Updated for 2026/27 · Based on HMRC Rates · Confirmed Statutory Values

CIS Tax Calculator 2026/27 UK | Deduction & Subcontractor Rebate

Updated for 2026/27 tax year: Verified against GOV.UK & HMRC Construction Industry Scheme guidance — last verified 4 October 2026. Read our calculation methodology →

Under the UK Construction Industry Scheme (CIS) for 2026/27, main contractors deduct tax at source from payments to subcontractors at 20% (registered), 30% (unverified), or 0% (gross payment status). Deductions apply strictly to the labour element of your invoice — materials and plant hire are exempt. On a £5,000 invoice with £1,000 in materials, a verified subcontractor has £800 deducted (20% of £4,000 labour), receiving a net payment of £4,200.

Key 2026/27 CIS Statutory Facts

  • Standard Deduction: 20% for subcontractors registered for CIS with HMRC.
  • Higher Deduction: 30% for unverified subcontractors or those without a verified UTR.
  • Gross Status (0%): Available to subcontractors passing HMRC turnover and compliance tests.
  • Exempt Items: Direct materials, consumable stores, equipment/plant hire, and VAT are completely exempt from deductions.
  • Year-End Rebates: Because the £12,570 Personal Allowance is ignored at source, sole traders usually overpay tax and receive a rebate via Self Assessment.

How the Construction Industry Scheme (CIS) Works in 2026/27

The Construction Industry Scheme governs payments made by contractors to subcontractors for construction work. Rather than paying subcontractors their full invoice and waiting for annual tax returns, HMRC requires main contractors to withhold tax at source as an advance payment towards the subcontractor’s annual tax bill.

If you also operate outside the construction sector or work through a personal service company, you can compare your statutory positions using our Contractor IR35 Calculator and Take-Home Pay Calculator.

The CIS Calculation Formula

CIS deductions apply only to the labour element of your invoice. The formula is:

CIS deduction = (Gross payment − materials − VAT) × deduction rate

On an £8,000 invoice with £1,500 in materials and 20% CIS rate: labour = £6,500. Deduction = £6,500 × 0.20 = £1,300. Net received = £6,700. Enter your figures in the calculator above for an instant breakdown including your estimated year-end rebate.

Labour vs Materials: What is Subject to Deduction?

Only labour is taxable under CIS. Main contractors must not deduct CIS from the cost of materials supplied by the subcontractor. Itemise materials clearly on every invoice and keep receipts — contractors need evidence before they can exclude them.

Items exempt from CIS deductions:

  • Actual materials purchased and used in the construction work
  • Consumables like fuel, drill bits, and safety equipment
  • Plant hire and scaffolding costs paid directly by the subcontractor
  • Value Added Tax (VAT)

Subcontractor Year-End Rebates Explained

Most CIS sole traders receive substantial tax rebates every spring. Contractors deduct 20% from your first pound of labour earnings, ignoring your £12,570 Personal Allowance and legitimate business expenses. When you file your Self Assessment return after 5 April, HMRC compares deductions suffered against your actual tax and NI liability and issues a refund for the excess. A sole trader earning £30,000 in CIS labour (£6,000 deducted) typically owes around £2,000 to £3,000 in tax and NI after allowances — resulting in a rebate of £3,000 to £4,000.

Gross Payment Status: How to Stop CIS Deductions Legally

Gross Payment Status (GPS) lets qualifying subcontractors receive full payments with zero deductions. To qualify, your annual construction turnover (net of VAT and materials) must reach £30,000 for sole traders or single directors, or £100,000 for partnerships and companies with multiple directors. You also need to pass HMRC compliance checks (no outstanding tax returns, no unpaid debt). Apply through your Government Gateway account. Once approved, contractors pay you in full and you settle tax directly via Self Assessment.

Frequently Asked Questions

How to calculate CIS tax?

CIS tax = (Gross payment minus materials minus VAT) × deduction rate. For a registered subcontractor: £5,000 invoice, £1,000 materials, 20% rate. Labour = £4,000. Deduction = £800. Net payment = £4,200. Use the calculator above to get your breakdown instantly.

Why am I being deducted 30% CIS?

