CIS Deductions Explained: Rates, Materials and Getting It Back

If you work for a contractor in construction, they will usually take tax off your pay before you get it. That is the Construction Industry Scheme (CIS). This guide covers how much is taken, what it should not be taken from, and how you get it counted against your tax bill.

Checked against HMRC’s guidance on GOV.UK on 06/10/2026.

How much is deducted

The deductions are not an extra tax. They are advance payments towards your Income Tax and National Insurance. Registering matters: unregistered, you lose 30% of each payment instead of 20% until your return is sorted out.

When you start with a contractor, give them exactly the details you registered with, including your Unique Taxpayer Reference (UTR) and your legal business or trading name. If they cannot verify you, you can be paid at 30%.

What the deduction should not be taken from

The contractor should only deduct from your labour. They should not take CIS from the parts of your invoice that cover:

• VAT
• materials you paid for yourself
• consumables that get used up on the job
• plant hired for the job
• manufacturing or prefabricating materials

Example. A registered subcontractor who is not VAT registered sends an invoice for £2,500: £2,000 labour and £500 of cable and accessories they bought for the job. The contractor deducts 20% of the £2,000 labour, which is £400, and pays £2,100.

Show materials as a separate line on your invoice and keep the receipts. The contractor may ask for proof. Without it, they will estimate the cost of the materials themselves.

Keep your monthly statements

Each month the contractor must give you a payment and deduction statement showing what they paid you and what they took off. It must reach you within 14 days of the end of each tax month. If it does not, ask for it. Keep every one: HMRC can ask for them when you claim the deductions back.

If you cannot get a statement, for example because the contractor has gone out of business, HMRC explains on GOV.UK how to write to them with the details.

Getting it back: sole traders

At the end of the tax year you send your Self Assessment tax return as usual, and you record:

• your total pay before deductions, as income
• the total deductions contractors took, as CIS deductions

HMRC works out your tax and takes the deductions off it. If you still owe tax, you pay it by 31 January after the end of the tax year. If too much was deducted, HMRC pays you a refund. Because 20% is taken from labour before any of your expenses are counted, a subcontractor with real business costs, such as tools, a van and training, can find more was deducted than they owe.

Getting it back: limited companies

A limited company does it through its payroll, not its Corporation Tax return. You send your Full Payment Submission (FPS) as usual, and an Employer Payment Summary (EPS) with the CIS deductions for the year to date. HMRC takes them off what the company owes. HMRC warns that using the Corporation Tax return for this can lead to a penalty.

Gross payment status

With gross payment status, contractors pay you in full and you pay all your tax at the end of the year. To get it you have to pass HMRC’s tests, which include paying tax on time in the past, running the business through a bank account and a minimum turnover. Check the current tests on GOV.UK before you apply.

How Mint Books helps

In Mint Books you invoice with the CIS deduction worked out on the labour, with materials kept separate. Mint Books tracks the tax taken off your pay through the year and carries it into your year-end figures, so the number for your tax return is already there. CIS is included in the Pro plan.

Bookkeeping for CIS subcontractors

Sources

• GOV.UK: What you must do as a CIS subcontractor

This guide is general information, not tax advice. If your situation is complicated, speak to an accountant.