CIS Tax Calculator
Updated November 2026 · Free · No sign-up
Calculate CIS tax deductions for UK construction subcontractors — the 20%/30% deduction on labour (not materials), what lands in your bank, and the refund most subbies are owed every April.
Quick answer: CIS deduction = 20% of the labour element (30% if unverified/unregistered; 0% with gross payment status). Materials are excluded. A £3,000 invoice with £500 materials → 20% × £2,500 = £500 deducted, £2,500 paid. Deductions are advance tax — most subcontractors reclaim at year-end.
How CIS Works
Under the Construction Industry Scheme, contractors deduct tax from subcontractors' labour payments and pass it to HMRC as advance income tax. The three rates: 20% (registered), 30% (unregistered or verification failed — register, it takes minutes), 0% (gross payment status for established businesses meeting turnover/compliance tests). Materials at cost, plant hire, and VAT are excluded from the deduction base.
Worked Examples
Example 1 — standard. £3,000 invoice, £500 materials: deduction = 20% × £2,500 = £500 → paid £2,500; the £500 sits with HMRC against your year-end bill.
Example 2 — the 30% penalty for not registering. Same invoice unregistered: £750 deducted — £250 more per invoice for skipping a free registration.
Example 3 — the April refund. A typical sole-trader subbie on £45,000 labour: CIS deducted £9,000; actual tax+Class 4 NI after expenses ≈ £7,100 → ~£1,900 refund. CIS over-collects for almost everyone with real expenses — file early, refunds arrive within weeks.
CIS Essentials
| Item | Rule |
|---|---|
| Covers | Construction operations (building, alteration, repair, demolition, site prep) — not professional-only work (architecture, surveying) |
| Statements | Contractors must issue monthly CIS deduction statements — KEEP every one; they are your refund evidence |
| Materials | Deducted at actual cost with evidence — marking up materials shifts the markup into taxable labour |
| VAT | Domestic reverse charge applies between CIS businesses — most sub-to-contractor invoices carry no VAT charge |
| Limited companies | Offset CIS suffered against PAYE/NI liabilities in-year via EPS — don't wait for April |
Getting Gross Payment Status (0%)
The tests: construction turnover ≥£30,000 (sole trader; £30k/director or £100k for companies), clean compliance (returns and payments on time), and a business bank account. Worth it for cash flow once turnover justifies — reviewed annually, lost on compliance slips. Until then, price the 20% into your cash-flow planning: the rate-setting math applies with CIS as a timing cost, not a true cost.
Refund Mechanics
- Sole traders: CIS deductions enter your Self Assessment as tax already paid — overpayment refunds after filing (file in April, not January, to get money back fast).
- Companies: offset against payroll liabilities monthly; residual reclaimed after year-end via the CIS repayment process.
- Common refund killers: missing deduction statements, contractor reported wrong UTR, cash-in-hand jobs breaking the paper trail.
Frequently Asked Questions
How much tax is deducted under CIS?
20% of the labour element for registered subcontractors, 30% if unregistered, 0% with gross payment status. Materials at cost are excluded.
Are materials included in CIS deductions?
No — materials at documented cost, plant hire, and VAT are excluded; the deduction applies to labour only.
Why did I get a CIS refund?
CIS takes 20% of labour with no allowance for your personal allowance or expenses — actual tax is usually lower, so the excess refunds after Self Assessment.
How do I stop 30% deductions?
Register for CIS as a subcontractor (free, online) and give contractors your correct UTR for verification — the rate drops to 20% immediately.
What is gross payment status?
0% deduction for businesses passing turnover (£30k+/trader), compliance, and bank tests — you handle all tax through returns instead.
Do limited companies reclaim CIS differently?
Yes — offset CIS suffered against the company's PAYE/NI each month via EPS, then reclaim any balance after year-end.
✓ Formula verified • Last updated: November 3, 2026