CIS Tax Calculator UK 2026

In 2026, registered subcontractors pay 20% CIS deductions on labour costs. Unregistered subcontractors pay 30%. Subcontractors with Gross Payment Status (GPS) pay 0% and handle their own tax payments through Self Assessment.

The rate applies only to labour - materials are always paid in full regardless of CIS status. Register with HMRC to reduce your deduction rate from 30% to 20% immediately.

No, materials are not subject to CIS deductions. Only labour costs have CIS tax deducted. Materials are paid in full to the subcontractor regardless of CIS registration status.

You must clearly separate labour and materials on your invoice. Materials include anything you supply that becomes part of the permanent structure. Travel, subsistence, and equipment hire are typically treated as labour costs unless specifically agreed otherwise with your contractor.

Yes, if your CIS deductions exceed your actual tax liability for the year, HMRC will refund the difference through your Self Assessment tax return. Many subcontractors receive CIS refunds due to personal allowances (£12,570 in 2026/27) and deductible business expenses.

CIS deductions are advance payments toward your tax bill, not your final amount owed. Calculate actual tax on profits after expenses. If deductions exceed your tax bill, claim the refund when filing Self Assessment by 31 January following the tax year end. Consider using our self-employed tax calculator to estimate your final tax position.

To qualify for GPS, you must pass HMRC's compliance test (all tax returns filed on time for 12 months), turnover test (£30,000+ for sole traders, or £30,000 per partner/director), and business test (construction is your main activity).

Apply online through HMRC's CIS service using your Government Gateway account. HMRC reviews applications within 60 days. GPS dramatically improves cash flow but requires maintaining perfect compliance - late returns or unpaid tax result in immediate GPS removal and return to 20% deductions.

Yes, CIS and VAT are separate systems. VAT-registered subcontractors working for VAT-registered contractors must apply the domestic reverse charge for VAT on construction services from March 2021. Under this system, you don't charge VAT on your invoice - the contractor accounts for it directly with HMRC.

However, CIS deductions still apply at 20% or 30% depending on your registration status, calculated on labour costs. Both CIS and reverse charge VAT must be clearly stated on invoices. Your contractor handles VAT through their VAT return, while CIS deductions are paid through their monthly CIS returns - completely separate processes.

Unregistered subcontractors have 30% deducted from labour payments instead of 20% - an extra 10% cost. This significantly reduces cash flow and means more of your money is held by HMRC until you file your Self Assessment and claim any refund.

Register immediately through HMRC's CIS online service to reduce deductions to 20%. You'll need your UTR (Unique Taxpayer Reference) and National Insurance number. Registration is quick, free, and takes effect for payments made after verification. The 10% saving adds up substantially over a year - worth £5,000 annually on £50,000 labour invoices.

Contractors must pay CIS deductions to HMRC monthly, by the 19th of each month (or 22nd if paying electronically). They submit monthly CIS returns showing all payments made to subcontractors and deductions taken during the previous month.

As a subcontractor, you'll receive payment statements showing deductions taken. These appear on your HMRC CIS statement, which you should check regularly. Your annual Self Assessment return should match your total CIS deductions shown on HMRC's system - discrepancies delay refunds and may trigger investigations.

CIS deductions count towards your annual tax bill calculated on profits after expenses. When you file your Self Assessment, you deduct allowable business expenses (vehicle costs, tools, insurance, professional fees, premises costs) from your income. Your actual tax is calculated on this profit figure.

If your CIS deductions exceed your actual tax liability, you receive a refund. For example, if you paid £8,000 in CIS deductions but your actual tax on profits after expenses is £5,000, you'll receive a £3,000 refund. The more allowable expenses you claim, the lower your tax bill and the larger your potential refund. Keep detailed records of all business expenses to maximise legitimate deductions. For expense guidance, explore our contractor take-home pay calculator which factors in typical business expenses.