CIS Tax Deduction Calculator UK 2025

The Construction Industry Scheme (CIS) is a HMRC scheme that requires contractors in the construction industry to deduct tax at source from payments made to subcontractors. The deducted tax is paid to HMRC and counts towards the subcontractors tax and National Insurance liability.

There are three CIS deduction rates: 20% for subcontractors who are registered with CIS, 30% for subcontractors who are not registered, and 0% for those with gross payment status. The deduction is applied to the labour element only, not to materials.

No. CIS deductions are only made on the labour element of a payment. If a subcontractor supplies materials as part of the work, the cost of those materials should be excluded from the amount subject to CIS deduction. Materials must be separately itemised on the invoice.

You can register for CIS online through your HMRC Government Gateway account or by calling the CIS helpline. You will need your UTR (Unique Taxpayer Reference) and National Insurance number. Registration reduces your deduction rate from 30% to 20%.

Gross payment status means no CIS deductions are made from your payments. To qualify, you must meet three tests: a business test (you run a construction business in the UK), a turnover test (your net construction turnover exceeds £30,000 per year or £30,000 per partner), and a compliance test (you have met all tax obligations on time).

A contractor must register for CIS if they pay subcontractors for construction work averaging more than £1 million per year over a three-year period, or if they are a construction business themselves. This includes developers, property companies, and government bodies.

CIS monthly returns must be submitted to HMRC by the 19th of each month. They cover the tax month (6th to 5th). Returns can be submitted online through HMRC or via payroll software. You must report all payments to subcontractors and any deductions made.

Yes. If you are a subcontractor who also employs people, CIS deductions suffered can be offset against your PAYE and NIC liabilities. If you are a sole trader or partner, the deductions are offset against your self-assessment tax bill. Any excess can be reclaimed from HMRC.

If you fail to verify a subcontractor with HMRC before making payment, you must apply the higher 30% deduction rate regardless of their registration status. Verification can be done online or by phone and confirms the correct deduction rate to apply.

CIS applies to most construction operations including building, civil engineering, demolition, repairs, decorating, and installation of heating, lighting, and power systems. It does not apply to professional services (architects, surveyors), delivery of materials, or work on your own home.