CIS tax deduction calculator

What is the Construction Industry Scheme (CIS)?

Under CIS, contractors deduct money from a subcontractor’s payments and pass it to HMRC as an advance towards the subcontractor’s tax and National Insurance. This calculator works out the deduction on a payment, separating the labour element (which is subject to deduction) from materials (which are not).

Deduction rates depend on whether the subcontractor is verified, registered or unregistered with HMRC. Contractors must file monthly CIS returns; subcontractors can often reclaim over-deducted amounts.

The deduction is on labour only

Twenty per cent — or thirty where the subcontractor is not registered — comes off the labour element, not the materials. If an invoice does not separate them, the contractor is entitled to apply the deduction to the whole amount, and many do because they have nothing else to work from. Itemise labour, materials and plant hire on every invoice; on a materials-heavy job it changes the figure substantially.

It is usually a refund, not a bill

Tax is deducted from gross payments before any expenses, so once costs and the personal allowance are taken into account most subcontractors have overpaid. The money comes back when the return is filed — and only for deductions that can be evidenced, so keep every payment and deduction statement.

If the deduction is a cash-flow problem rather than a tax one, gross payment status removes it entirely. It has to be applied for, and a clean filing and payment record is the condition most applications fail on.