The 30% rate applies when your contractor cannot verify your registration with HMRC. This happens if you have not registered for CIS, your UTR is wrong, or the online verification returns an unmatched result. Fix this by registering for CIS or correcting your UTR, then asking your contractor to re-verify you. Once verified, the rate drops to 20%.

Is CIS always 20%?

No. There are three rates: 20% (registered subcontractor), 30% (unverified), and 0% (Gross Payment Status). Your rate depends on whether you are registered with HMRC and whether your contractor has successfully verified you.

How much tax do you pay through CIS?

CIS deductions are advance payments, not a final tax. They are set against your actual Income Tax and NI bill at the end of the year. On £40,000 labour income, £8,000 is deducted at 20%. Your actual liability after the £12,570 allowance and expenses is often £3,000–£5,000 — giving a typical rebate of £3,000–£5,000.

How do I work out CIS deductions?

Step 1: Total gross payment from contractor. Step 2: Subtract materials and VAT. Step 3: Multiply the labour figure by your CIS rate (20%, 30%, or 0%). That is your deduction. Net = gross minus deduction.

What does the 20% CIS deduction mean?

It is an advance payment toward your annual tax and NI bill — not a final charge. HMRC credits it against what you actually owe. If you owe less than was deducted (which is common for sole traders with a Personal Allowance), HMRC sends a refund after you file your return.

Is CIS calculated before or after VAT?

Before VAT. CIS applies to the net labour amount, and VAT is completely excluded from the calculation. On £5,000 net labour plus £1,000 VAT, the 20% CIS deduction is £1,000 (based on £5,000) — not £1,200.

How do I pay CIS tax?

As a subcontractor, you do not pay CIS directly. Your contractor deducts it and pays HMRC on your behalf each month. You then settle any remaining liability (or claim a refund) when you file your Self Assessment return, due by 31 January after the tax year end.

Where can I find my CIS deduction?

Your contractor must give you a payment and deduction statement with each payment that includes a deduction. It shows gross amount, materials, labour, and CIS deducted. Keep every statement — you need them for your Self Assessment return.

How can I check my CIS status in the UK?

Log in to your HMRC Government Gateway account and navigate to the CIS online service. You can view your registration status, see whether contractors have verified you, and check monthly returns filed on your behalf. If you have not registered yet, you can do so online at GOV.UK.

How does CIS work for subcontractors?

Register with HMRC for CIS. Give your UTR and NI number to each contractor. They verify you online before making a payment, then deduct CIS at 20% from the labour portion of each invoice. They provide deduction statements monthly. At year end, you declare total deductions on your Self Assessment return and HMRC calculates any rebate owed.

What is the Construction Industry Scheme (CIS)?

CIS is an HMRC scheme requiring contractors to deduct tax from subcontractor payments and pass it to HMRC as advance tax. It covers most UK construction work: building, repairs, demolition, and installations. Contractors must register. Subcontractors should register to get the 20% rate rather than 30%.

How do I calculate my deductions?

Formula: (Gross invoice minus VAT minus materials) × CIS rate. Example: £8,000 gross, £1,000 materials, 20% rate. Labour = £7,000. Deduction = £1,400. Net = £6,600. Or just enter your numbers in the calculator above.

What is the formula for calculating UK income tax?

For 2026/27: 20% on taxable income from £12,570 to £50,270. 40% from £50,270 to £125,140. 45% above £125,140. For CIS subcontractors, the actual tax owed is compared to deductions already suffered. The difference is either a rebate (most sole traders) or an additional payment.

How do I avoid CIS deductions?

The legitimate route is Gross Payment Status. Apply through HMRC if your annual construction turnover (excluding VAT and materials) is at least £30,000 (sole trader/single director) or £100,000 (partnership or company). You also need a clean compliance record. With Gross Status, contractors pay you in full and you settle tax directly via Self Assessment.

How do I calculate my CIS rebate?

Estimated rebate = Total CIS deductions suffered minus your actual Income Tax liability minus your actual Class 4 NI liability. Example: £8,000 deducted, £2,500 income tax owed, £1,500 Class 4 NI owed. Rebate = £8,000 minus £4,000 = £4,000. The calculator above shows an annualised estimate based on your inputs.

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