If you work in construction as a subcontractor, your contractor may take money off every payment before you get paid. This is the Construction Industry Scheme (CIS). Often more is taken through CIS than you really owe, and the extra can be claimed back. This guide explains, in simple steps, how CIS deductions work and how to claim a refund. Tax figures are for the 2026 to 2027 tax year (6 April 2026 to 5 April 2027) unless we say otherwise.
What is CIS?
Under CIS, contractors take deductions from a subcontractor’s payments and pass them to HMRC. These deductions count as advance payments towards your tax and National Insurance. They are not an extra tax. At the end of the year, HMRC compares what was taken with what you really owe.
CIS deduction rates
- Registered for CIS: the contractor deducts 20%.
- Not registered: the contractor deducts 30%.
- Gross payment status: you are paid in full with no deduction, and you pay your tax later through your tax return.
So if you work as a subcontractor, it is worth registering for CIS. Otherwise 30% is taken instead of 20%.
What the deduction is taken from
The deduction should only come off the labour part of your invoice. Contractors should not take CIS deductions from the amounts you charge for:
- VAT
- materials you paid for directly
- plant hired for the job
- equipment which is now unusable
- manufacturing or prefabricating materials
Always show materials separately on your invoice. If a contractor takes 20% from the whole invoice, including materials, you lose money until you claim it back.
Why many subcontractors are owed a refund
A 20% deduction is taken from your labour income, but your tax is worked out on your profit, after allowable expenses. For the 2026 to 2027 tax year:
- The first £12,570 of income is usually tax-free (the Personal Allowance).
- Basic rate Income Tax is 20% on income from £12,571 to £50,270.
- Class 4 National Insurance is 6% on profits between £12,570 and £50,270, and 2% above that.
Because of the tax-free allowance and your business expenses, the total taken by contractors is often more than your real bill. When that happens, HMRC pays back the difference. (Income tax bands are different in Scotland.)
Expenses that can reduce your tax
Common allowable expenses for construction workers include:
- tools and equipment for work
- protective clothing and safety boots (not everyday clothes)
- van or vehicle costs for business journeys, or the HMRC flat mileage rate
- travel to temporary sites
- phone costs (the business part)
- public liability insurance
- accountant’s fees
Keep receipts for everything. The more expenses you can prove, the lower your profit and the bigger your possible refund.
How to claim your CIS refund: sole traders
If you are self-employed (a sole trader or partner), you claim back CIS deductions through your Self Assessment tax return. On the return you record:
- your total pay before deductions, as income
- the total deductions contractors have taken, as “CIS deductions”
- your allowable expenses
HMRC works out your tax and takes off the CIS deductions. If the deductions are more than your bill, you get a refund. If there is still tax to pay, it is due by 31 January after the end of the tax year.
You can send your return as soon as the tax year ends. For the 2025 to 2026 tax year, the online deadline is 31 January 2027, but you do not need to wait. Filing early means you can get any refund sooner.
How to claim: limited companies
If your business is a limited company, it works differently. The company claims CIS deductions through its payroll. Each month, it sends its Full Payment Submission (FPS) as usual and an Employer Payment Summary (EPS) showing the total CIS deductions for the year so far. These are set against the company’s PAYE bill. Extra deductions can be carried forward within the same tax year, and after the year ends the company can claim a refund of what is left.
Keep your payment and deduction statements
Each month, your contractor must give you a payment and deduction statement within 14 days of the end of each tax month. It shows what they paid you and what they deducted. Keep every statement: HMRC may ask for them as proof when you claim. If one is missing, ask the contractor for it.
Gross payment status
With gross payment status, you are paid in full and pay your tax through your tax return. To qualify, you must show HMRC that you have paid your tax and National Insurance on time in the past, that your business does construction work in the UK, and that it runs through a bank account. You also need turnover (not counting VAT and materials) of at least £30,000 in the last 12 months as a sole trader. Partnerships and companies have their own limits. See our CIS accounts service if you want help to apply.
How UK Tax Co can help
We help subcontractors all over the UK, online. We check your deduction statements, find your allowable expenses and send your return to HMRC. See our CIS accounts page and Self Assessment page. A Self Assessment tax return with us costs £120.
Frequently asked questions
Is CIS an extra tax?
No. CIS deductions are advance payments towards your Income Tax and National Insurance.
Why was 30% taken instead of 20%?
Usually because you are not registered for CIS, or the contractor could not verify you. Register with HMRC as a subcontractor so the 20% rate applies.
Should CIS be taken from materials?
No. Deductions should not be taken from materials you paid for, VAT, or plant hired for the job. Show these separately on your invoice.
When can I claim my refund?
As a sole trader, you can file your Self Assessment tax return as soon as the tax year ends on 5 April. HMRC will repay any extra deductions after it processes your return.
What if I lost my CIS statements?
Ask your contractor for copies. Contractors must give you a statement each month.
This article is general guidance, not personal tax advice.
Need help? Call UK Tax Co on 020 7050 0712 or WhatsApp 07579566666.