When CIS applies
CIS covers most construction work done in the UK — including site preparation, repairs, decorating and demolition. It applies when a contractor pays a subcontractor for construction work. If you're self-employed and doing labour for a builder or main contractor, you're almost certainly inside the scheme.
Work for a homeowner directly (domestic work) is outside CIS — you invoice and get paid in full as normal.
The deduction rates
How much the contractor deducts from the labour part of your pay depends on your status with HMRC:
- Registered subcontractors — 20% deduction from labour (materials and VAT are excluded).
- Not registered — 30% deduction, so register with HMRC before your first CIS job.
- Gross payment status — 0% deduction; you receive the full amount and settle your own tax. You need to apply and meet HMRC's turnover, compliance and business tests.
What to show on your invoices
Your invoice should separate labour from materials clearly, because CIS deductions only apply to the labour element. A typical CIS invoice shows: labour charge, materials (with receipts where possible), the CIS deduction the contractor will make, and the net amount you expect to be paid.
Keep every invoice and every payment statement the contractor sends you. Contractors must give you a written statement each month showing what they paid and what they deducted — you need these to reclaim deductions against your tax bill.
Claiming deductions back
CIS deductions are not an extra tax — they're advance payments towards your Self Assessment bill. If too much was deducted over the year, you claim the difference back through your tax return. Sole traders do this on their Self Assessment; limited companies offset deductions against their PAYE bill.
The single biggest reason tradespeople lose out is missing paperwork. If you can't prove the deductions, you can't claim them.
Put it into practice
Do this in minutes with the Invoices tool
Split labour and materials on every invoice, record the CIS deduction, and keep a searchable record of everything you've billed — so reclaiming at year end takes minutes, not days.
Sources & further reading
Common questions
- Do I charge VAT on top of CIS deductions?
- If you're VAT registered, yes — you charge VAT on the full invoice amount as normal, and the CIS deduction is calculated on the labour element excluding VAT. The two schemes operate independently.
- Does CIS apply to materials I supply?
- No. CIS deductions apply only to the labour element of your invoice, plus certain expenses. Keep materials clearly itemised so the contractor deducts from the right figure.
- What if the contractor never gives me a payment statement?
- Chase it in writing — contractors are legally required to provide one each month. If they refuse, report it to HMRC's CIS helpline, because you need the statements to reclaim your deductions.
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