CIS Explained for Self Employed Builders UK — Plain English Guide 2026
If you’re a self employed builder working as a subcontractor, 20% or 30% of your pay is being deducted before it reaches you. That’s the Construction Industry Scheme. Most builders know it exists but don’t fully understand how it works, what changed in April 2026, or how to make sure they’re not overpaying. This guide explains everything in plain English.
What CIS actually is
CIS is an HMRC scheme that applies to anyone working in construction as a self employed subcontractor. When a contractor pays you for work, they don’t pay you the full amount. They deduct tax first and send it straight to HMRC on your behalf.
Think of it like PAYE for self employed builders — except you’re still self employed, you still file a self assessment tax return, and the deductions are just advance payments towards your tax bill. They’re not an extra tax. They’re your tax, taken early.
The deduction rates
| Your CIS status | Deduction rate | What it means |
|---|---|---|
| Registered subcontractor | 20% | Standard rate — you’ve registered with HMRC |
| Not registered | 30% | Higher rate — register to drop this to 20% |
| Gross payment status | 0% | No deduction — you must meet strict criteria |
The deduction applies only to the labour portion of your invoice. Materials, equipment hire, and other direct costs are paid in full without any deduction. This is important — if you’re not separating materials on your invoices, the contractor may be deducting 20% from the entire amount, meaning you’re overpaying.
Always itemise materials separately on your invoices. If you don’t, the contractor is legally required to treat the whole payment as labour and deduct CIS from the full amount.
How to register
You register as a CIS subcontractor with HMRC — this is separate from registering for self assessment (you need both). You can register online at gov.uk or by calling the CIS helpline. You’ll need your National Insurance number and your UTR (Unique Taxpayer Reference).
Once registered, your deduction rate drops from 30% to 20%. If you’re currently unregistered and having 30% deducted, registering is the single quickest way to improve your cash flow.
Gross payment status — getting paid in full
If you meet certain criteria, you can apply for gross payment status, which means contractors pay you the full amount with no deduction. The requirements include a minimum turnover (£30,000 for sole traders), a clean tax compliance record, and passing HMRC’s other eligibility tests.
From April 2026, HMRC has stronger powers to immediately remove gross payment status if they believe a business was knowingly part of a tax-fraudulent supply chain. This hasn’t changed the rules for honest builders, but it does mean HMRC is paying closer attention.
How CIS deductions work at tax time
When you file your self assessment tax return, you report your gross income — the full amount you invoiced, not the amount you received after deductions. You then enter the total CIS deductions in box 38 (short form) or box 81 (full form).
HMRC calculates your actual tax liability and offsets the CIS deductions against it. If the deductions exceed what you owe, you get a refund. Many builders are owed money by HMRC and don’t realise it because they never filed a return or didn’t enter their CIS deductions correctly.
Keep every payment and deduction statement (PDS) your contractors give you. You’ll need these to prove how much CIS was deducted. Contractors are required to provide them within 14 days of the end of each tax month.
What changed in April 2026
Making Tax Digital: From April 2026, self employed builders earning over £50,000 must submit quarterly digital records to HMRC instead of one annual return. Your CIS deductions still work the same way, but you’ll need MTD-compatible software to submit quarterly.
Nil returns: Contractors must now file nil returns for months when they don’t use subcontractors, or notify HMRC in advance. This doesn’t affect you as a subcontractor, but it means contractors are under tighter scrutiny.
Mileage rate: The HMRC approved mileage rate increased from 45p to 55p per mile. If you drive your own van to sites, this is a significant increase in your claimable expenses — reducing your taxable profit and potentially increasing your CIS refund.
Common mistakes builders make with CIS
Not registering: If you’re having 30% deducted instead of 20%, you’re giving HMRC 50% more than necessary as advance tax. Register and drop to 20% immediately.
Not filing a tax return: CIS deductions are advance payments. Without a tax return, HMRC keeps the money and you never get the overpayment back. Even if you think you owe nothing, file the return to trigger the refund.
Not separating materials on invoices: If your invoice shows one lump sum, the contractor deducts CIS from the entire amount including materials. Always list materials separately.
Not claiming expenses: Your CIS deduction is calculated on your gross invoice amount, but your actual tax is calculated on your profit (income minus expenses). If you’re not claiming your allowable expenses — tools, mileage, skip hire, insurance, CSCS card — your tax liability is higher than it needs to be, and your CIS refund is smaller.
The bottom line
CIS isn’t complicated once you understand it. Register as a subcontractor (20% rate), separate materials on every invoice, keep all your deduction statements, claim every allowable expense, and file your tax return on time. Many builders are owed hundreds or even thousands in CIS overpayments — the only way to get that money back is to file a return with your deductions and expenses entered correctly.
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