CIS deduction rates: 20%, 30% and 0%
Under the Construction Industry Scheme (CIS), a contractor takes tax from a subcontractor's payment and sends it to HMRC. The rate depends on the subcontractor's status, which HMRC confirms when the contractor verifies them. The CIS tax is an advance payment towards the subcontractor's own Income Tax and National Insurance, or their company's tax bill. It is not an extra charge.
| Subcontractor status | Deduction | When it applies |
|---|---|---|
| Registered for CIS | 20% | The standard rate, once HMRC has matched the subcontractor |
| Not registered or unmatched | 30% | The subcontractor has not registered, or HMRC cannot match the details you gave when verifying them |
| Gross payment status | 0% | HMRC has granted gross payment status, so you pay in full and the subcontractor settles their own tax |
To get gross payment status, a subcontractor applies to HMRC and must show that it has paid its tax and National Insurance on time, does construction work in the UK and runs the business through a bank account. Its turnover for the last 12 months, ignoring VAT and the cost of materials, must be at least £30,000 for a sole trader. A partnership or company needs £30,000 for each partner or director, or at least £100,000 in total. A company controlled by 5 people or fewer needs £30,000 for each of them.
Sources: GOV.UK: make CIS deductions and pay subcontractors; GOV.UK: how to get gross payment status. Rates checked 9 November 2026.
What the CIS deduction is taken from
The deduction applies to the labour part of a payment for construction work. Start with the invoice total excluding VAT, then take out the costs that are not liable:
- Materials at the price the subcontractor paid for them. A markup on materials stays in the amount liable to deduction.
- VAT, which is never part of the CIS calculation.
- Plant hire, consumables and fuel that the subcontractor paid for to do the job. Plant only counts if it was hired from a third party, and fuel for travelling is not excluded.
- The CITB levy, where the subcontractor has agreed the contractor can withhold an amount for it.
What remains is liable, including travel and subsistence the contractor pays the subcontractor. Ask for invoices that list labour and materials separately. The contractor can ask for receipts. If the subcontractor has no evidence of what the materials cost, the contractor should estimate the cost. The calculator has no CITB line, so enter the labour figure net of any agreed levy amount.
Sources: GOV.UK: how to make a CIS deduction; HMRC CIS 340 guide, sections 3.12 to 3.14; HMRC manual CISR11100 on the CITB levy; HMRC manual CISR15080 on travel and subsistence.
A worked CIS deduction
A self-employed joiner invoices a main contractor for a month's first-fix work: £2,000 of labour, £600 of timber and fixings he bought for the job, and £150 for a scaffold tower he hired. The invoice comes to £2,750 before VAT. Only the £2,000 of labour is liable to the deduction.
| Subcontractor status | CIS deducted | Paid to the subcontractor |
|---|---|---|
| Registered · 20% | £400 | £2,350 |
| Not registered · 30% | £600 | £2,150 |
| Gross payment status · 0% | £0 | £2,750 |
If the joiner had charged the timber at £700 while it cost him £600, only £600 would come off. The deduction would then be worked out on £2,100. The contractor pays the deduction to HMRC and gives the joiner a payment and deduction statement, which he keeps as evidence for his tax return. VAT for this invoice is covered under the domestic reverse charge below.
CIS monthly returns and deadlines for contractors
CIS runs on tax months from the 6th of one month to the 5th of the next. For each tax month, a contractor must:
- Give each subcontractor a payment and deduction statement within 14 days of the end of the tax month, so by the 19th.
- File the monthly return to HMRC by the 19th, listing every subcontractor paid and the deductions taken.
- Pay the deductions to HMRC by the 22nd if you pay electronically, or by the 19th if you pay by post.
For example, deductions from payments made between 6 November and 5 December 2026 go on the return due by 19 December, and electronic payment is due by 22 December. If the 22nd falls on a weekend or bank holiday, an electronic payment must reach HMRC by the previous banking day.
From 6 April 2026, a contractor that paid no subcontractors in a tax month must again tell HMRC by the 19th, either by filing a nil return or by asking for its scheme to be made inactive for up to 6 months. A late monthly return gets a £100 penalty the day after the deadline, rising to £200 at 2 months late and to £300 or 5% of the CIS deductions on the return, whichever is higher, at 6 and 12 months. The calculator works out the tax month and statement date for an invoice. It does not file returns; use HMRC's CIS online service or CIS-capable software for that.
Sources: GOV.UK: file your CIS monthly returns; GOV.UK: pay CIS deductions to HMRC; HMRC CIS 340 guide on nil returns and inactivity and payment dates.
