CIS Tax Deduction Calculator

What CIS deductions are

Under the Construction Industry Scheme, a contractor must deduct money from a subcontractor's payment and pay it to HMRC as an advance towards the subcontractor's own tax and National Insurance. The rate depends on the subcontractor's registration status: 20% if registered for CIS, 30% if not registered or not verified, and 0% if the subcontractor holds gross payment status.

Why materials are excluded

The deduction only applies to the labour element of a payment — the cost of materials the subcontractor has genuinely incurred is deducted from the gross payment first, and CIS tax is calculated on what's left. Enter the materials cost separately and this calculator does that split for you.

Registered vs unregistered vs gross

Registering for CIS as a subcontractor drops your deduction rate from 30% to 20% — worth doing even if you don't expect to apply for gross payment status. Gross payment status (0% deduction) is available to subcontractors who pass HMRC's turnover, compliance and business tests, meaning you're paid the full amount and settle your tax bill yourself through Self Assessment instead of it being withheld up front.

What happens to the money that's deducted

CIS deductions aren't a final tax — they're an advance payment. At the end of the tax year, a subcontractor totals up everything deducted across every contractor they worked for and sets it against their actual Income Tax and Class 4 NI bill on their Self Assessment return. If more was deducted than they owe, HMRC refunds the difference — this is the CIS refund most subcontractors are owed every year.

Getting the numbers right

The figure a contractor deducts should match the Payment and Deduction Statement (PDS) they're required to give you for every payment. Keeping every PDS is what lets you (or ac-co, filing on your behalf) add up the total CIS suffered correctly at year end — a missing statement is the single most common reason subcontractors under-claim their refund.

A worked example

A registered subcontractor invoices a contractor £2,000 for a job, of which £400 is materials they bought and can evidence. The labour element is £1,600. At the 20% CIS rate for a registered subcontractor, the deduction is £320, so the contractor pays out £1,680 net (£2,000 minus £320). If that subcontractor had been unregistered, the same job would have been deducted at 30% — £480 — for a net payment of £1,520 instead, a £160 difference on one invoice alone.

Common mistakes to avoid

The most frequent error is applying the CIS rate to the full gross payment instead of the labour element only — materials genuinely incurred should always be split out first. The second is subcontractors not registering for CIS at all and accepting the 30% rate indefinitely, when registering is free and drops the rate to 20% immediately. The third is losing Payment and Deduction Statements over the year, which makes it harder to prove the total CIS already suffered when the Self Assessment return is filed and a refund claimed.

Turning CIS deductions into a refund

Because CIS suffered is set against your actual Income Tax and Class 4 NI bill at year end, most subcontractors who've had tax deducted at 20% or 30% throughout the year are due a refund once allowable business expenses (tools, travel, materials not already netted off, protective equipment) are taken into account on their Self Assessment return — the deduction rate doesn't know about your expenses, only your gross labour income. ac-co's Self Assessment service totals every PDS and expense automatically to calculate the exact refund due.