CIS Subcontractor Tax Calculator

Under the Construction Industry Scheme (CIS), contractors must deduct tax at source from payments made to subcontractors for construction operations. The standard deduction rate is 20% and applies to the labour element of each payment. Material costs that the subcontractor has incurred are excluded from the deduction, provided the subcontractor provides evidence such as supplier invoices. The contractor then pays the withheld amount to HMRC on behalf of the subcontractor.

Subcontractors can apply for gross payment status (0% deduction) if they meet HMRC's turnover, compliance, and business tests. Unverified subcontractors—those not registered with HMRC under CIS or whose details cannot be confirmed—face a higher 30% deduction rate. Contractors must verify each new subcontractor with HMRC before making the first payment, using the online verification service.

Contractors file monthly CIS returns by the 19th of each month, reporting all payments made to subcontractors and the deductions applied. Subcontractors offset their CIS deductions against their Self Assessment or Corporation Tax liability at the end of the year. If total CIS deductions exceed the tax owed, the subcontractor receives a refund. Accurate record-keeping of gross payment amounts, material deductions, and CIS deductions is mandatory for both parties.

What is CIS (Construction Industry Scheme)? HMRC scheme for contractors and subcontractors in UK construction. Contractors must verify subcontractors' status with HMRC and deduct tax at source from payments. Three tax rates: 0% gross payment status (subcontractor met conditions); 20% standard deduction (most subcontractors); 30% deduction (unregistered subcontractors). Deductions go to HMRC against subcontractor's eventual tax bill. CIS applies to: builders, plumbers, electricians, demolition, civil engineering, decorating.

Who's a contractor and who's a subcontractor? Contractor: business paying others for construction work, OR business spending £3M+/year on construction in any 12-month period. Subcontractor: business performing construction work for a contractor. Many businesses are BOTH (deemed contractor + subcontractor). Mainstream contractors (construction businesses): always register. Deemed contractors (non-construction businesses spending £3M+ on construction): also register. Subcontractors register independently.

Registration and gross payment status (GPS). Subcontractor registers via gov.uk CIS service. Standard 20% deduction applies unless qualifying for Gross Payment Status. GPS criteria: turnover £30,000+/year (sole trader); £100,000+ partnership/limited company; clean compliance history (filed returns and paid tax on time for 12+ months); pass 'business test' (genuine independent business). GPS holders receive payments without deduction — pay tax via Self Assessment/CT in normal way. Removed if compliance lapses.

Verification process. Before each new contract, contractor must verify subcontractor with HMRC. Phone HMRC or use CIS online service. HMRC confirms tax treatment: 0%, 20%, or 30%. Contractor records: UTR (Unique Taxpayer Reference) and verification number. Issue: payment and deduction statement to subcontractor each month (similar to payslip). Monthly CIS return to HMRC: list of all payments and deductions, due 19th of following month. Late returns: £100 per month escalating.

CIS reclaims and Self Assessment. Subcontractor on 20% CIS: tax over-paid throughout year (real liability typically lower after expenses, personal allowance). Reclaim via Self Assessment (sole trader) or CT600 (limited company). Annual reconciliation. Sample £40k turnover sole trader subcontractor: CIS deductions £8,000; allowable expenses £8,000 → £32k profit; tax due £4,886; refund due £3,114. Limited company subcontractor: monthly CIS deductions offset against PAYE/CT bill quarterly. Cash flow critical — keep meticulous records of CIS deductions to recover at year-end.