Construction industry payments to subcontractors
for sole traders

Construction industry payments to subcontractors is box 18 on the full self-employment pages. It is for the total you pay to subcontractors, or any person or company, for construction work. If you pay subcontractors for construction work, you are usually a contractor under the Construction Industry Scheme, and must register, verify them and make deductions from their payments.

What goes in this category

• Total payments to subcontractors for construction work, before CIS deductions.
• Labour and materials charged by subcontractors.
• Payments to companies and individuals for construction work.
• Payments to subcontractors with gross payment status.

What does not

• Payments for non-business work, which also go in box 33 if included.
• Your own employees’ wages, which go in box 19.
• Materials you buy yourself, which go in box 17.
• CIS deductions taken from your own income as a subcontractor.

Items in this category

Related items filed elsewhere

Contractors and subcontractors

Under the scheme, contractors deduct money from subcontractors' payments and pass it to HMRC as advance payments towards the subcontractors' tax and National Insurance. Many sole traders are both: a subcontractor to main contractors, and a contractor to their own subcontractors. Box 18 is about what you pay out.

Registering as a contractor

You must register as a contractor before you take on your first subcontractor. You also check whether the person should be employed instead, and verify each subcontractor with HMRC to find the right deduction rate. Getting employment status wrong can bring penalties.

Deduction rates

The standard deduction is 20% for registered subcontractors and 30% for those not registered. Subcontractors with gross payment status have no deduction. Deductions are made from the labour element of the payment, not from materials the subcontractor supplies.

Gross, not net

Box 18 is the total payment to subcontractors, before CIS deductions. The deductions you make are not an extra cost: they are part of what you owe the subcontractor, paid to HMRC on their behalf.

Monthly returns

Contractors file a monthly return to HMRC listing payments and deductions, even if the deductions are nil, and give subcontractors payment and deduction statements. Penalties apply for late returns, and they are not allowable.

If you are a subcontractor

If contractors deduct CIS from your payments, you declare your gross income, claim your expenses, and enter the total CIS deductions on your return so they count towards your tax. If too much was deducted, you get a refund after filing.

Domestic reverse charge VAT

If you and your subcontractors are VAT registered, many construction services are subject to the domestic reverse charge, where the customer accounts for the VAT instead of the supplier. It affects invoices and VAT returns, not the box 18 figure.

Deemed contractors

Businesses outside construction that spend more than £3 million on construction work in 12 months become deemed contractors and must also operate the scheme. That rarely affects sole traders.

Materials and the labour element

Deductions apply only to the labour part of a subcontractor's invoice. If the subcontractor supplies materials, the cost of those materials, and any VAT, is excluded from the amount the deduction is worked out on. Ask subcontractors to show materials separately on their invoices, and keep the invoices, because HMRC may ask you to show how you worked out the deduction.

Paying the deductions to HMRC

Deductions are paid to HMRC by the 22nd of the month after the tax month ends if you pay electronically, together with any PAYE for employees. They are not your money and not a cost, so keep them separate from your own funds. Late payment brings interest and penalties, which are not allowable.

Is CIS work allowable?

Payments to subcontractors for work on your customers' jobs are allowable business costs in the normal way. Payments for work on your own home are not, even if you run them through the scheme; if you include them, put the non-business part in box 33 so it is added back.

Records to keep

Keep subcontractor verification references, invoices, payment and deduction statements, and monthly return records. They show both the cost in box 18 and that deductions were correctly made. Keep them for at least three years after the end of the tax year they relate to.

Worked example: a builder with two subcontractors

A builder pays a plasterer £12,000 for labour, deducting 20% (£2,400) and paying her £9,600, and pays an electrician with gross payment status £8,000 including £2,000 of materials, with no deduction. Box 18 is £20,000, the total before deductions.

Four questions before a cost goes here

1. Was it for the business, and only for it? A cost must be incurred wholly and exclusively for the trade. A cost with a personal purpose that cannot be separated is not allowable at all.
2. Is part of it personal? Where a business part can be identified, such as business miles or business calls, claim that part on a reasonable basis and leave the rest out.
3. Is it a running cost or something you keep? Running costs belong in the expense categories. Things you keep are capital: an expense on the cash basis (except cars), capital allowances on traditional accounting.
4. Is there a specific rule? Some costs are disallowed whatever their purpose, such as fines and client entertaining, and some have their own treatment, such as cars, which always go through capital allowances.

Trading allowance or expenses

Instead of deducting expenses, a sole trader can claim the £1,000 trading allowance against trading income. You cannot claim both, so the allowance only helps when your allowable expenses are under £1,000. If your gross trading income is £1,000 or less, the allowance covers it and you may not need to register. Once your costs pass £1,000, deducting actual expenses gives the lower profit.

This category in Making Tax Digital

Under Making Tax Digital for Income Tax, each quarterly update carries your expenses in the same 15 categories as the full self-employment pages, so this category is one line of every update. Sole traders with qualifying income over £50,000 join from 6 April 2026, falling to £30,000 from April 2027 and £20,000 from April 2028. If your turnover is under £90,000 you can send one consolidated expenses figure instead of the categories, but you still keep the records behind it. The same £90,000 limit decides whether you can use the short self-employment pages (SA103S), which ask only for total allowable expenses.

Cash basis or traditional accounting

The cash basis, the default for sole traders and landlords since 2024/25, counts a cost in the tax year you pay it. Traditional (accruals) accounting counts it when you incur it, whenever you pay, and treats things you buy to keep as capital, relieved through capital allowances. For most costs in this category the only difference is timing; for anything you buy to keep, the basis decides whether it is an expense at all.

The disallowable column

The full self-employment pages have a second column of boxes (32 to 45) for disallowable expenses. If your accounts include something that is not allowable, such as the private share of a phone bill or client entertaining, you put the total cost in the expense box and the disallowable part in the matching box, so the tax calculation adds it back. The short pages (SA103S) simply ask for allowable expenses, so you leave the disallowable part out.

How much an allowable cost saves

Each pound of allowable expense saves a sole trader 26p at the basic rate (20% Income Tax plus 6% Class 4 National Insurance) and 42p at the higher rate, in England, Wales and Northern Ireland. Scottish Income Tax bands differ, and the sole trader tax calculator works out your own figure.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

Keep the invoice or receipt for every cost in this category, with a note of the business purpose wherever it is not obvious, and how you worked out the business share of anything also used privately. From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep digital records and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028.

Common mistakes

• Entering net payments after CIS deductions.
• Deducting CIS from the materials element.
• Not verifying subcontractors before paying them.

Every other category

The other 14 categories on the self-employment pages, in box order:

• Cost of goods sold, SA103F box 17
• Wages, salaries and other staff costs, SA103F box 19
• Car, van and travel expenses, SA103F box 20
• Rent, rates, power and insurance costs, SA103F box 21
• Repairs and maintenance of property and equipment, SA103F box 22
• Phone, stationery and other office costs, SA103F box 23
• Advertising costs, SA103F box 24
• Business entertainment, SA103F box 24, disallowed in box 39
• Interest on bank and other loans, SA103F box 25
• Bank, credit card and other financial charges, SA103F box 26
• Irrecoverable debts written off, SA103F box 27
• Accountancy, legal and other professional fees, SA103F box 28
• Depreciation and loss or profit on sale of assets, SA103F box 29, disallowed in box 44
• Other business expenses, SA103F box 30

The A to Z of expenses lists every item and all 23 categories: the 15 self-employment categories and the 8 for UK property.