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CIS deductions, explained simply

If you work as a subcontractor in construction, your contractor is usually required to deduct money from your payments and pass it to HMRC. It isn't an extra tax — it's an advance payment towards your bill — but it changes what you invoice and what lands in your account.

Who it applies to

The Construction Industry Scheme covers most construction work in the UK — building, alterations, repairs, demolition, installation of systems, and similar. If you're a subcontractor paid by a contractor for that kind of work, CIS almost certainly applies.

Register as a subcontractor before you start invoicing. Registration is what determines your deduction rate.

The deduction rates

That 10-point gap between registered and unregistered is the single strongest reason to register before your first job.

  • 20% — the standard rate for registered subcontractors
  • 30% — for subcontractors who aren't registered, or can't be verified
  • 0% — gross payment status, for those who qualify and apply successfully

What the deduction is taken from

The deduction applies to the labour element of your invoice. It does not apply to materials you supply, to VAT, or to certain plant hire and consumables.

This is why itemising matters: an invoice that separates labour from materials shows exactly what should be deducted from. A single lump sum invites over-deduction, and you'll be waiting until your tax return to recover it.

How it appears on your paperwork

You invoice the full amount for labour and materials as normal. The contractor deducts the CIS amount from the labour portion when paying you, and must give you a payment and deduction statement — keep every one, because that's your evidence of tax already paid.

At the end of the year those deductions are set against your income tax and National Insurance. If too much was deducted, you're due a refund.

Invoice with labour and materials split

Separate line items so the deductible labour element is obvious to your contractor.

Make a invoice — free

Common questions

Is CIS an extra tax?
No. It's an advance payment towards the income tax and National Insurance you'd owe anyway, deducted at source and reconciled through your tax return.
Should I still send an invoice under CIS?
Yes — invoice the full amount and let the contractor apply the deduction. Splitting labour and materials clearly is essential.
Do I charge VAT as well as having CIS deducted?
If you're VAT registered, VAT is handled separately and CIS is never deducted from the VAT. Where the domestic reverse charge applies, you don't charge VAT at all.

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General information for UK businesses, not legal, tax or accounting advice. Rules and thresholds change — check GOV.UK or speak to a qualified professional for your situation.