If you work as a subcontractor in the construction industry, you've probably noticed that a chunk of your pay is already deducted before it reaches you — that's the Construction Industry Scheme (CIS) at work. It's not a separate tax on top of Income Tax; it's tax being collected in advance, which then gets reconciled when you file your Self Assessment return.
What CIS actually is
Under CIS, contractors are required to deduct money from a subcontractor's pay and send it directly to HMRC, as an advance payment towards that subcontractor's eventual Income Tax and National Insurance bill. The subcontractor still needs to file a Self Assessment return at the end of the tax year — CIS deductions don't replace that requirement, they just mean some of the tax is already paid upfront.
What rate gets deducted?
There are three possible deduction rates:
- 20% — the standard rate, if you're registered with HMRC as a CIS subcontractor
- 30% — applied if you're not registered for CIS, or if HMRC can't verify your details
- 0% — "gross payment status", available to subcontractors who meet certain turnover and compliance criteria, meaning no deduction is taken at all and you handle all your tax through Self Assessment directly
Registering for CIS (rather than letting deductions default to 30%) is almost always worth doing — it's a straightforward one-off registration with HMRC and immediately drops your deduction rate to 20%.
Why you almost always get money back
The 20% (or 30%) CIS deduction is calculated on your gross pay, before any of your business expenses are taken into account. But your actual tax bill is calculated on your profit — income minus allowable expenses. Because of this, most CIS subcontractors have paid in more tax through deductions than they actually owe once expenses are factored in, and end up due a refund.
What counts as an allowable expense
Common CIS subcontractor expenses include:
- Tools and equipment
- Protective clothing and safety gear required for the work
- Vehicle costs for travel between job sites (not your regular commute to one fixed workplace)
- Materials you've paid for yourself
- Public liability insurance
- Accountancy or filing costs
How the refund actually happens
When you file your Self Assessment return, you declare your total CIS income and the CIS deductions already taken (shown on the payment and deduction statements your contractors are required to give you). Your final tax calculation compares what you actually owe against what's already been deducted — if you've overpaid, HMRC pays back the difference, usually within a few weeks of your return being processed.
Keep your CIS statements
Every contractor you work for is legally required to give you a payment and deduction statement each time they pay you — keep these. They're what confirms exactly how much was deducted and by whom, and they're what your Self Assessment return relies on to get the CIS figures right.
The bottom line
CIS deductions aren't the end of your tax obligations — they're a prepayment towards them. Filing your Self Assessment return properly, with your real expenses claimed, is usually how CIS subcontractors get money back rather than owing more.