On this page8 sections
20%
Deducted from registered subcontractors
30%
Deducted if you are not registered
0%
With gross payment status
The Construction Industry Scheme is one of the few parts of UK tax that systematically overcharges by design. It is not a fault. It is what happens when you take a flat percentage off turnover to secure tax that is actually charged on profit. Every allowable expense you incur widens the gap, and the gap is your refund.
This guide shows exactly how the arithmetic works, with a full 2026/27 worked example, and covers the mistakes that leave subcontractors either underclaiming or paying someone a fee for the privilege.
All figures are estimates on published 2026/27 rates for a rest of UK taxpayer. Confirm your own position with HMRC.
- CIS deduction
- An amount a contractor takes from a subcontractor's payment and pays to HMRC. HMRC states these deductions 'count as advance payments towards the subcontractor's tax and National Insurance bill'. They are not a final tax, and they are calculated on labour rather than on the whole invoice.
The rates, and what they come off
HMRC sets three CIS deduction rates:
- 20% for registered subcontractors
- 30% for unregistered subcontractors
- 0% if the subcontractor has 'gross payment' status
The 10 point difference between registered and unregistered is the cheapest money in construction. Registering costs nothing and immediately improves your cash flow by a third of your deduction. HMRC's own framing on the subcontractor page is blunt: "If you do not register for the scheme, contractors must deduct 30% from your payments instead."
Just as important is what the percentage is applied to. HMRC's instruction to contractors is to start with the gross invoice and take away what the subcontractor paid for:
- VAT
- equipment which is now unusable, described as consumable stores
- fuel used, except for travelling
- equipment hired for the job, or plant hire
- manufacturing or prefabricating materials
- materials, but only if the subcontractor paid for them directly
Only what remains is subject to the deduction. If your invoices lump materials in with labour and you do not itemise them, you are handing over 20% of your materials cost as well as your labour, and waiting a year to get it back.
“Itemise materials on every invoice. It is the single highest-value five minutes in a subcontractor's admin, and it is entirely within your control.”
Where the refund comes from
Your CIS deductions are an advance payment against a bill calculated later, on entirely different figures.
| What CIS is charged on | What your tax is charged on |
|---|---|
| Labour element of your invoices | Profit, after all allowable expenses |
| No Personal Allowance applied | First £12,570 taxed at 0% |
| Flat 20% or 30% | 20% band, then 40%, then 45% |
| No account of Class 4 thresholds | Class 4 NI only above £12,570 |
The Personal Allowance alone is worth £2,514 of tax at basic rate, and CIS gives you none of it during the year. Add ordinary business expenses and the overcharge compounds.
A full worked example, 2026/27
Dan is a registered subcontractor. Over the tax year he invoices £45,000, of which £6,000 was materials he bought and paid for directly. His other allowable business expenses come to £5,500: van running costs, tools, public liability insurance, phone and accountancy.
Step 1: what was deducted.
The contractor excludes the £6,000 of materials, so the deduction applies to £39,000 of labour.
£39,000 x 20% = £7,800 deducted across the year
Step 2: what he actually owes.
| Line | Amount |
|---|---|
| Turnover | £45,000 |
| Less materials | (£6,000) |
| Less other allowable expenses | (£5,500) |
| Taxable profit | £33,500 |
| Personal Allowance | £12,570 |
| Income taxed at 20% | £20,930 |
| Income tax due | £4,186 |
| Class 4 NI at 6% on £20,930 | £1,256 |
| Total tax and NI due | £5,442 |
Step 3: the refund.
£7,800 deducted, £5,442 due. Estimated repayment: £2,358.
Now run the same year unregistered. The deduction becomes 30% of £39,000, or £11,700, against the same £5,442 bill. The estimated repayment jumps to £6,258, which sounds better and is not: that is £6,258 of Dan's working capital sitting with HMRC for up to a year.
The four mistakes that cost real money
1. Not registering. 30% instead of 20%, for nothing.
2. Not itemising materials. Every pound of materials inside the labour figure is 20p handed over unnecessarily and reclaimed a year later.
3. Underclaiming expenses. The refund is driven by profit, so every legitimate expense you leave off increases your bill. Tools, protective equipment you bought yourself, van costs or mileage, site travel, phone, insurance, accountancy and trade subscriptions all count where they are genuinely for the business. Our guide to allowable expenses covers what qualifies.
4. Filing late. No return, no refund. The repayment is produced by the return, so a late return is a late refund plus penalties. See MTD deadlines and penalties.
How to claim it
There is no P800 and nothing automatic. HMRC states that if you are registered for Self Assessment your bill "will be adjusted automatically if you've underpaid or overpaid tax" and you "will not get a tax calculation letter". The adjustment happens when you file.
