The Construction Industry Scheme, explained for subcontractors.
Why contractors take money off your invoices, how much they can take, how to get it back, and how to get paid in full.
Last checked 5 November 2026 against GOV.UK. General information, not tax advice; check with HMRC or your accountant.
Tax taken before you're paid.
Under CIS, a contractor who pays you for construction work takes a deduction from your invoice and pays it to HMRC for you. It's an advance on your tax and National Insurance, not an extra tax. You get it back against your tax bill, or as a refund if too much was taken.
CIS covers most construction work: building, alterations, repairs, decorating, demolition, and installing heating, lighting and power systems. It applies when you work for a contractor, not when you work directly for a homeowner.
| Your CIS status | Deduction from labour |
|---|---|
| Registered for CIS | 20% |
| Not registered | 30% |
| Gross payment status | Nothing taken (0%) |
Labour only, never materials.
Show materials separately
The deduction is worked out on your labour only. Materials you bought for the job, plant hire and VAT are left out. List them on separate lines so the contractor doesn't take tax off them.
Example
Invoice: labour £2,000, materials £800. Registered at 20%: the contractor deducts £400 and pays you £2,400. The £400 goes to HMRC in your name.
Keep your statements
The contractor must give you a monthly statement of what they deducted. Keep them all: you need them for your tax return.
How deductions come off your bill.
Sole traders and partners
Put your CIS deductions on your Self Assessment return. They count towards your tax and Class 4 National Insurance. If more was taken than you owe, HMRC refunds the difference.
Limited companies
Deductions are set against what the company owes through its payroll (PAYE) each month, and any extra can be reclaimed from HMRC.
Register to pay less
If you haven't registered as a subcontractor, you lose 30% instead of 20%. Registering is free on GOV.UK; sole traders need their Unique Taxpayer Reference (UTR).
Get paid in full.
With gross payment status, contractors pay you in full and you pay your tax yourself at the end of the year. You apply to HMRC, and you need to pass three tests:
| Test | What you need |
|---|---|
| Business test | Construction work in the UK, run through a business bank account. |
| Turnover test | Sole trader: at least £30,000 of construction turnover in the last 12 months, not counting VAT and materials. Partnerships and companies: £30,000 per partner or director, or £100,000 for the business. |
| Compliance test | Tax returns filed and tax paid on time over the last 12 months. Since April 2024 this includes VAT. |
HMRC checks every year and can remove the status if you fall behind, and immediately if it suspects fraud.
Reverse charge and the 2026 changes.
Domestic reverse charge (VAT)
If you're VAT registered and work for a VAT-registered contractor who isn't the end customer, you don't charge them VAT on CIS work. Your invoice says the reverse charge applies, and the contractor accounts for the VAT instead.
April 2026 changes
The changes from 6 April 2026 are mostly for contractors: nil returns are back for months with no payments, and payments to some public bodies are outside CIS. Deduction rates didn't change.
Contractors' deadlines
Contractors file a monthly return by the 19th of the month after each tax month (which ends on the 5th), and send your statement by the same date.
CIS and reverse charge, worked out for you.
Tick "Building firms take CIS off what they pay me" in Settings, add your rate and UTR, and mark which customers take CIS. Their invoices show materials at cost, the CIS taken off your labour and the amount to pay, with the VAT reverse charge applied if you're both VAT registered. You can switch it off for a one-off job. Mark paid fills in what you should receive, and your CIS total for the tax year is ready to download for your tax return. It's optional and on every plan. How the accounts side works
CIS questions
Does CIS apply if I work for a homeowner?
No. CIS applies when you work for a contractor. A homeowner having work done on their own home isn't a contractor under CIS.
Is the deduction an extra tax?
No. It's an advance payment towards your own tax and National Insurance, and you get any overpayment back.
Why was 30% taken instead of 20%?
Usually because the contractor couldn't verify you as registered. Register on GOV.UK and give the contractor your details.
Can a contractor deduct from my materials?
No. Deductions are on labour only. Show materials separately on your invoice, and keep the receipts.