New to CIS? A Complete Guide for Subcontractors in the UK Construction Industry

If you've just started working as a CIS subcontractor and feel like everyone's speaking a different language — you're not alone. The Construction Industry Scheme (CIS) has a lot of moving parts, and when you're new, it's easy to feel overwhelmed.

This guide breaks down everything you need to know about CIS in plain English: what it is, how to register, how deductions work, what records to keep, and how to make sure you're not overpaying (or underpaying) HMRC.

What Is the Construction Industry Scheme (CIS)?

CIS is a tax scheme run by HMRC that applies specifically to the construction industry in the UK. Under CIS, contractors deduct money from subcontractors' payments and send it directly to HMRC as an advance payment towards the subcontractor's tax and National Insurance.

The idea is simple: construction has historically had a high rate of tax evasion and cash-in-hand work. CIS makes sure tax gets collected at the point of payment, rather than relying on subcontractors to set aside the money themselves.

If you work in construction as a subcontractor — whether you're a bricklayer, carpenter, plumber, electrician, groundworker, scaffolder, plasterer, or any other trade — CIS likely applies to you.

Who Counts as a Subcontractor Under CIS?

A subcontractor is anyone who does construction work for a contractor. This includes:

1. Sole traders and self-employed individuals
2. Partnerships
3. Limited companies
4. Agencies supplying construction workers

Even if you sometimes work as a contractor yourself (paying other subcontractors), you're still a subcontractor when you work for someone else above the threshold.

Construction work covered by CIS includes a wide range of activities: building, alterations, repairs, decoration, demolition, site preparation, and installation work on construction sites. Not all construction-adjacent work is covered — for example, delivering materials, architecture, surveying, and scaffolding hire (without erection) are generally outside CIS.

If you're unsure whether your specific work falls under CIS, check HMRC's detailed guidance or speak to an accountant who understands construction.

How to Register as a CIS Subcontractor

Registration is free and done directly with HMRC. Here's how:

Step 1: Get a UTR Number

You need a Unique Taxpayer Reference (UTR) number. If you've already registered for Self Assessment, you'll have one. If not, register for Self Assessment first — HMRC will send you a UTR by post (usually within 10 working days).

Step 2: Register for CIS Online

Once you have your UTR, register as a CIS subcontractor through your Government Gateway account at gov.uk. You'll need:

1. Your UTR number
2. Your National Insurance number
3. Your business name (if different from your personal name)
4. Your business address and contact details

Step 3: Verify with HMRC

After registering, HMRC will verify your details. Once verified, your contractor can check your CIS status and confirm the correct deduction rate.

Step 4: Keep Your Confirmation

HMRC will send confirmation of your CIS registration. Keep this safe — you'll need your UTR for invoices, tax returns and communications with HMRC.

How CIS Deductions Work

This is the part that confuses most people new to CIS. Here's how it actually works:

When a contractor pays you, they deduct a percentage of your pay (excluding VAT and the cost of materials) and send it to HMRC. The deduction rates are:

1. 20% if you're registered as a subcontractor (gross status or net status)
2. 30% if you're not registered for CIS

The key thing to understand: these deductions are not your final tax bill. They're advance payments towards your tax and National Insurance for the year.

Worked Example: What Happens When You Invoice a Contractor

Let's say you're a bricklayer working for a contractor. You agree a day rate of £200. Here's exactly what happens:

1. You do the work and send an invoice

You complete a day's work and send the contractor an invoice for £200 (labour only, no materials).

Your invoice should include:

1. Your name or business name
2. Your UTR number
3. The contractor's name and address
4. A description of the work done
5. The date of the work
6. The amount: £200

2. The contractor calculates the CIS deduction

The contractor checks your CIS registration with HMRC. You're registered, so the deduction rate is 20%.

The contractor calculates:

1. Gross amount (labour): £200
2. CIS deduction (20% of £200): £40
3. Amount paid to you: £160
4. Amount sent to HMRC: £40

3. You receive payment

You get £160 in your bank account — not the full £200. The £40 that was deducted has gone straight to HMRC on your behalf.

