The Construction Industry Scheme (CIS) requires contractors in the construction industry to deduct tax at source from payments to subcontractors and pass those deductions to HMRC. If you work as a self-employed sole trader subcontractor in construction, your contractor will deduct either 20% (if you are registered with CIS) or 30% (if you are not registered) from your payments before you receive them. This is not your final tax bill — it is an advance payment toward your Self Assessment liability.
Updated 2026/27 · SoleTraderTaxCalculator.co.uk · Editorial standards · Methodology
CIS applies to payments made by contractors to subcontractors for construction work in the UK. Construction for CIS purposes is broadly defined: it includes building, demolition, repair, decorating, installation of systems (plumbing, heating, electrical), civil engineering, and landscaping when it forms part of a construction project. It does not include professional services such as architecture or surveying, or manufacturing and delivering materials.
If you work directly for a householder rather than a contractor — for example, you are self-employed and your customers are homeowners — CIS does not apply. CIS applies specifically to the contractor-subcontractor relationship in the supply chain.
Deduction rates: if you are registered with HMRC under CIS, the contractor deducts 20% from the labour element of your payment (not materials). If you are not registered, the deduction is 30%. This is why CIS registration matters — the 10 percentage point difference is significant on any reasonable level of payments.
CIS deductions are not a separate tax — they are advance payments toward your Self Assessment income tax and Class 4 NI liability. When you file your Self Assessment return at the end of the tax year, you include the gross amount you received from contractors (before CIS deductions) as your income, claim your allowable business expenses to arrive at taxable profit, and then calculate the tax owed. The CIS deductions made by your contractors are then credited against your tax liability.
To claim the credit, you enter the total CIS deductions on your Self Assessment return. HMRC cross-references this with the CIS returns submitted by your contractors throughout the year, so the figures need to match. If your CIS deductions exceed your total Self Assessment tax bill, HMRC repays the difference — meaning many subcontractors with legitimate expenses actually receive a repayment after filing.
The practical importance of keeping good records is high under CIS. You need your monthly CIS deduction statements from each contractor to complete your return accurately. These statements should be issued by the contractor at the end of each tax month. If a contractor fails to provide them, you are entitled to request them — you need this information to claim your tax credit.
To be deducted at the standard 20% rate rather than the higher 30% rate, you must register with HMRC as a CIS subcontractor. Registration is done online via your HMRC online account under the CIS section. You will need your UTR number, National Insurance number, and business details. Once registered, contractors verify your status before making payments and deduct at the correct rate.
Gross payment status allows your contractor to pay you in full without any CIS deduction, leaving you to pay your own tax through Self Assessment. To qualify for gross payment status, you must meet three tests: your business must have been in the construction industry for at least one year (or since business commenced); you must be compliant with your tax obligations — no outstanding returns or payments; and your business must have net turnover above a minimum threshold (currently £30,000 per year for a sole trader). HMRC can withdraw gross payment status if you fail to maintain tax compliance, so it is not a permanent entitlement.
Gross payment status is genuinely useful for cashflow — you receive full payment when invoiced rather than 80% with 20% withheld until after filing. But it requires rigorous Self Assessment discipline, because no tax is being deducted at source throughout the year and the full annual bill arrives in January.
Your contractors are required to give you a CIS deduction statement for each monthly tax period in which they make a payment to you. This statement must show the gross amount paid, the deduction rate applied, and the amount deducted. Keep every statement — these are the documents you use to complete your Self Assessment return and to support a repayment claim if your tax credits exceed your liability.
Your own records should include: all invoices issued to contractors, showing gross amounts and whether materials were included (materials are not subject to CIS deductions and should be clearly separated on invoices); all CIS deduction statements received; your business bank statements showing actual payments received; and your other business expenses in the usual way for Self Assessment.
If a contractor fails to make deductions correctly — either not deducting when they should, deducting the wrong amount, or failing to issue a statement — you should raise it with them promptly. Incorrect deductions affect your Self Assessment calculation and can create discrepancies between what you report and what contractors report to HMRC. These discrepancies trigger HMRC queries that take time to resolve.
A contractor under CIS is any business that pays other businesses for construction work and has a certain level of construction expenditure. A subcontractor is the business receiving payment for the construction work. The same business can be both a contractor and a subcontractor in different relationships.
No. CIS deductions apply only to the labour element of a payment, not to the cost of materials. Make sure your invoices clearly separate labour and materials so the contractor deducts correctly.
Your contractor is required to deduct 30% from the labour element of your payment and pass it to HMRC. You can still reclaim this through Self Assessment, but you lose access to more cash during the year compared to the 20% deduction rate for registered subcontractors.
Via your HMRC online account under the CIS section. You must meet the turnover, compliance and business age tests. HMRC will verify your tax compliance history before approving gross status.
HMRC issues a repayment of the difference after your Self Assessment return is processed. This typically happens when a subcontractor has significant allowable expenses that reduce taxable profit below the level of CIS deductions already paid.
The sole trader tax calculator turns this guidance into a concrete monthly take-home and tax reserve estimate, based on 2026/27 HMRC rates. Enter taxable profit — not turnover.