How CIS deductions work
Under the Construction Industry Scheme, contractors deduct 20% from the labour part of your pay if you're registered, or 30% if you're not. Materials aren't taxed. Some subcontractors have gross payment status and nothing is deducted.
Why many subcontractors are due money back
CIS deductions are like tax paid in advance, but they're taken from your gross pay. Your actual bill is based on your profit after expenses and your personal allowance. If you have real costs (tools, van, mileage, phone, or workwear), the deductions can be more than you owe.
A worked example (2026/27, England)
| Labour paid (no materials) | £30,000 |
| CIS deducted at 20% | £6,000 |
| Business expenses | £4,000 |
| Profit | £26,000 |
| Income tax (20% on £13,430 above the £12,570 allowance) | £2,686 |
| Class 4 National Insurance (6% on £13,430) | £805.80 |
| Estimated refund | about £2,508 |
Illustrative only. Other income, a different region, or different expenses change the answer.
How to claim it
You claim CIS deductions through your Self Assessment return (or your final declaration once you're in MTD). Keep every monthly payment and deduction statement, and check each one; mistakes and missing statements are common.
CIS and Making Tax Digital
For MTD, your income is the gross amount before deductions, so many full-time subcontractors are over £30,000 and in from April 2027.
Questions
What CIS rate applies to me?
20% if you're registered for CIS, 30% if you're not, and 0% with gross payment status.
What if a contractor deducted the wrong amount?
Raise it with the contractor first, with your statements. Keep records of every statement you receive.
Get ready properly: the MTD Starter Kit (£7.99) gives you the full Plain-English Guide and the spreadsheet that does the quarterly sums.
General information, not tax advice. Not affiliated with HMRC.