is approximately £2,000–£3,000 per year, because:
- CIS deducts 20% of all labour — but your actual tax rate after expenses and the personal allowance may be 0–15%
- Your actual costs (tools, vehicle, PPE, phone, accountant fees) reduce your taxable profit
How to Claim Your CIS Overpayment
File a Self Assessment tax return each January 31st. Include all CIS deductions suffered (your contractors provide monthly CIS statements). HMRC deducts these from your tax bill. Any excess is refunded — typically within 4–6 weeks of the return being processed.
Frequently Asked Questions
Can I register for CIS online?
Yes — register at gov.uk as a subcontractor and contractor (if you hire others) using your Government Gateway login. Registration takes approximately 15 minutes and immediately changes your deduction rate from 30% to 20%.
Can I be both employed and a CIS subcontractor?
Yes. Many construction workers have a main PAYE job and additional self-employed CIS income. Both must be declared on your Self Assessment return, and HMRC reconciles your total tax position across both.
Calculate your CIS refund with our CIS Tax Refund Calculator.