CIS Deduction Calculator
Work out the CIS deduction a contractor must withhold from a subcontractor payment, and what the subcontractor actually receives.
Using 2026/27 UK tax rates
Enter £0 if no VAT is charged or the reverse charge applies.
Direct cost paid by the subcontractor, excluding VAT.
Advanced options
For example qualifying plant hire fuel, where HMRC allows it.
CIS deduction
£800.00
- Total invoice
- £6,000.00
- VAT (excluded)
- £1,000.00
- Amount excluding VAT
- £5,000.00
- Materials (excluded)
- £1,000.00
- CIS base (labour)
- £4,000.00
- Rate applied
- 20%
- Amount payable to subcontractor
- £5,200.00
The deduction is paid to HMRC and credited against the subcontractor’s tax and National Insurance.
What counts as materials?
The direct cost of materials the subcontractor actually paid for, excluding VAT and excluding any mark-up. Travel, subsistence and their own labour never count.
What this means
Under the Construction Industry Scheme, contractors withhold a percentage of the labour element of a subcontractor’s payment and pay it to HMRC as an advance towards the subcontractor’s tax and National Insurance.
The deduction is never taken from VAT, and never from the direct cost of qualifying materials the subcontractor paid for. Getting either wrong is the most common CIS error.
Quick answers
- What are the CIS deduction rates?
20% for subcontractors registered under CIS, 30% for those who are unregistered or cannot be verified, and 0% for subcontractors with gross payment status.
- Is CIS deducted from VAT?
No. VAT is always excluded before the CIS deduction is worked out, including where the domestic reverse charge applies to the invoice.
- Is CIS deducted from materials?
No. The direct cost of qualifying materials the subcontractor paid for is taken off the payment before the deduction is calculated.
- Is the CIS deduction an extra cost to the subcontractor?
No. It is an advance payment towards the subcontractor's own Income Tax and National Insurance, which is credited against their bill once they file.
- Who verifies a subcontractor's CIS status?
The contractor verifies each subcontractor with HMRC before the first payment, which confirms whether to apply the 20% or 30% rate, or 0% for gross payment status.
Keep materials evidenced separately
Deductions are made on labour, so the split between labour and qualifying materials needs to be clear on the invoice and supported by receipts.
Contractors must file monthly CIS returns and give subcontractors a payment and deduction statement.
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How we calculated it
CIS base = payment excluding VAT − qualifying materials − other allowed exclusions
Deduction = CIS base × the rate for the subcontractor’s status
Amount payable = total invoice including VAT − deduction
The rate is 0% for subcontractors with gross payment status, 20% when registered with HMRC under CIS, and 30% when unverified or not registered.
Assumptions
- The work falls within CIS and the contractor has verified the subcontractor with HMRC.
- Materials entered are the subcontractor’s direct, qualifying cost — not a marked-up figure.
- VAT is excluded before the deduction is worked out, including under the domestic reverse charge.
- No CIS offsets, set-offs or repayment claims are modelled.
How this calculator works
The deduction is money advanced to HMRC on the subcontractor’s behalf, not an extra tax. It is set against their eventual bill, so a subcontractor with large material costs can end up over-deducted if materials are not entered correctly.
For VAT on construction invoices — including whether the domestic reverse charge applies — see the VAT calculator, and check the effect of deductions on your bank balance with the cash flow runway calculator. If a subcontractor trades through their own limited company, the Corporation Tax calculator and salary vs dividend calculator can help plan around CIS deductions received during the year.
Worked examples
Labour only
A subcontractor invoices £5,000 for labour, with no VAT charged and no materials involved. The CIS base is the full £5,000. At the 20% registered rate the deduction is £1,000, and the subcontractor is paid £4,000.
Labour plus materials
The same subcontractor invoices £5,000, made up of £4,000 labour and £1,000 of qualifying materials, with no VAT on this invoice. The £1,000 of materials is excluded first, so the CIS base is £4,000. At 20% the deduction is £800, leaving £4,200 payable.
Labour, materials and VAT
A subcontractor invoices £6,000 including £1,000 of VAT, of which £1,000 is materials. The payment excluding VAT is £5,000, so after removing the £1,000 of materials the CIS base is £4,000. At the 20% registered rate the deduction is £800, and the subcontractor is paid £5,200 — the £6,000 invoice total less the £800 deduction.
Key terms explained
- CIS (Construction Industry Scheme)
A statutory scheme under which contractors deduct money from a subcontractor's payments and pass it to HMRC as an advance towards the subcontractor's Income Tax and National Insurance. It applies to most construction work in the UK.
- Gross payment status
A status a subcontractor can apply for that lets a contractor pay them in full, with no CIS deduction at all. The subcontractor is then responsible for paying their own tax and National Insurance directly, usually through Self Assessment or Corporation Tax.
- Qualifying materials
The direct cost of materials a subcontractor actually paid for to carry out the job, excluding VAT and excluding any mark-up they add on. Only this direct cost is excluded from the CIS deduction — labour, travel, plant hire and profit margin are not.
Common mistakes
Applying CIS deduction to VAT
VAT must always be excluded before the CIS deduction is calculated, including where the domestic reverse charge applies. Deducting CIS from the VAT-inclusive total overstates the deduction and underpays the subcontractor.
Deducting CIS from qualifying materials
The direct cost of materials the subcontractor paid for is excluded from the CIS base entirely. Only the labour element — plus any non-qualifying costs — is subject to the deduction.
Using a marked-up materials figure
Only the subcontractor's actual direct cost of materials qualifies for exclusion. If a subcontractor adds a profit margin on top of the materials, that mark-up is not excluded and stays in the CIS base.
Forgetting to verify a subcontractor's status
Contractors must verify each subcontractor with HMRC before the first payment. Getting this wrong can mean applying the 20% registered rate when 30% should apply, or missing that a subcontractor holds gross payment status.
Common questions
What is the CIS deduction rate?
20% for subcontractors registered under CIS, 30% where they are unregistered or cannot be verified, and 0% with gross payment status.
Is the CIS deduction an extra tax?
No. It is an advance payment towards the subcontractor's Income Tax and National Insurance, credited when they file.
Who has to operate CIS?
Contractors paying subcontractors for construction work, and some businesses outside construction that spend heavily on it. Check the HMRC guidance.
What if too much has been deducted?
The subcontractor reclaims the excess through their tax return, or through their payroll if they operate as a limited company.
What is gross payment status?
A status HMRC grants to subcontractors who meet certain turnover, compliance and business tests, allowing contractors to pay them in full with no CIS deduction. The subcontractor then pays their own tax and National Insurance directly.
What counts as qualifying materials under CIS?
The direct cost the subcontractor actually paid for materials used on the job, excluding VAT and excluding any profit margin they add. Plant hire, travel and the subcontractor's own labour do not qualify as materials.
Does CIS apply if the subcontractor is a limited company?
Yes. CIS deductions still apply to payments to a subcontractor operating through a limited company, but the deductions suffered can then be set against the company's PAYE and National Insurance bill rather than a personal tax return.
How is CIS different from PAYE?
CIS applies to self-employed subcontractors and companies paid for construction work, deducting a flat percentage from labour. PAYE applies to employees, deducting variable Income Tax and National Insurance based on their pay and tax code.
Sources
Last reviewed: 7 September 2026 · Statutory rates: 2026/27. This calculator is information only and is not tax, accounting or financial advice.