Written by the TaxTune Editorial Team · Reviewed by our qualified accountants · Updated for 2026
The quick answer Under the Construction Industry Scheme, contractors deduct tax from subcontractor payments and pass it to HMRC. The deduction is 20% for registered subcontractors and 30% for unregistered ones. It counts as an advance payment of your tax, and you often reclaim some of it after the year end.

How CIS works, step by step

  1. Registration. Contractors register as contractors, subcontractors register to get the 20% rate instead of 30%.
  2. Verification. Before paying, the contractor verifies each subcontractor with HMRC to confirm the deduction rate.
  3. Deduction. The contractor deducts 20% or 30% from the labour part of each payment and pays it to HMRC.
  4. Statements. The subcontractor receives a deduction statement showing what was taken.
  5. Reclaim. Because CIS is deducted before expenses and allowances, subcontractors often overpay and reclaim after the year end.

Getting back what you are owed

Sole trader subcontractors reclaim overpaid CIS through their Self Assessment return. Companies offset it against other payroll taxes or reclaim from HMRC. Either way, keeping every deduction statement is what makes a smooth, full reclaim possible.

Owed a CIS refund?

Many subcontractors are due money back but never claim it in full. TaxTune gathers your statements, claims your expenses, and gets the maximum refund HMRC owes you.

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Frequently asked questions

What is the CIS deduction rate?

Contractors deduct 20% from registered subcontractors and 30% from unregistered ones. Registering as a subcontractor is what secures the lower 20% rate.

Is CIS an extra tax?

No. It is an advance payment of your income tax and National Insurance. Because it is taken before expenses and allowances, you often overpay and reclaim after the year end.

How do subcontractors get CIS back?

Sole traders reclaim overpaid CIS through their Self Assessment return. Limited companies offset it against payroll taxes or reclaim it from HMRC.

What is CIS verification?

Before paying a subcontractor, a contractor checks with HMRC to confirm whether to deduct at 20%, 30% or nothing. It ensures the right rate is applied.

Do I need to keep CIS statements?

Yes. Deduction statements are your evidence of tax already paid. Keeping every one is what allows a full and smooth refund claim.