Verifying a subcontractor before you pay them
Before paying a new subcontractor, a contractor checks with HMRC that they are registered for CIS and which rate to apply. You need your own Unique Taxpayer Reference (UTR), accounts office reference and employer reference. For the subcontractor, you need their UTR plus their National Insurance number if they are a sole trader, or the company name and registration number if they are a limited company. The details must exactly match the ones they registered with. Verify through HMRC's free CIS online service or commercial CIS software, which you must use for more than 50 subcontractors.
You do not need to verify again if the subcontractor was on one of your monthly returns in the current or previous two tax years. If HMRC cannot match the details, it tells you to deduct at 30% and issues a verification number to record. Check the details with the subcontractor and verify again: if they are registered, a correct match normally moves them to 20%.
Sources: GOV.UK: verify subcontractors; HMRC CIS 340 guide on verification.
How subcontractors claim back CIS deductions
Sole traders and partners claim deductions on their Self Assessment tax return. Enter your total pay before deductions as income, and the total CIS deducted by contractors in the CIS deductions box. HMRC takes the deductions off the tax and National Insurance you owe, and repays any excess. Keep every payment and deduction statement, and ask the contractor for any that are missing.
Limited companies reclaim deductions through payroll. Alongside the monthly Full Payment Submission, the company sends an Employer Payment Summary (EPS) showing the CIS deductions suffered in the tax year to date. HMRC sets them against the PAYE and National Insurance the company owes, and unused deductions carry forward within the same tax year. Anything left after the tax year ends can be claimed as a refund. A refund during the year is only available in limited cases, such as when the company has stopped trading.
Making Tax Digital for Income Tax changes how sole traders over the income threshold keep records and send quarterly updates. It does not change the CIS rates. Our guide to MTD for Income Tax explains who is affected.
Sources: GOV.UK: pay tax and claim back CIS deductions; GOV.UK: CIS refunds for limited companies.
CIS and the VAT domestic reverse charge
The domestic reverse charge applies to standard- and reduced-rated construction services when the supplier and the customer are both VAT registered and the payment is reported under CIS. The subcontractor does not charge VAT. The invoice says the reverse charge applies, and the contractor accounts for the VAT on its own VAT return, where it can normally reclaim the same amount as input tax. The CIS deduction is unaffected because it never includes VAT.
In the worked example, if the joiner and the contractor are both VAT registered, the joiner's invoice shows no VAT and the contractor accounts for £550 (20% of £2,750) on its return. An end user is a VAT- and CIS-registered business that does not supply the construction work on to anyone else. Main contractors are not usually end users. If an end user has told its supplier in writing that it is one, the reverse charge does not apply: the joiner would charge £550 VAT as normal and be paid £2,900 after a 20% CIS deduction. Without that written notice, the reverse charge still applies. Work for a private householder is outside the reverse charge because the customer is not VAT registered.
Sources: GOV.UK: reverse charge for suppliers; GOV.UK: reverse charge for customers; GOV.UK: end users in the reverse charge technical guide.
What the calculator does and doesn't cover
The calculator works out one invoice at a time at 20%, 30% or 0%. It excludes materials, plant hire, consumables and site fuel, and gives the tax month and the date the statement is due. It does not verify subcontractors, file returns or decide whether work is within CIS. For other calculations, try the HMRC mileage claim calculator or browse the free tools.
Frequently asked questions
Is CIS deducted from VAT?
No. The CIS deduction is never taken from VAT. Work it out on the invoice total excluding VAT, then remove materials and the other excluded costs. Where the domestic reverse charge applies, the invoice shows no VAT at all and the contractor accounts for it on its own VAT return.
Is CIS taken off materials?
No, provided the amount is what the subcontractor actually paid for the materials used on the job. A markup on materials is not excluded, so the deduction applies to it. Only a subcontractor who paid for the materials directly can have them excluded. If they have no evidence of the cost, the contractor should estimate it.
How do I know whether to deduct 20%, 30% or nothing?
HMRC tells you when you verify the subcontractor. A registered subcontractor is normally deducted at 20%, an unregistered one at 30%, and a subcontractor with gross payment status is paid in full. Do not choose the rate from the subcontractor’s invoice alone.
Can I get CIS deductions back?
Yes, deductions count towards your tax rather than being an extra cost. Sole traders and partners claim them on their Self Assessment tax return. Limited companies set them against PAYE and National Insurance through an Employer Payment Summary each month, then claim a refund of anything left once the tax year has ended.
Is the PDF a valid payment and deduction statement?
The PDF shows the invoice lines, the tax month, the statement due date and the deduction. HMRC also requires a statement to show your name and employer tax reference, the subcontractor’s name and Unique Taxpayer Reference, and their verification number if they could not be verified and you deducted at the higher rate. Add those details before you send it. The calculator does not send anything to HMRC or file your monthly return.
Where is my calculation saved?
Nowhere. The calculator and the PDF run in your browser and there is no account or save function. Download the statement to keep your figures; reloading the page clears the invoice lines.