CIS For Subcontractors: Getting Paid the Right Way
Here's the second part in our blog series on the Construction Industry Scheme...
If you work in construction as a subcontractor, the Construction Industry Scheme (CIS) affects how you get paid. Instead of receiving the full invoice amount, contractors deduct tax before paying you. Here’s what you need to know to make sure you’re not losing out.
How CIS Works for Subcontractors
When you invoice a contractor for your work, they’re required to deduct tax at source and pass it to HMRC. This deduction counts as an advance payment towards your tax and National Insurance.
Mini example:
• You invoice £1,000.
• If you’re CIS registered: contractor deducts 20% (£200) → you receive £800.
• If you’re not registered: contractor deducts 30% (£300) → you receive £700.
Registering with HMRC ensures you keep more of your money up front.
Registering as a Subcontractor
You can register for CIS online with HMRC. It’s quick, and it makes a big difference:
• Registered subcontractors: Deductions at 20%.
• Unregistered subcontractors: Deductions at 30%.
For some subcontractors, it’s also possible to apply for gross payment status, meaning you’re paid in full with no deductions (but you’ll need to pay the tax at year-end).
Claiming Back Overpaid Tax
Because CIS deductions are advance payments, you may end up paying more tax than you owe. This usually happens if you’ve had a lot deducted but your expenses reduce your taxable profit.
Example:
You’ve had £5,000 deducted through CIS during the year, but after deducting tools, materials, and mileage, your tax bill comes to £3,800. You’ll reclaim £1,200 from HMRC.
Tip: File your self-assessment tax return early to get refunds quicker.
Subcontractor Responsibilities
Even though contractors make deductions, you still need to:
• Keep accurate records of your income and expenses.
• File your self-assessment tax return each year.
• Pay any remaining tax and National Insurance due.
Staying Organised
1. Keep all CIS deduction statements from your contractors—they’re proof of what’s been deducted.
2. Track your expenses as you go to reduce your taxable profit.
3. Work with an accountant to maximise what you reclaim.
Takeaway:
For subcontractors, CIS means you’ll see deductions from your payments—but with registration, good record-keeping, and a solid tax return, you can make sure you’re paid fairly and avoid overpaying tax.
Set Yourself up for Success
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Book your 30 minute discovery call today— enjoy a relaxed, no-obligation chat with one of our qualified accounting advisors. We can assess your situation and determine how to best serve and add value to your business.
Alternatively, you can send us a message with any queries (big or small), and one of our team members will get back to you promptly.
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