CIS Tax Deduction Calculator — How Much CIS Tax Will Be Deducted?

CIS is an HMRC scheme where contractors in the construction industry must deduct tax from payments to subcontractors and pass it to HMRC. It applies to most construction work in the UK including building, alterations, repairs, decorating, demolition and civil engineering. The deductions count as advance payments towards the subcontractor's tax and National Insurance.

There are three rates: 20% for registered subcontractors (verified by HMRC), 30% for subcontractors who are not registered or cannot be verified, and 0% for those with gross payment status. Most subcontractors are on the 20% rate. The 30% rate applies to anyone the contractor cannot verify with HMRC.

No. VAT is never subject to a CIS deduction. HMRC requires the contractor to take VAT away from the invoice total first, then take away materials and other qualifying costs, and only then apply the CIS rate to the remaining labour element. If you are VAT-registered, enter your labour and materials figure excluding VAT in the Gross Payment field and enter the VAT separately, so the deduction is applied to the correct base.

For most CIS work it does not come to you. Since 1 March 2021 the VAT domestic reverse charge applies when a VAT-registered subcontractor supplies a VAT-registered contractor for construction services reported under CIS. In that default case you do not charge or receive the VAT — the contractor accounts for it directly to HMRC on its own VAT return, so it is never part of your net payment. You only charge and receive the VAT (added to your net payment) where the reverse charge does not apply: supplies to an end user or a non-VAT-registered customer, or excepted services such as professional architectural and surveying work. The "VAT reverse charge applies" toggle defaults to on, matching the typical subcontractor-to-contractor case. Source: gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services.

HMRC lets the contractor take away several direct costs before applying the CIS rate, all excluding VAT: the cost of materials the subcontractor paid for directly, plant hired for the job from a third party, fuel used to run that plant (but not travel fuel), consumable stores, and any manufacturing or prefabrication costs. Travel and subsistence are NOT excluded — they stay in the amount the CIS deduction is taken from. Keep invoices and receipts to evidence every excluded cost.

Yes. The cost of materials the subcontractor has directly purchased for the job (excluding VAT) is deducted from the gross payment before calculating the CIS deduction. Only the labour element (gross minus materials and other qualifying costs) is subject to CIS tax. You should provide invoices or receipts for materials to support the deduction.

You can register as a subcontractor with HMRC online or by calling the CIS helpline (0300 200 3210). You will need your UTR (Unique Taxpayer Reference) number and National Insurance number. Registration moves you from the 30% deduction rate to 20%, saving you significant tax on every payment.

Gross payment status means you receive payments without any CIS deductions (0% rate). To qualify, you must meet three tests: a business test (you run a construction business in the UK), a turnover test (minimum £30,000 annual turnover excluding materials and VAT, or £30,000 per partner), and a compliance test (good record of filing tax returns and paying tax on time). Apply to HMRC.

No. CIS only applies when the payer is a contractor or deemed contractor in the construction industry. If you are a homeowner hiring a tradesperson for work on your own home, CIS does not apply. However, property developers, housing associations and some large businesses may be deemed contractors under CIS rules.