CIS deductions, explained for subcontractors
Does MTD apply to you yet?If you subcontract in construction, contractors hold back a slice of your labour pay before it reaches you. Under the Construction Industry Scheme that's 20% if you're registered, 30% if you're not, and 0% with gross payment status. The money isn't lost: deductions are advance payments towards your tax and National Insurance, and they come off your Self Assessment bill at the end of the year, often producing a refund.
The three rates
| Status | Deduction from labour |
|---|---|
| Registered subcontractor | 20% |
| Unregistered | 30% |
| Gross payment status | 0% (you're paid in full and settle it all at Self Assessment) |
Labour only, never materials
Before working out the deduction, the contractor must take away what you've paid for VAT, materials, plant hire, consumable stores, and fuel other than for travelling. The percentage applies only to what's left, essentially your labour.
Worked example: you invoice £1,200, made up of £1,000 labour and £200 materials. A registered subcontractor has 20% of £1,000 withheld, so £200. You receive £1,000, and the £200 goes to HMRC against your name.
The statements matter
Every deduction must come with a statement from the contractor. Those bits of paper are your proof of tax already paid, and the year's stack is what gets your money back at return time. Keep all of them, photograph them, lose none.
How it comes back at Self Assessment
On your return you record your invoices in full as income, and the year's CIS deductions in their own field. HMRC works out the real bill, with your Personal Allowance and expenses finally in the picture, and takes off everything already withheld. Deducted more than you owe, and the difference is refunded.
One more effect worth knowing: CIS deductions count as tax collected at source, so they also shrink any payments on account, often to nothing. The flat 20% off your labour all year quietly does your instalments for you.
Quick answers
I'm being deducted 30%. Why?
That's the unregistered rate. Registering as a subcontractor under CIS brings it down to 20%. Same work, a third less withheld.
Do my materials get deducted too?
No. The contractor takes materials, VAT, plant hire and consumables off the invoice first, and the percentage only applies to what's left, your labour.
Will I get a refund?
Often, yes. Deductions are taken from labour at a flat rate with no Personal Allowance or expenses factored in, so many subcontractors have paid more through the year than their final bill.
What if a contractor doesn't give me a statement?
They're required to provide one for every deduction. Chase it, and keep every one you get: they're your proof of tax already paid.
Get all of this handled for you
Snap receipts as you get them. Drive like you always do. Invoice from your phone. SoleTax turns all of it into MTD-ready digital records, and shows the tax building as you go. 14 days free, no card needed.
Join the betaSources: HMRC's CIS 340 guide and gov.uk CIS deduction rates and subcontractor guidance. Checked on 4 July 2026.