CIS · Subcontractors
CIS deductions: what subcontractors need to know (2026/27)
If you're on the tools and a contractor keeps taking a slice of your invoice before it lands, that's CIS — the Construction Industry Scheme. Here's what they're taking, why, and how you get the right amount of it back. With real numbers for 2026/27.
What CIS actually is
CIS isn't a tax bill — it's an advance payment towards one. Your contractor deducts money from each payment and sends it to HMRC. When you file your Self Assessment, those deductions count towards what you owe. If you've had more deducted than your bill comes to, HMRC pays the difference back.
The catch: the standard deduction is a blunt 20% of your labour charge — usually much more than your actual tax bill works out to. That's money sitting with HMRC that should be in your account.
The three rates
- 20% — you're registered with HMRC as a CIS subcontractor. The standard rate.
- 30% — you're not registered. Contractors must deduct 30% for unregistered subcontractors, and they don't have a choice about it.
- 0% — gross payment status. You apply for it separately; HMRC checks your turnover and your compliance record before approving.
Materials are never deducted — labour only
This is the one that costs subcontractors the most. The CIS deduction applies to labour only. Materials, plant hire and consumables are not CIS income and must not be deducted. VAT doesn't get deducted either, as long as it's properly separated on the invoice.
Worked example: one invoice, £2,400
You invoice a contractor £2,400: £1,500 labour + £900 materials.
| Scenario | Deduction | You receive |
|---|---|---|
| Registered, 20% on labour only (correct) | £300 | £2,100 |
| 20% deducted on the whole invoice (wrong) | £480 | £1,920 |
| Not registered, 30% on labour | £450 | £1,950 |
Get it wrong in the contractor's favour and you're £180 out of pocket per invoice — and you wait months for Self Assessment to hand it back. Splitting labour and materials on every invoice isn't paperwork for its own sake; it's pay.
How the money comes back
Keep every CIS payment statement your contractors give you — they're your evidence. Each one shows the gross payment, the deduction rate and amount.
At Self Assessment, your deductions are credited against your Income Tax and Class 4 NI bill. A rough illustration: if £4,000 was deducted across the year and your final bill works out at £1,800, HMRC refunds £2,200. The bigger your expenses (tools, mileage, phone, training), the smaller your bill — and the bigger that refund. Not sure what your bill will actually be? Our guide to how much to set aside for tax as a sole trader walks through it with numbers.
Subcontractor checklist
- Register as a CIS subcontractor at gov.uk (before your first job if you can).
- Give your contractor your details so they can verify you — the rate they deduct depends on it.
- Invoice labour and materials separately, every time.
- Keep every CIS payment statement.
- File your Self Assessment on time and claim the deductions back.
How Clok handles CIS
Clok's self-employed mode is built around exactly this:
- Add a Materials this period figure on your pay period card and Clok only applies the CIS deduction to labour — with a live "£X saved from CIS" preview.
- Your set-aside for HMRC updates the moment you log it, so you know what's genuinely yours.
- Log expenses against seven HMRC-allowable categories — including 45p-per-mile mileage — and your tax bill shrinks in real time.
- Send PDF invoices with labour and materials split out, and export a quarterly ZIP with totals and receipts your accountant can use for Self Assessment.
FAQ
Does CIS apply to materials?
No. The deduction is on labour only. Materials, plant hire and consumables pass through untouched.
What happens if I don't register?
Contractors must deduct 30% instead of 20%, backdated across your work with them. Registration is free and takes minutes.
Can I get paid gross?
Possibly. Gross payment status is applied for separately, and HMRC looks at your turnover and compliance record. Worth it if you're established.
I'm CIS-deducted but also have a PAYE job — does the CIS money still come back?
Yes. CIS deductions are advance payments towards your tax and NI bill whatever else you earn; everything reconciles on your Self Assessment.
How do I claim CIS deductions back?
Through your Self Assessment return, using your CIS payment statements as evidence. If deductions exceed your bill, HMRC refunds the difference.
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