What is CIS tax?
Where a link is marked *, it is a partner link — we receive commission at no extra cost to you. Links without a * earn us nothing. How we make money.
In short: Tax deducted at source from payments to subcontractors in the construction industry. Contractors register with HMRC, verify subcontractors, and deduct 20% (registered) or 30% (unregistered) unless the subcontractor has gross payment status.
Last reviewed:
Reviewed by Kaiser Khan
The Construction Industry Scheme (CIS) requires contractors to deduct tax from payments to subcontractors for construction work — not employees on PAYE, but self-employed tradespeople, partnerships, and companies doing qualifying work.
Before paying, the contractor verifies the subcontractor with HMRC. Registered subcontractors have 20% deducted from the labour element of each payment; unregistered ones face 30%. Materials costs and VAT are excluded from the deduction. The contractor pays the deducted tax to HMRC monthly.
Subcontractors treat CIS deductions as advance tax paid. Sole traders and partners offset them against their Self Assessment bill; companies against Corporation Tax or PAYE. If too much was deducted, HMRC refunds the difference after the year-end return.
Subcontractors with a strong compliance record can apply for gross payment status so no tax is deducted — they then pay all tax through Self Assessment or Corporation Tax themselves. Registration, monthly returns, and record-keeping are mandatory for both contractors and subcontractors in the scheme.
Primary source: gov.uk/what-is-the-construction-industry-scheme
Part of our Benefits & tax
This quick answer sits inside our wider benefits & tax hub — with sub-guides, calculators and step-by-step explainers on the same topic.
Read the full benefits & tax guide →