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CIS deductions, explained in plain English.

A free CIS guide for subcontractors in the drylining and interior fitout trades.

This four-page quick reference covers the three CIS deduction rates, how to register, how gross payment status works, and how to get back what's been deducted from your pay.

It also covers what changes when you start paying subcontractors of your own, plus the key dates and HMRC links you need.

WHAT YOU'LL GET

Four pages. Plain English. Free.

The three deduction rates

0%, 20% or 30%, and what decides which one comes off your invoices.

Gross payment status

Who qualifies, what HMRC checks, and how to apply to get paid in full.

Getting your deductions back

How CIS deductions count against your tax, whether you're a sole trader or a limited company.

This is a plain-English reference, not tax advice. For your own situation, check with HMRC or your accountant.

How much is the CIS deduction?

There are three rates. Which one comes off your payments depends on your status with HMRC:

  • 20% if you're registered for CIS

  • 30% if you're not registered

  • 0% if you have gross payment status

The deductions aren't lost. They count as advance payments towards your tax and National Insurance, and you get any overpayment back at the end of the year.

How to calculate a CIS deduction

The deduction comes off the labour part of your invoice, not the whole amount. The contractor works it out like this:

  1. Start with the total of your invoice.

  2. Take off the VAT.

  3. Take off the materials you paid for yourself, plus any plant hire, consumables, and fuel other than for travelling.

  4. Apply your rate (20%, 30% or 0%) to what's left.

  5. Pay you the invoice total less the deduction.

Worked example

A drylining invoice for £3,000 before VAT: £2,400 labour and £600 of board, stud and fixings that you bought yourself.

  • Amount the deduction applies to: £3,000 - £600 = £2,400

  • Deduction at 20%: £2,400 x 0.20 = £480

  • You're paid: £3,000 - £480 = £2,520, plus any VAT due

If you weren't registered, the deduction at 30% would be £720 and you'd be paid £2,280. With gross payment status, there's no deduction and you're paid the full £3,000.

Show your materials on the invoice

The contractor can only take off materials you can show you paid for. They can ask for receipts, and if there's no evidence, they have to estimate. So list materials as a separate line on every invoice and keep your supplier receipts. The line items on our drylining quote template let you price materials as their own lines from the start.

Getting your CIS deductions back

Sole traders and partners: put your gross earnings and your total CIS deductions on your Self Assessment tax return. HMRC works out your tax, takes off what's already been deducted, and refunds anything you've overpaid.

Limited companies: claim through your company's payroll. Show the year-to-date CIS deductions on your Employer Payment Summary, and HMRC offsets them against what the company owes in PAYE and other payroll taxes. Anything left at the end of the tax year can be claimed back. HMRC says not to use your Corporation Tax return for this.

Gross payment status

With gross payment status, contractors pay you in full and you pay your tax yourself.

To qualify, you need to:

  • have paid your tax and National Insurance on time in the past

  • do construction work, or supply labour for it, in the UK

  • run your business through a bank account

  • have a turnover of at least £30,000 over the last 12 months, not counting VAT and the cost of materials

For a partnership or company, the turnover test is £30,000 for each partner or director, or £100,000 for the business as a whole. If a company is controlled by five people or fewer, it's £30,000 for each of them.

Get the free CIS quick reference

Our four-page CIS guide puts all of this on paper: the rates, registering, gross payment status, getting your deductions back, what changes when you start paying subcontractors yourself, and the key dates and HMRC links.

Common questions

Is CIS deducted from materials?

No. The deduction only applies to labour. Materials you paid for, VAT, plant hire and some other costs come off first. Keep receipts, because the contractor can ask for them.

Why is 30% being deducted?

Because the contractor's check with HMRC shows you as not registered for CIS, or HMRC couldn't match your details. Register as a CIS subcontractor, or check your name and UTR match what HMRC holds, and the rate drops to 20%.

Can I get a CIS tax rebate?

If more has been deducted than you owe in tax and National Insurance, yes. Sole traders get it back through Self Assessment. Limited companies offset it through payroll and can claim back what's left after the tax year ends.

Do I have to register for CIS?

If you're a subcontractor, you don't have to, but if you don't, contractors deduct 30% from your payments in place of 20%.

This is a plain-English reference, not tax advice. For your own situation, check with HMRC or your accountant.

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