4. The contractor gives you a payment and deduction statement

The contractor must give you a statement showing:

1. Gross amount: £200
2. CIS deduction: £40
3. Amount paid: £160

Keep this statement — it's your proof that £40 was sent to HMRC for you.

5. What happens at tax year end

Over a year, say you work 220 days at £200/day. Your gross income is £44,000. Total CIS deductions: £8,800.

But your actual tax bill depends on your profit, not your gross income. Say you have £12,000 in allowable expenses (van, fuel, tools, insurance, training, etc.).

1. Gross income: £44,000
2. Allowable expenses: £12,000
3. Taxable profit: £32,000
4. Income Tax + National Insurance on £32,000 (2024/25 rates): approximately £6,400

You've already had £8,800 deducted through CIS. Your actual tax bill is around £6,400 — so HMRC owes you a refund of approximately £2,400.

That refund comes back to you when you file your Self Assessment. This is why keeping records of every CIS deduction matters — you need to prove what was deducted to get the money back.

What if you're not registered for CIS?

Same £200 day rate, but the deduction jumps to 30%:

1. Gross amount: £200
2. CIS deduction (30%): £60
3. Amount paid to you: £140
4. Amount sent to HMRC: £60

Over 220 days, that's £13,200 deducted instead of £8,800 — an extra £4,400 out of your pocket until you reclaim it at tax year end. This is why registering before you start work matters.

What if you have gross payment status?

Same £200 day rate, but no deductions:

1. Gross amount: £200
2. CIS deduction: £0
3. Amount paid to you: £200

You receive the full amount every time. But you're responsible for setting aside your own tax — HMRC won't be collecting it for you. If you don't save enough, you'll face a big tax bill (and possible penalties) at year end.

What about materials?

CIS deductions apply to your labour only, not the cost of materials. If you invoice £200 labour + £80 materials:

1. Gross labour: £200
2. Materials (no CIS deduction): £80
3. CIS deduction (20% of £200): £40
4. Amount paid to you: £240 (£160 labour + £80 materials)
5. Amount sent to HMRC: £40

Gross Payment Status

If you pass certain tests (business tests, compliance tests and turnover tests), you can register for gross payment status. This means the contractor pays you in full with no deductions. You're then responsible for setting aside your own tax and paying it through Self Assessment.

Gross status is valuable — it improves your cash flow significantly — but HMRC reviews it regularly and can remove it if you fall behind on tax returns or payments.

Net Payment Status (20% Deduction)

Most registered subcontractors fall here. The contractor deducts 20% and sends it to HMRC. You claim this back (or offset it against your tax bill) when you file your Self Assessment.

Unregistered (30% Deduction)

If you haven't registered for CIS, contractors must deduct 30% — a significant hit. This is why registering as soon as you start is so important.

How to Claim Back Overpaid CIS Deductions

Here's the part many new subcontractors miss: at the end of the tax year, you file your Self Assessment tax return. On that return, you report:

1. Your total income from all sources
2. Your allowable business expenses
3. The total CIS deductions that contractors have made

Your actual tax bill is calculated based on your profit (income minus expenses). If the CIS deductions total more than your actual tax liability, HMRC refunds the difference. If the deductions are less than your tax liability, you pay the balance.

This is why keeping good records matters — you need to know exactly how much was deducted to claim it correctly.

What Records Should a CIS Subcontractor Keep?

Under CIS rules and for Self Assessment, you should keep:

1. All payslips or payment statements from contractors (showing gross amount, materials, and CIS deduction)
2. Receipts for all business expenses (tools, fuel, materials, workwear, training)
3. Mileage logs if you travel between sites
4. Invoices you've issued to contractors
5. Bank statements (ideally a separate business account)
6. Your UTR number and CIS registration details
7. Any CIS deduction statements (contractors must give you these)

Keep these records for at least five years after the 31 January submission deadline for that tax year.

