CIS Explained: What UK Subcontractors Need to Know

What is CIS and why does it matter?

The Construction Industry Scheme is a tax deduction system that applies to payments from contractors to subcontractors in the construction industry. If you're a subcontractor, your contractor deducts tax from your payments and sends it to HMRC on your behalf. Think of it as PAYE for the self-employed in construction.

Who does CIS apply to?

CIS applies to all construction work in the UK, including building, decorating, repairs, demolition, civil engineering, and installing heating, lighting, and ventilation systems. It does not apply to architecture, surveying, or professional consultancy.

The deduction rates

If you're registered with CIS: 20% is deducted from the labour portion of your invoice. If you're not registered: 30% is deducted. If you have gross payment status (rare, requires a track record of compliance): 0% is deducted. Registration is free and straightforward — there's no good reason not to register.

How to invoice correctly under CIS

Your invoice must separate labour from materials. CIS deductions only apply to labour. Materials, equipment hire, fuel, and VAT are all exempt. Show the gross labour amount, the CIS deduction, and the net payment clearly. This is where most subcontractors get confused, and it's exactly the problem UteQuote solves — just describe the job, and the AI separates labour from materials automatically.

Getting your deductions back

CIS deductions are advance payments of your income tax. When you file your Self Assessment tax return, the total CIS deductions for the year are offset against your tax bill. If the deductions exceed your tax liability, you get a refund. Keep every payment and deduction statement your contractor gives you — these are your proof.