Registered for CIS
You are paid
£1,300.00
£200.00 taken off at 20%
| Labour | £1,000.00 |
| CIS taken off (20%) | − £200.00 |
Your figures, your sums - nothing is sent anywhere. General information, not tax advice - check your status with HMRC.
How CIS is worked out
CIS (the Construction Industry Scheme) is not an extra tax. A contractor takes a percentage off what they pay you and sends it to HMRC as an advance payment towards your own tax and National Insurance.
For the 2026/27 tax year (6 April 2026 to 5 April 2027) the rates are 20% if you are registered for CIS, 30% if you are not, and nothing taken off if you hold gross payment status.
The deduction is taken from labour only. Take the invoice total before VAT, subtract what you bought for the job (materials, plant hire you paid for), and apply the rate to what is left.
A worked example
You invoice £1,500 before VAT, of which £500 is materials you bought. Labour is £1,000.
Registered at 20%: the contractor takes off £200 and you are paid £1,300. Not registered at 30%: they take off £300 and you are paid £1,200. With gross payment status you are paid the full £1,500 and pay the tax yourself later.
The £200 is not lost. It counts towards your tax bill, and if it is more than you owe, HMRC repays the difference after your tax return.
Common mistakes
Taking CIS off the whole invoice. Materials you paid for are not part of the deduction, so show them as a separate line.
Leaving the deduction off the invoice, then being short in your account. Show it on the invoice so you and the contractor see the same figure.
Losing the monthly statement. The contractor should give you a payment and deduction statement each month. Keep them: you need them to claim tax back.
Getting VAT wrong. Between VAT-registered businesses on most construction work, the domestic reverse charge applies: you do not add VAT to the invoice and the contractor accounts for it.
Gross payment status
Gross payment status means the contractor pays you in full and you pay your own tax. To qualify you must pass a business test, a compliance test (tax returns and payments up to date) and a turnover test. For a sole trader the turnover test is £30,000 a year from construction work, not counting materials.
You apply to HMRC. If you lose the status, you go back to 20% deductions.
JobGuard takes CIS off the labour on your invoices and adds the reverse charge note when the job needs it.
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Questions
What does CIS get taken off?
Only the labour. Materials you bought for the job, VAT and plant hire you paid for are not deducted, so show them on the invoice separately.
Why 20% or 30%?
Subcontractors registered for CIS have 20% taken off; if you are not registered, it is 30%. With gross payment status nothing is taken off and you pay your tax yourself.
Do I get the CIS back?
It counts towards your tax and National Insurance for the year. Sole traders claim it through their Self Assessment; limited companies offset it through payroll. Ask an accountant about your own case.
What about VAT on a CIS invoice?
Between VAT-registered builders on most construction work, the domestic reverse charge applies: you do not add VAT and the contractor accounts for it. CIS is still worked out on your labour.