Do You Need an Accountant as a CIS Subcontractor?

This was the question from a recent community discussion — a new CIS subcontractor feeling overwhelmed and wanting someone to explain things clearly.

The honest answer: you don't legally need an accountant for CIS. But many subcontractors benefit from one, especially in your first year, because:

1. They ensure your expenses are claimed properly — maximising your tax refund
2. They handle your Self Assessment and make sure CIS deductions are claimed correctly
3. They explain how CIS interacts with VAT, National Insurance, and other tax obligations
4. They help you plan for your tax bill so there are no surprises
5. They can assist with applying for gross payment status when you're eligible
6. They give you peace of mind so you can focus on the work

When choosing an accountant, look for someone who:

1. Has experience with construction and CIS specifically
2. Offers fixed-fee pricing (not hourly rates that escalate)
3. Explains things in plain English — if they can't, they're not the right fit
4. Is responsive when you have questions
5. Is registered with a professional body (ACCA, ICAEW, AAT)

A good accountant should save you more in tax than they cost in fees. If you're new to CIS, even one year of professional help can be worth it while you learn the system.

How Invoice Hero Helps CIS Subcontractors

Invoice Hero supports your CIS workflow by:

1. Creating professional invoices that include your UTR number
2. Tracking all income from every contractor in one place
3. Recording expenses by category — making Self Assessment and CIS reconciliation easier
4. Tracking tax-year income so you can see how much you've earned and how much CIS has been deducted
5. Exporting data to share with your accountant
6. Automatic VAT calculations if you're VAT-registered
7. Client management — store all your contractor details and payment records

With Invoice Hero handling your invoicing and income tracking, you (or your accountant) have clean, organised records at tax return time. Try Invoice Hero free at invoicehero.co.uk/register

CIS for Subcontractors — Quick Start Checklist

1. Register for Self Assessment and get your UTR number
2. Register as a CIS subcontractor with HMRC
3. Give your UTR number to every contractor you work for
4. Keep every payslip and CIS deduction statement
5. Keep receipts for all business expenses
6. Open a separate business bank account
7. Consider whether gross payment status is right for you
8. File your Self Assessment by 31 January each year
9. Claim all CIS deductions on your tax return
10. Consider hiring an accountant, especially in your first year

Common CIS Questions from New Subcontractors

I just started — do I need to register for CIS immediately? Yes, register as soon as you know you'll be working as a subcontractor. If you don't register, contractors must deduct 30% instead of 20%, which is a significant hit to your income.

Can I claim expenses as a CIS subcontractor? Yes. CIS deductions are made on your gross income, but when you file your Self Assessment, you deduct allowable business expenses to calculate your actual profit. Tools, materials, fuel, workwear, training and other legitimate business costs are deductible.

What's the difference between CIS and Self Assessment? CIS is the deduction mechanism — contractors deduct money and send it to HMRC. Self Assessment is where you finalise your tax for the year, claim expenses, and either pay more or get a refund based on what was deducted through CIS.

Do I need to be VAT-registered for CIS? No. CIS and VAT are separate. You may need to register for VAT separately if your turnover exceeds the VAT threshold. Check current HMRC guidance for the latest threshold.

What if I work for multiple contractors? Each contractor deducts CIS from your payments independently. At year-end, your Self Assessment totals all CIS deductions from all contractors. Keep records from every contractor.

Can I get gross payment status as a new subcontractor? Gross status requires passing business, compliance and turnover tests. New subcontractors may not meet the turnover test initially. As your business grows and you build a clean compliance record, you can apply.

How do I know how much CIS has been deducted? Every contractor must give you a payment and deduction statement showing the gross amount, materials cost (if any), and CIS deduction. Keep these — they're your proof for your tax return.

This article provides general information about the Construction Industry Scheme. Tax rules change, and your circumstances may be different. Always check current HMRC guidance at gov.uk or speak to a qualified accountant.