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Self Assessment · Construction

CIS refunds explained for subcontractors

If you work for contractors, a slice of your pay goes to HMRC before it ever reaches your bank. For most subbies that slice is bigger than the tax they actually owe — here's how the money comes back.

What CIS actually is

The Construction Industry Scheme (CIS) makes contractors collect tax on HMRC's behalf. Every time a contractor pays you for labour, they hold back a percentage and send it straight to HMRC under your name. It is not a fee and not a discount on your invoice — it's your own income tax, paid in advance.

Invoice £1,000 of labour and you'll typically see £800 land in the bank. You still earned £1,000 — the missing £200 is sitting with HMRC as a credit against your year-end tax bill.

The three deduction rates

20%

Registered

The standard rate when you've registered for CIS as a subcontractor. Most subbies are here.

30%

Not registered

The penalty rate when HMRC can't verify you. Registering for CIS is free and drops you to 20% — do it.

0%

Gross payment status

You're paid in full and settle your own tax. HMRC only grants it after turnover and compliance tests — typically £30,000+ of labour turnover and a clean filing record.

Deductions only apply to the labour part of an invoice — materials you charge on shouldn't have tax taken off them. That's why a payment is sometimes a little more than a neat 80%.

Why most subbies overpay

The 20% comes off your gross labour income — before your van, fuel, tools, materials, insurance and every other expense. But your actual tax bill is worked out on your profit, after those costs, and only above the personal allowance (£12,570). Flat-rate deductions on gross income versus banded tax on net profit: the maths almost always lands in your favour.

A worked example

Earn £40,000 gross on the tools with £8,000 of expenses, and contractors withhold £8,000 (20% of £40k). Your actual income tax and Class 4 National Insurance on £32,000 of profit comes to roughly £5,100 — so HMRC is holding about £2,900 of your money. That's a refund, not a bonus: it was always yours.

How the refund actually happens

Under Making Tax Digital you send HMRC four quarterly updates a year. Those updates report your income gross— the full invoice value, including the tax that was withheld — and there is no CIS box in a quarterly update at all. Don't worry: HMRC already knows what's been deducted, because every contractor files a monthly return naming you and the amount they withheld.

The reconciliation happens at the final declaration(the year-end sign-off that replaced the Self Assessment return). HMRC's calculation takes the tax due on your profit, subtracts everything withheld under CIS, and the difference becomes either a small balance to pay or — for most subbies — a repayment to your bank account. If you think HMRC's CIS total is wrong, you can correct it after your fourth quarterly update and before you make the final declaration.

Keep your deduction statements

Contractors must give you a payment and deduction statement within 14 days of the end of each tax month they paid you in. They're your proof of every pound withheld — if a contractor files late or wrongly, those statements are how you get your full credit. Chase any that are missing, and keep them with your records for at least 5 years.

How Get Sorted tracks it

Three ways in, one running total:

  • Paid-short invoices: when a bank payment lands around 20% (or 30%) below an invoice total, we ask whether CIS was deducted before recording anything.
  • The CIS toggle: any contractor payment in your transactions can be marked as CIS in one tap — we gross up your income and bank the deduction as tax already paid.
  • Monthly statements:enter each statement's total on the tax page as a cross-check. If your statements and transactions disagree by more than £1, we flag it so nothing slips through.

Your tax page then shows the headline that matters: estimated bill, minus CIS already withheld, equals what you'll really pay — or what HMRC owes you back.

Track your CIS refund as it builds

Get Sorted spots short-paid invoices, records every deduction, and shows what HMRC owes you all year — not just in January.

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