CIS Deduction Calculator (2026/27).

The Construction Industry Scheme (CIS) requires contractors to deduct money from subcontractor payments and pass it to HMRC. It applies to most construction work — including site preparation, alterations, repairs, demolition and installation of heating and electrical systems. Both limited companies and sole traders working as subcontractors can be subject to CIS.

Registered subcontractors whose details can be verified by HMRC have 20% deducted from the labour portion of their invoices (standard rate). Unregistered subcontractors — those who cannot be verified — have 30% deducted (higher rate). Materials are always paid gross with no deduction, regardless of registration status.

Subcontractors with Gross Payment Status (GPS) receive payments without any CIS deduction. To qualify, a business must pass HMRC turnover and compliance tests. Sole traders need at least £30,000 annual construction turnover; partnerships £30,000 per partner or £100,000 in total; companies £30,000 per director or £100,000 total.

Sole traders and partnerships reclaim CIS deductions through their Self-Assessment tax return — deductions reduce the income tax and NI liability. Limited company subcontractors offset CIS deductions against PAYE/NI payments due to HMRC, or claim a repayment. Monthly CIS returns must be filed by contractors.

Contractors must verify subcontractors with HMRC before making the first payment, file monthly returns by the 19th of each month, issue deduction statements to subcontractors, and keep records of payments and deductions for at least 3 years. Failure to comply can result in penalties of up to £3,000 per month.