CIS Deductions Calculator
Calculate Construction Industry Scheme deductions for subcontractor payments.
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Important Disclaimer
This tool provides indicative calculations only and does not constitute financial, accounting, tax, or legal advice. The accuracy of results depends on the accuracy of information you provide. Consult a qualified professional for complex situations.
Overview
Under the Construction Industry Scheme (CIS), contractors must deduct tax from payments to subcontractors and pass it to HMRC as an advance on the subcontractor's tax bill. The rate you deduct depends entirely on the subcontractor's verification status: 0% for those holding gross payment status, 20% for subcontractors registered with a valid UTR, and 30% for anyone unregistered or unverifiable. The rates are unchanged for 2026/27. Crucially, deductions apply only to the labour element of an invoice — materials, plant hire, scaffolding and travel are excluded — so a properly itemised invoice directly changes how much you must withhold. Always verify a subcontractor with HMRC before their first payment; the calculator then works out the exact deduction and net payment.
Worked Example (2026/27)
### Worked Example: £5,000 Invoice from a Registered Subcontractor
**Inputs**: a subcontractor registered for CIS (20% rate) invoices £5,000, itemised as £3,500 labour and £1,500 materials.
**Calculation**: 1. CIS applies to labour only: £3,500 2. Deduction: £3,500 × 20% = **£700** 3. Payment to subcontractor: £5,000 − £700 = **£4,300** 4. The £700 is reported on the monthly CIS return and paid to HMRC; the subcontractor offsets it against their own tax bill
**Variant — unregistered subcontractor**: the same invoice at the 30% rate means a £1,050 deduction and a £3,950 payment. Registration is worth 10 percentage points of cash flow to the subcontractor, so check status before assuming.
2026/27 Rates & Thresholds
| Verification Status | Deduction Rate | Notes |
|---|---|---|
| Gross payment status | 0% | Verified UTR + HMRC-granted status; paid in full |
| Registered with valid UTR | 20% | Standard net rate |
| Unregistered / not matched | 30% | No UTR, invalid UTR, or not on the CIS register |
| Monthly return deadline | 19th of each month | Covers the tax month (6th–5th); nil returns required |
| Late return penalties | £100 → £200 → £300 or 5% | 1 day → 2 months → 6 months late; more at 12 months |
| Gross status turnover test | £30,000 (sole trader) | Plus clean tax record and 12+ months trading |
What CIS Applies To — and What It Doesn't
CIS deductions apply to labour and supervision costs, including the labour element of sub-subcontractor payments. Excluded from the deduction calculation: materials (timber, bricks, cables, pipe), plant and equipment hire, scaffolding, and subsistence or travel. Subcontractors should itemise invoices to keep the labour element — and therefore the deduction — accurate.
Who is in the scheme: mainstream contractors (builders, groundworkers, electricians, plumbers, plasterers, decorators), deemed contractors (businesses outside construction spending over £3 million on construction operations in any 12 months), and every subcontractor doing construction work for a contractor. Householders and self-build projects are outside CIS.
Gross Payment Status
Gross payment status lets a subcontractor receive payments with no CIS deduction at all. HMRC grants it to businesses that pass a turnover test (£30,000 for sole traders, higher for partnerships and companies), have a clean compliance record, and have traded for at least 12 months. HMRC reviews gross status annually — a late return or payment can lose it, so treat compliance deadlines as protecting your cash flow.
Common Mistakes HMRC Penalises
- Deducting CIS from the whole invoice instead of the labour element only.
- Paying a new subcontractor before verifying them with HMRC — if they can't be matched, the 30% rate applies.
- Missing the monthly return deadline of the 19th, or skipping the nil return in a quiet month — penalties are automatic.
- Treating VAT as part of the CIS calculation — deductions are worked out on amounts net of VAT (and reverse-charge VAT usually applies between CIS businesses).
- Forgetting that deemed contractors outside construction are caught once construction spend passes £3 million.
- Not keeping the verification reference — you need it to justify the rate applied.
When to Seek Professional Advice
Seek advice if you operate near the deemed-contractor threshold, if HMRC has downgraded or refused gross payment status, or if you're unsure whether specific work (repairs, installation, mixed supply-and-fit contracts) falls inside CIS. Repeated verification mismatches, offsetting CIS suffered against PAYE liabilities as a limited company, and correcting past returns are all areas where an accountant will usually save more than they cost.
Frequently Asked Questions
What is the CIS deduction rate for 2026/27?+
Three rates apply: 0% for subcontractors with gross payment status, 20% for registered subcontractors with a valid UTR, and 30% for unregistered subcontractors. Rates are unchanged for 2026/27, and deductions are taken from the labour element of the invoice only.
Do CIS deductions apply to materials?+
No. CIS deductions only apply to the labour element of a payment. Materials, plant hire, scaffolding, equipment hire, and travel are all excluded — which is why subcontractors should itemise invoices so the labour element is clear.
How do I verify a subcontractor under CIS?+
Use HMRC's CIS online service (or the Reckonly CIS Verifier tool as a pre-check). You need the subcontractor's UTR and name, and for companies their company registration number. HMRC confirms the deduction rate to apply — keep the verification reference to justify it.
What is gross payment status?+
Gross payment status allows a subcontractor to receive full payment without CIS deductions. HMRC grants it to businesses that pass a turnover test (£30,000 for sole traders, higher for partnerships and companies), have a clean tax record, and have been trading for at least 12 months. HMRC reviews the status annually.
Can I reclaim CIS deductions if my business is not profitable?+
Yes. Deductions are advance payments towards your income tax and Class 4 NI, reclaimed through Self Assessment (sole traders) or offset against PAYE liabilities (limited companies). If your total liability for the year is lower than the deductions made, HMRC refunds the difference.
What happens if I miss a CIS monthly return?+
Returns are due by the 19th of each month, covering the tax month from the 6th to the 5th, and a nil return is required even if no payments were made. HMRC issues automatic penalties: £100 for one day late, £200 after two months, then £300 or 5% of the CIS liability (whichever is higher) at six months, with a further penalty at twelve months.
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