CIS deduction calculator

If you are a subcontractor in the building trade, the Construction Industry Scheme (CIS) decides how much of your payment the contractor hands to you and how much they hold back for HMRC. This calculator works out that deduction and the amount you will actually be paid. Here is how the scheme works and what the numbers mean.

How CIS deductions work

Under CIS, a contractor takes a slice of what they owe a subcontractor for construction work and pays it straight to HMRC. That money is not an extra tax. It counts as an advance payment towards your Income Tax and National Insurance, so you are really paying some of your tax bill early, through the contractor.

The important detail is what the deduction is worked out on. It applies to the labour part of the payment only. The cost of any materials you supplied is taken off first, and the whole thing is calculated on the amount excluding VAT.

The three CIS rates

How much is deducted depends on your status with HMRC.

The jump from 20% to 30% is the reason it almost always pays to register. On a big labour bill, that ten points is a serious chunk of your cashflow tied up until your tax is sorted.

What the deduction applies to

Two things are kept out of the CIS calculation:

• Materials. Genuine materials you paid for and supplied are deducted before the rate is applied, so they are paid to you in full.
• VAT. CIS is worked out on the net, ex-VAT figure. VAT is handled under its own rules.

So the sum is simply: deduction = labour × rate, and you are paid the invoice total minus that deduction.

A worked example

Take a registered subcontractor invoicing £2,000 of labour and £500 of materials, all excluding VAT.

The £400 goes to HMRC in your name. Unregistered, the same job would lose £600, and only materials would come through untouched.

Getting the deductions back

You do not lose the deducted money. As a sole trader, you record your CIS deductions on your Self Assessment tax return, and they are set against the Income Tax and National Insurance you owe. If more has been deducted than you owe, HMRC refunds the difference. Limited companies reclaim through their payroll scheme instead. Either way, keep every CIS deduction statement the contractor gives you, because that is your proof.

CIS and VAT are not the same thing

It is easy to mix these up. CIS is about deducting advance tax from labour. VAT is a separate tax on the value of the work. On top of that, many VAT-registered construction subcontractors fall under the VAT domestic reverse charge, where you do not add VAT to your invoice and the contractor accounts for it instead. If you are VAT-registered, work out the VAT side with our VAT calculator and keep it separate from the CIS deduction here.

Invoice it clearly

Because the deduction rests on splitting labour from materials, your invoice should show them as separate lines so the contractor can apply CIS correctly and you can prove it later. Our invoice generator makes a clean, itemised invoice you can download, and there is more on tightening up your whole payment cycle in how to get paid faster as a tradesperson.

This tool and guide are for general information and are not tax advice. CIS rules and rates can change, and your situation may differ. Check the current HMRC guidance on GOV.UK or speak to a qualified accountant before you rely on a figure.