- Collect your payment and deduction statements. Contractors must give you one "within 14 days of the end of each tax month". These are your evidence of what was deducted, and reconciling them against your invoices is the step most likely to find a missing month.
- Total your CIS deductions for the year and check the total against your own records rather than trusting one side of it.
- Total your turnover and every allowable expense.
- File your Self Assessment return, entering the CIS deductions in the appropriate box so they credit against the bill.
- Request the repayment from your Self Assessment account once the return is processed.
HMRC publishes a check when you can expect a reply tool, updated weekly and covering both Self Assessment and CIS, which is the reliable way to see how long processing is currently taking. Our guide to how long a tax rebate takes sets out the timings for every other route.
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Start freeGross payment status, and whether to want it
Gross payment status means contractors pay you in full with no deduction, and you settle the whole bill through Self Assessment. It transforms your cash flow and removes the annual refund entirely.
The trade-off is discipline. Money that used to be withheld at source is now yours to hold until January, and the bill still arrives. For a subcontractor with steady record-keeping and a habit of setting tax aside, it is clearly better. For one who relies on the deduction as enforced saving, the refund model has a hidden virtue.
Should you pay someone to claim it?
CIS is the case where a refund company has the strongest argument, because the claim requires a Self Assessment return rather than a form. It is also where the fees are largest. RIFT publishes a fixed fee of £354 including VAT for a CIS claim that includes filing a tax return, rather than its 36% PAYE rate.
Weigh that against filing the return yourself, or against an accountant's fee for the same work, which is itself an allowable expense that reduces next year's bill. Our guide to refund companies and their fees sets out the wider picture, including the 2023 rule changes that made nominations cancellable.
One thing changing for subcontractors
Making Tax Digital for Income Tax began in April 2026 for sole traders and landlords with qualifying income over £50,000, with lower thresholds following in 2027 and 2028. Qualifying income is gross, before expenses, so it is your invoiced turnover that counts, not your profit. A subcontractor invoicing £55,000 and taking home far less is in scope.
In practice that means digital records and quarterly updates rather than one annual return. It also means your expenses get recorded as you go, which is exactly the discipline that makes a CIS refund bigger. Our guides to MTD for sole traders and quarterly submissions cover who is in scope and what changes.
If you also have PAYE employment alongside your subcontracting, that side can be overpaying too. Check your code with our free tax code checker, see am I due a tax rebate? for the ten common triggers, and use the full reclaim guide to work the whole four-year window.
File your MTD quarterly updates in minutes
TapTax imports your bank statements, categorises expenses automatically, and submits to HMRC with a tap. Free plan, no card required.
Start freePeople also ask
How much CIS tax do you get back?
It depends on your expenses, not on your turnover. CIS deducts 20% of your labour, or 30% if you are not registered, before any expenses. Your actual bill is income tax and Class 4 National Insurance on your profit after all allowable expenses, with the first £12,570 covered by the Personal Allowance. In the worked example above, a subcontractor invoicing £45,000 with £11,500 of materials and expenses had £7,800 deducted against a real bill of £5,442, giving an estimated repayment of £2,358. The larger your genuine expenses, the larger the gap.
How do I claim a CIS tax refund?
Through your Self Assessment return, not through a P800. Collect the payment and deduction statements your contractors must give you within 14 days of the end of each tax month, total your CIS deductions for the year, total your turnover and allowable expenses, file the return with the CIS deductions entered so they credit against your bill, then request the repayment from your Self Assessment account. HMRC never issues a tax calculation letter to anyone registered for Self Assessment, so nothing happens until you file.
Is CIS deducted from materials?
It should not be. HMRC instructs contractors to start with the gross invoice and take away VAT, consumable stores, fuel used other than for travelling, plant hire, prefabricating or manufacturing materials, and materials the subcontractor paid for directly, then apply the percentage to what is left. Contractors can ask for evidence such as receipts, and will estimate the materials cost if you cannot supply any. If your invoices do not itemise materials separately, you are effectively lending HMRC 20% of your materials cost until you file.
What is the difference between 20% and 30% CIS?
Registration. HMRC sets the CIS deduction rates at 20% for registered subcontractors, 30% for unregistered subcontractors, and 0% for those with gross payment status. Registering is free and immediately improves your cash flow by a third of the amount withheld. Being on 30% does not mean you pay more tax overall, because the excess comes back through your Self Assessment return, but it means a substantially larger share of your working capital sits with HMRC for up to a year before it does.
How long does a CIS refund take?
There is no single published figure, because the repayment follows your Self Assessment return through processing rather than the fast P800 route. HMRC publishes a "check when you can expect a reply" tool, updated weekly, that covers both Self Assessment and Construction Industry Scheme queries, and that is the reliable place to see current timings. The part you control matters more: the repayment cannot start until the return is filed, so filing early rather than in January is the single biggest thing that moves the date forward.