If you work in construction as a subcontractor, the Construction Industry Scheme — CIS — affects how you get paid and how much tax you hand over. It confuses a lot of people, so here's the plain-English version.

What CIS actually is

CIS is a system HMRC uses to collect tax from people working in the construction industry. Under it, contractors deduct money from a subcontractor's pay and send it straight to HMRC as an advance towards that subcontractor's tax and National Insurance.

In other words: the contractor pays part of your money to the taxman before it ever reaches you.

How the deductions work

There are three possible deduction rates:

  • 20% — the standard rate for subcontractors registered under CIS
  • 30% — the higher rate, applied if you're not registered
  • 0% — "gross payment status", for established businesses that meet HMRC's criteria

The single easiest way to keep more of your money each month is simply to register for CIS — that drops you from 30% to 20% straight away.

💡 Quick tip: The CIS deduction is not an extra tax. It's money paid towards your eventual tax bill. If too much has been taken over the year, you get it back.

Getting your money back

Because CIS deductions are often more than you actually owe once your expenses are accounted for, most subcontractors are due a refund after filing their self-assessment tax return. Tools, travel, equipment, protective clothing and other allowable costs reduce your taxable profit — and the tax already deducted gets offset against the final bill.

This is exactly why keeping your receipts matters. Every legitimate expense you can prove is money back in your pocket.

Your responsibilities as a subcontractor

  • Register with HMRC as a CIS subcontractor
  • Keep records of all payments and deduction statements from contractors
  • File a self-assessment tax return each year
  • Keep receipts for anything you want to claim as an expense

The bottom line

CIS isn't something to fear — but if you don't stay on top of it, you either overpay tax or fall behind with HMRC. Getting registered, keeping clean records, and filing an accurate return is usually the difference between a refund and a headache.

Topics: CIS Subcontractors Tax