CIS tax in construction: deductions and how to reclaim
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Quick answer: The Construction Industry Scheme (CIS) requires contractors to deduct 20% or 30% from subcontractor payments and pass it to HMRC. Subcontractors register for gross payment status to avoid deductions, or reclaim overpaid tax through Self Assessment.
If you work in construction as a subcontractor — plastering, plumbing, electrical, roofing, and many other trades — CIS affects how you are paid. Contractors deduct tax at source before paying you. Understanding CIS helps you minimise deductions and reclaim overpaid tax at the end of the tax year.
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Read the full work & self-employment guide →Primary source: www.gov.uk/what-is-the-construction-industry-scheme
How CIS deductions work
When a contractor pays you, they deduct CIS tax from the labour element of your invoice (not materials). Registered subcontractors lose 20%; unregistered ones lose 30%.
The contractor sends the deducted tax to HMRC and gives you a payment statement showing the gross amount, deduction, and net payment.
Registering and gross payment status
Register as a CIS subcontractor with HMRC before starting work. Registration reduces deductions from 30% to 20%.
Gross payment status means no deductions at all — you receive the full invoice amount and pay tax through Self Assessment. HMRC grants this if you have a good compliance history and meet turnover and tax return filing requirements.
Reclaiming overpaid CIS tax
CIS deductions are advance payments of Income Tax and NI. If total deductions exceed your actual tax liability for the year, you reclaim the difference through Self Assessment.
Many construction workers receive a tax refund because CIS deductions do not account for the personal allowance, business expenses, or other reliefs. File your Self Assessment promptly to get refunds quickly.
Common questions
Do I need to register for CIS?
If you work as a subcontractor in construction, register before you start. Unregistered subcontractors face 30% deductions instead of 20%.
Can CIS deductions exceed my actual tax bill?
Yes. CIS does not account for your personal allowance or expenses. Most subcontractors who file Self Assessment receive a refund.
Does CIS apply to all construction work?
No. CIS covers building, alteration, repair, and demolition work. It excludes architecture, surveying, carpet fitting, and delivering materials.