CIS for self-employed subcontractors: a simple guide

What is the Construction Industry Scheme?

The Construction Industry Scheme (CIS) is a HMRC tax scheme that governs how payments are made between contractors and subcontractors in the UK construction industry. Under CIS, contractors deduct money from their subcontractor payments and pass it directly to HMRC as an advance payment towards the subcontractor's tax and National Insurance.

CIS applies to a wide range of construction work — not just housebuilding. Plumbing, electrical work, heating, roofing, groundwork, decorating, and more all fall within its scope when the work is on construction or civil engineering projects.

Who does CIS apply to?

CIS applies when:

• A contractor (a business that pays subcontractors for construction work) hires a subcontractor
• The work is construction, alteration, repair, extension, demolition, or dismantling

If you work directly for homeowners (not through a contractor), CIS typically does not apply. CIS is primarily relevant when you work as a subie for a larger contractor or main contractor.

How deductions work

When a CIS contractor pays you, they will deduct tax at source from your payment before sending it. The rate depends on your registration status:

• Registered subcontractor: 20% deduction on labour (not materials)
• Unregistered subcontractor: 30% deduction — a significant penalty for not registering
• Gross payment status: No deduction — you must apply to HMRC for this and meet conditions including a good compliance history

Important: deductions only apply to the labour element of your invoice. Materials, plant hire, and VAT are not subject to CIS deduction. Always separate labour and materials clearly on your invoices to ensure you're only being deducted on the correct amount.

How to register as a CIS subcontractor

Register at gov.uk or call HMRC's CIS helpline on 0300 200 3210. You'll need your Unique Taxpayer Reference (UTR) and National Insurance number. Registration takes a few days to process. Once registered, contractors can verify you with HMRC and apply the correct 20% deduction rather than the 30% unregistered rate.

Monthly statements from contractors

Each month, your contractor must provide you with a CIS deduction statement showing the gross amount, the deduction made, and the net payment. Keep these statements carefully — they are your evidence when offsetting the deductions against your tax bill at Self Assessment time.

Offsetting CIS deductions

The money deducted under CIS is not a separate tax — it is an advance payment of your Income Tax and Class 4 NI bill. When you complete your Self Assessment tax return, you enter the total CIS deductions made during the year, and HMRC offsets them against what you owe. If your deductions exceed your tax bill, HMRC refunds the difference — which is why timely CIS registration and Self Assessment filing is genuinely worth the effort.