Written by the TaxTune Editorial Team·Reviewed by our qualified accountants·Updated June 2026

How CIS works for subcontractors

Under the Construction Industry Scheme, contractors deduct tax from the payments they make to subcontractors and pass it to HMRC on your behalf. For a registered subcontractor the deduction is 20% of the labour element. The deduction is taken from labour only, not from the cost of materials you supply, and not from things like plant hire that are itemised separately.

Importantly, the 20% is a flat deduction. It takes no account of your personal allowance of £12,570, and it ignores your business expenses. That is the heart of why so many subcontractors are due money back. You can read more in our guides to CIS refunds and how to claim a CIS refund.

Declaring your income and CIS deducted

On your Self Assessment return you report your construction income as a self employed trade. You declare your gross income, meaning the full amount invoiced before the CIS tax was taken off, not the net amount you received.

You then separately enter the CIS tax deducted during the year. Your contractors should give you monthly payment and deduction statements, often called CIS vouchers, showing the gross pay, the cost of any materials, and the tax deducted. Add up the deductions across all your contractors for the tax year.

This deducted tax is treated as a payment you have already made towards your bill. When HMRC works out your actual liability and compares it to what has already been deducted, the difference is usually a refund.

Claiming your expenses

Because the 20% deduction ignored your costs, claiming your business expenses is what turns a modest refund into a proper one. Allowable costs for a typical subcontractor include:

  • Tools, small equipment and protective clothing
  • Vehicle costs, either 45p per business mile for the first 10,000 miles and 25p after that, or actual running costs
  • Public liability and tools insurance
  • Materials and consumables you paid for
  • Phone, and accountancy fees

Every pound of allowable expense reduces your taxable profit, and because tax has already been deducted on the full labour figure, that reduction usually flows straight through to a larger refund. Our guide to expenses for CIS subcontractors covers what you can and cannot claim.

A worked example

Worked example

A subcontractor due a refund

Liam is a registered CIS subcontractor. Over the tax year his gross labour income is £38,000, and his contractors deducted 20%, which is £7,600 of CIS tax. His allowable expenses, including tools, mileage, insurance and his phone, come to £6,000.

His profit is £38,000 less £6,000, which is £32,000. After the personal allowance of £12,570, he is taxed at 20% on £19,430, which is £3,886 of income tax. Class 4 National Insurance at 6% on the profit above the threshold adds a further amount, say around £1,160.

So his actual bill is roughly £5,046, but £7,600 has already been deducted under CIS. The difference of about £2,554 is refunded to him through Self Assessment once the return is filed.

Common mistakes

CIS returns lose people money in a few familiar ways.

  • Declaring net pay. You must declare gross income before the deduction, then enter the CIS tax separately. Declaring only what you received understates both income and the tax already paid.
  • Not entering the CIS deductions. If you forget to claim the tax deducted, you lose your refund. Keep every monthly statement.
  • Skipping expenses. The deduction ignored your costs, so failing to claim tools, mileage and insurance leaves money with HMRC.
  • Losing the statements. Without your CIS vouchers it is hard to prove the deductions. Ask contractors for any missing ones.
  • Filing late. A late return delays your refund and can bring penalties.

What you should do

Keep every monthly CIS statement in one place and log your expenses and business miles as you go. The sooner after the tax year you file, the sooner the refund lands, so there is no reason to wait until January if your records are ready.

The online filing deadline is 31 January after the tax year, but for a refund the earlier you file the better. You can estimate your position with our tax calculators, and TaxTune can prepare your CIS return, claim every allowable expense and chase the refund you are owed. When you are ready, start your quote.

In short

A guide to how subcontractors report CIS income, declare tax already deducted, claim expenses and recover their refund.

Frequently asked questions

Why am I due a CIS refund?
The 20% CIS deduction is a flat rate that ignores your personal allowance of £12,570 and your business expenses. When your actual tax is worked out on Self Assessment, it is usually less than what was deducted, so the difference is refunded.
Do I declare gross or net income?
You declare your gross income, the full amount invoiced before the CIS tax was taken off, and then enter the CIS tax deducted separately. Declaring only the net amount understates both your income and the tax already paid.
What expenses can a subcontractor claim?
Typical claims include tools, protective clothing, vehicle costs by mileage or actual running costs, insurance, materials you paid for, phone and accountancy fees. Claiming these reduces your profit and usually increases your refund.
Is CIS deducted from materials?
No. The 20% deduction applies to the labour element only. The cost of materials you supply, and items such as separately itemised plant hire, are not subject to the deduction.
How do I get my refund?
You file a Self Assessment return declaring your income, expenses and the CIS tax deducted. HMRC compares your actual liability with the tax already deducted and refunds the difference.
When should I file to get my refund quickly?
The deadline is 31 January after the tax year, but you can file from soon after the tax year ends on 5 April. Filing early means your refund is paid sooner.