Getting to Grips with CIS as a Subcontractor
If you’re working in construction as a self-employed person, chances are you’ve come across the Construction Industry Scheme (CIS). It’s HMRC’s way of making sure tax is collected in real-time from subcontractors like you.
Under CIS, the contractor you work for takes 20% tax off your payments before they reach your bank. It’s not a fine or penalty – it’s just how HMRC collects tax early. But it can be confusing, especially when it comes to your self-assessment, expenses, and getting the right refund.
So in this guide, we’ll walk through everything you need to know about accounting for CIS as a subcontractor — in plain English, with zero jargon.
Step 1: Register as a CIS Subcontractor
Before anything else, make sure you’re registered with HMRC as a CIS subcontractor. If not, contractors will deduct 30% instead of 20% – which is a big chunk of your earnings.
To register:
You’ll need your UTR (Unique Taxpayer Reference) and National Insurance number.
You can do it online through the HMRC website.
If you’re already registered as self-employed, you can just add CIS to your account.
This part’s simple but super important – one tick box can mean the difference between a decent refund and a tax headache.
Step 2: Understand What’s Being Deducted (and Why)
When a contractor pays you under CIS, they’ll deduct 20% of your labour charge (materials are paid in full). They’ll send this to HMRC on your behalf.
Here’s a quick example:
You invoice for £1,000 labour + £200 materials = £1,200
The contractor deducts 20% of the £1,000 labour = £200
You get £1,000 (£800 labour + £200 materials)
HMRC gets the £200 tax credit under your UTR
This £200 counts towards your yearly tax bill, so come Self Assessment time, you might have already paid enough – or even overpaid.
Step 3: Keep Your CIS Statements and Invoices
To make your life easier at tax time, keep a record of every CIS statement you receive. Contractors must send these each time they pay you. They show:
Gross amount you invoiced
CIS tax deducted
Net payment received
Also, keep copies of your invoices and receipts – especially for:
Tools and equipment
Work clothing and boots
Vehicle costs
Phone and internet used for work
The better your records, the bigger your chance of a refund and the less hassle with HMRC.
Tip: Use apps like Xero and Dext to snap receipts, track invoices, and log expenses on the go. It’s one of the easiest tools out there for subcontractors under CIS.
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Step 4: Do Your Self-Assessment Tax Return
Even though contractors take CIS tax off your pay, you still need to file a Self Assessment tax return each year – usually by 31st January.
Here’s what happens:
You declare your total income from all contractors.
You list your business expenses (travel, tools, van, etc).
You enter the CIS tax already deducted.
HMRC calculates what tax you should have paid.
If you’ve overpaid, you’ll get a tax refund – often within a few weeks.
It’s not uncommon for subcontractors to get back £1,000 or more, depending on how much CIS tax was deducted and what expenses you claim.
Step 5: Claim for All the Right Expenses
Here’s where many subcontractors miss out — they don’t realise just how much they can claim to reduce their tax bill.
Some typical CIS-allowable expenses include:
Tools, repairs and replacements
Protective clothing, helmets, boots
Mileage (45p per mile for cars, 25p after 10,000 miles)
Public liability insurance
Business-related phone bills
Training and trade subscriptions
Hire of specialist equipment
If it’s “wholly and exclusively for your work”, it’s usually claimable.
👉 Want a full list? See our guide to self-employed expenses.
Step 6: Thinking About VAT? Read This First
If your turnover (before deductions) goes over £90,000 in a 12-month period, you must register for VAT. But it’s not always bad news.
Many CIS subcontractors benefit from registering early, especially if:
You buy a lot of materials or kit
You work mainly for VAT-registered contractors
Just be aware of the domestic reverse charge rules, which can be tricky. These rules mean you don’t charge VAT on labour to other contractors — they account for it themselves.
Luckily, Xero handles reverse charge VAT automatically, so you stay compliant with much less faff.
What About Limited Companies and CIS?
Running your business through a limited company under CIS? The rules are a bit different.
You’ll still receive payments with CIS deducted.
But your company does the Self Assessment, not you personally.
You’ll need to register as a CIS contractor if you hire other subcontractors.
This can be tax-efficient but comes with extra admin and responsibilities, so it’s worth chatting to a CIS-savvy accountant before you make the move.
Final Tips for CIS Subbies
Let’s sum it all up with a few last pointers to make CIS accounting smoother:
Register for CIS (as a subcontractor) to avoid that painful 30% tax rate.
Keep every statement – it’s your proof of income and tax paid.
Use Xero to save time and avoid mistakes.
Don’t forget your Self Assessment, even if tax has been deducted.
Claim for every allowable expense – it all adds up.
Set aside money in case you need to top up your tax bill (aim for 20% of your gross earnings).
And if you’re feeling overwhelmed, remember — you don’t have to do it alone.
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