Free CIS Deduction Calculator

Calculate Construction Industry Scheme (CIS) deductions on subcontractor payments instantly. Enter the gross payment amount and the materials cost to see the labour element subject to CIS, the deduction at 20% (registered subcontractors) or 30% (unregistered), and the net payment due to the subcontractor. This calculator is free to use with no sign-up required and is designed for UK contractors who need to verify their CIS deductions before making payments or preparing their monthly CIS return to HMRC.

How to use this calculator

Enter the gross payment amount shown on the subcontractor's invoice, the verified materials cost (the actual cost of materials purchased by the subcontractor for the contract - not a mark-up), and select the subcontractor's CIS deduction rate (20% for registered subcontractors verified with HMRC, or 30% for unregistered subcontractors). The calculator deducts the materials cost from the gross payment to arrive at the labour element, applies the CIS deduction rate to the labour element, and shows the net payment due together with the CIS deduction amount that must be paid to HMRC via your monthly return. The results update instantly as you adjust the inputs.

How CIS works in UK construction

The Construction Industry Scheme (CIS) is a HMRC tax scheme that requires contractors to deduct income tax at source from payments made to subcontractors for construction operations. It applies across a wide range of construction work including groundworks, building, civil engineering, demolition, installation of building systems, and repair and maintenance of construction works. The scheme exists to reduce tax evasion in the construction industry by collecting tax on subcontractor earnings at the point of payment rather than waiting for the subcontractor to declare income in their Self Assessment or company tax return.

Under CIS, contractors are required to register with HMRC as a CIS contractor before engaging any subcontractors. Before making the first payment to a new subcontractor, the contractor must verify the subcontractor with HMRC to establish the correct deduction rate. Verification is done online via HMRC's CIS Online service and requires the subcontractor's name (or company name), Unique Taxpayer Reference (UTR), and National Insurance number for sole traders or company registration number for limited companies. HMRC's verification response confirms whether the subcontractor has gross payment status (no deduction), standard registered status (20% deduction), or unregistered status (30% deduction).

CIS deductions are calculated on the labour element of the payment only. Materials costs - the actual cost of materials purchased by the subcontractor specifically for the contract - are excluded from the deduction. This means contractors must obtain clear evidence of materials costs from subcontractors and must not apply CIS deductions to materials mark-ups or profit elements. Plant hire costs are generally treated as part of the labour element unless the plant is hired in from a third-party plant hire company, in which case the cost may be excludable. Contractors should seek advice from their accountant or HMRC if they are uncertain how to treat specific cost components.

Contractors must submit a monthly CIS return to HMRC by the 19th of each month covering all payments made to subcontractors in the previous tax month. The return lists each subcontractor paid, the gross payment amount, the materials deduction, and the CIS deduction made. The total CIS deductions collected must be paid to HMRC by the same deadline. Failure to file returns on time or to pay deductions across to HMRC results in penalties starting at £100 per return for up to one month late, rising to £200 for returns up to two months late and £300 (or 5% of the liability if greater) for returns over two months late.

Subcontractors who have CIS deductions made from their payments receive a monthly statement from the contractor (a CIS deduction statement) showing the gross payment, materials amount, deduction made, and net payment received. Subcontractors offset these deductions against their income tax or corporation tax liability when they file their annual return. Sole trader subcontractors offset deductions against their Self Assessment tax bill; limited company subcontractors offset against their company's PAYE liability via their employer payment summary. If the total CIS deductions exceed the tax liability, HMRC will make a repayment.

Subcontractors who meet HMRC's criteria can apply for gross payment status, which allows them to receive payments without any CIS deduction. To qualify, a subcontractor must have a clean tax compliance record, have an annual turnover above certain thresholds (£30,000 for sole traders, higher amounts for partnerships and companies), and pass HMRC's compliance tests. Gross payment status is reviewed annually and can be withdrawn if the subcontractor's compliance record deteriorates.

Frequently Asked Questions

What is the Construction Industry Scheme (CIS)?

CIS is a HMRC scheme requiring contractors to deduct tax at source from payments to subcontractors for construction operations. The deductions are offset against the subcontractor's income tax or corporation tax liability. It applies to a wide range of construction work but not to professional services such as architecture or surveying.

What are the CIS deduction rates?

Registered subcontractors verified with HMRC are subject to a 20% deduction on the labour element. Unregistered subcontractors are subject to 30%. Subcontractors with gross payment status receive payment in full with no CIS deduction. The deduction rate is confirmed when the contractor verifies the subcontractor before the first payment.

Are materials exempt from CIS deductions?

Yes. CIS deductions apply only to the labour element of the payment. Actual materials costs incurred by the subcontractor for the contract are excluded. Contractors must obtain evidence of materials costs from subcontractors and must not apply the deduction to mark-ups or profit on materials.

Do I need to register for CIS?

If you pay subcontractors for construction work, you must register as a CIS contractor with HMRC before making any payments. If you are a subcontractor, you do not have to register but if you do not you will be subject to the higher 30% deduction rate rather than the standard 20% rate.

How does CIS verification work?

Before the first payment to a new subcontractor, the contractor must verify them with HMRC via CIS Online. HMRC's response confirms the deduction rate: gross (0%), standard (20%), or higher (30%). Verification requires the subcontractor's name, UTR, and NI number or company registration number. Records of all verifications must be kept and included on monthly CIS returns.

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