The Construction Industry Scheme (CIS) requires contractors to deduct tax at source from payments to subcontractors. If you work in construction — whether as a bricklayer, electrician, plumber, or site labourer — you need to understand CIS deductions and how to reclaim any overpayment at year end.
How CIS works
Under CIS, the contractor (the business paying you) deducts tax from your payments before paying you. The deduction is sent directly to HMRC as an advance payment of your income tax. At year end, you reconcile via Self-Assessment and get a refund if too much was deducted.
CIS deduction rates
- 20% — standard rate for registered subcontractors
- 30% — for unregistered subcontractors
- 0% — gross payment status (must apply and qualify)
The deduction applies to labour only — the cost of materials (if shown separately on the invoice) is not subject to CIS deductions.
Registering as a subcontractor
You can register for CIS online through your Government Gateway account or by calling HMRC. Registration reduces your deduction from 30% to 20%. Gross payment status (0%) requires a proven track record of tax compliance and a minimum annual turnover (£30,000 for sole traders).
Reclaiming overpaid CIS deductions
CIS deductions are advance payments — not your final tax liability. If the 20% deducted exceeds what you actually owe (after expenses and allowances), you get the difference back through Self-Assessment.
For example: you earned £40,000 gross, had £8,000 CIS deducted (20%), and have £5,000 in allowable expenses. Your taxable profit is £35,000 and your actual tax+NI liability might be around £6,500 — so you are owed approximately £1,500 back.
Allowable expenses for CIS workers
- Tools and equipment
- Vehicle costs (fuel, insurance) or mileage at 45p/mile
- Protective clothing and PPE
- Travel to temporary workplaces
- Phone and admin costs
- Subcontractor payments (if you hire others)
CIS and Self-Assessment
You still need to file a Self-Assessment return at year end — CIS does not replace it. The return is where your expenses are deducted, your actual liability is calculated, and your refund (or additional payment) is determined.
Estimate your position
Use the income tax calculator to estimate your actual tax liability on your construction income. If the result is less than the CIS deductions shown on your payslips, you are likely owed a refund.