What Is the Construction Industry Scheme (CIS)?

The Construction Industry Scheme (CIS) is a UK tax system designed to make sure taxes are collected correctly from payments made to subcontractors in the construction sector. It helps HM Revenue and Customs (HMRC) keep track of income and ensures everyone pays the right amount of tax.

Under this system, contractors must deduct a portion of the payment from subcontractors’ earnings before sending it to HMRC. These deductions count as advance payments toward the subcontractor’s tax and National Insurance.

When a contractor pays a subcontractor, they must:

• Verify the subcontractor’s details with HMRC
  
• Deduct the correct CIS tax rate from the labour payment
  
• Send the deducted amount to HMRC by the 19th of each month
  
• Give the subcontractor a monthly payment and deduction statement
  

If you work in construction  as a contractor or subcontractor  the CIS Tax Calculator UK can help you quickly estimate how much tax you’ll pay or how much you might get back at the end of the tax year.

How the CIS System Works

Under the CIS system, when a contractor pays a subcontractor for construction work, they must deduct tax from the payment before sending it to the subcontractor. The amount deducted depends on whether the subcontractor is registered with CIS and what their HMRC verification status is.

These deductions are then paid directly to HMRC by the contractor. They count as advance payments toward the subcontractor’s tax and National Insurance. At the end of the tax year, subcontractors can offset these payments against their total tax bill — and in many cases, claim a refund if they’ve overpaid.

Responsibilities of a Contractor

If you are a contractor under CIS, there are several key responsibilities you must follow to stay compliant:

1. Verify the Subcontractor with HMRC
   Before making a payment, contractors must verify the subcontractor’s CIS status through HMRC’s online system. This helps determine whether deductions should be made at 20%, 30%, or if no deduction is required.
2. Deduct the Correct CIS Rate
   Contractors must apply the correct deduction rate to the labour portion of the payment.
   • 20% for registered subcontractors
   • 30% for unregistered subcontractors
   • 0% (gross payment) if the subcontractor qualifies to receive full payments without deductions
3. Send Deductions to HMRC
   Contractors are required to send the deducted tax to HMRC by the 19th of each month following the end of the tax month (which runs from the 6th to the 5th).
4. Provide a Monthly Statement
   Every month, contractors must give subcontractors a CIS payment and deduction statement showing the amount paid, deductions made, and what has been sent to HMRC on their behalf.

Failing to follow these steps can lead to penalties and interest charges, so keeping accurate records is essential.

Subcontractors Under CIS

As a subcontractor, the deductions made by your contractor act as advance payments toward your Income Tax and National Insurance.

At the end of the tax year, you’ll need to submit a Self Assessment tax return, declaring all your income and CIS deductions. HMRC will then calculate how much tax you actually owe — and if you’ve overpaid, you’ll receive a CIS tax refund.

Subcontractors can check their expected deductions or refunds in advance using a CIS Tax Calculator UK, which provides an instant estimate based on your income, expenses, and deduction rate.

How to Use a CIS Tax Calculator UK

The CIS Tax Calculator UK is a simple online tool designed to help both contractors and subcontractors estimate CIS tax deductions accurately.

Here’s how it works:

1. Enter Your Gross Income
   Add the total amount you’ve earned before deductions.
2. Choose Your CIS Tax Rate
   Select your current deduction rate (20% or 30%). If you’re on gross payment status, you can select 0%.
3. Include Your Expenses
   Add details about allowable expenses, such as materials, tools, fuel, insurance, or uniform costs.
4. Get Your Estimated Take-Home Pay or Refund
   The calculator instantly shows your net income after CIS deductions and an estimate of your potential refund at the end of the tax year.

Using a CIS calculator regularly can help you stay on top of your finances, plan for tax payments, and avoid surprises at the end of the year.

Understanding CIS Tax Rates: 20%, 30%, and Gross Payment

The CIS deduction rate depends on your registration status:

• 20% Rate (Registered Subcontractors)
  You’re registered with CIS and verified by HMRC. The contractor deducts 20% from your labour payments.
• 30% Rate (Unregistered Subcontractors)
  You haven’t registered with CIS. HMRC instructs contractors to deduct 30% from your payments — meaning you’ll take home less cash.
• 0% Rate (Gross Payment Status)
  If you meet certain turnover and compliance conditions, HMRC can approve you for gross payment status, allowing you to receive payments in full without any CIS deductions.

👉 If you’re currently paying 30%, registering for CIS can save you thousands of pounds per year and improve your cash flow.

Benefits of Using the CIS Tax Calculator UK

Using a CIS Tax Calculator isn’t just about estimating deductions — it’s about financial control and better planning. Here’s how it helps:

• Accurate tax estimates for contractors and subcontractors
• Quick CIS refund calculation for overpaid taxes
• Clear breakdown of income, deductions, and take-home pay
• Better cash flow planning throughout the year
• Helps with record-keeping and compliance with HMRC rules

By using the calculator, you can make more informed decisions and avoid underpayment or overpayment issues.

Material Costs and CIS Deductions

Under CIS rules, only labour costs are subject to deductions. Material costs — such as bricks, cement, tools, or plant hire — are excluded from CIS tax calculations.

For example:
If a subcontractor bills £2,000, including £500 for materials, CIS deductions apply only to the £1,500 labour portion.

This is another reason why using a detailed calculator or proper invoicing system is crucial — it helps separate material and labour costs correctly to avoid over-deduction.

Staying Compliant with CIS

Whether you’re a contractor or a subcontractor, staying compliant with CIS rules is key to avoiding penalties and maintaining good financial standing. Always remember to:

• Keep accurate records of payments and deductions
• File monthly CIS returns on time (by the 19th of each month)
• Provide statements to subcontractors
• Register or verify your CIS status with HMRC
• Use digital tools like a CIS calculator to stay organized

Mastering CIS Tax the Smart Way

The Construction Industry Scheme (CIS) doesn’t have to be complicated. With the right understanding and tools, you can stay compliant, maximize your take-The Construction Industry Scheme doesn’t have to be confusing. With the right approach and tools, you can take control of your tax and stay compliant.

Using the CIS Tax Calculator UK, you can:

• Calculate CIS deductions quickly and accurately
  
• Understand the difference between 20% and 30% tax rates
  
• Make the most of material exemptions to reduce deductions
  
• Stay on top of monthly filing requirements
  
• Use CIS strategically for smarter tax planning
  

If you’re a subcontractor paying 30%, registering properly for CIS could save you thousands of pounds each year. Try our calculator to see exactly how much you could reclaim and make sure you’re not overpaying.