What is CIS Tax Deduction? A Simple Guide for UK Subcontractors

If you're a subcontractor in the construction industry, you've probably noticed that a portion of your income is taken off before you get paid. This is called a CIS tax deduction — but what exactly is it, and can you get it back?

In this article, we'll explain what CIS tax deduction means, how much is deducted, and how to reclaim overpaid tax — with advice tailored for subcontractors in Bolton, Manchester, and across the UK.

What is CIS Tax Deduction?

Under the Construction Industry Scheme (CIS), contractors must deduct tax from payments made to subcontractors and send it to HMRC. This acts as an advance payment towards your annual income tax and National Insurance.

If you're registered for CIS, the deduction is 20%. If you're not registered, the deduction jumps to 30%.

How Much is CIS Tax Deducted?

The CIS deduction rate depends on your registration status with HMRC:

Only the labour portion of your invoice (excluding materials and VAT) is subject to CIS tax deduction. For example:

If you invoice £1,000 for labour (excluding materials), and you're registered, you'll receive £800, with £200 sent directly to HMRC.

Can You Claim Back Overpaid CIS Tax?

Yes! Many subcontractors end up overpaying tax through CIS deductions. You can claim back the difference when filing your annual Self Assessment tax return.

You're more likely to get a refund if you:

• Have allowable business expenses to deduct
• Worked part of the tax year
• Had higher CIS deductions than your actual tax liability

Allowable Business Expenses

One of the most effective ways to reduce your taxable income and increase your refund is to claim allowable business expenses.

These can include:

• Tools and equipment used for your work
• Protective clothing (hard hats, boots, gloves)
• Mileage or vehicle costs
• Public liability insurance
• Professional fees (e.g., accountants)
• Training courses related to your trade
• Materials not reimbursed by the contractor

Proper record-keeping is essential — and we can guide you on what's claimable under CIS rules.

Why Use YRF Accountants for CIS?

Our CIS services help subcontractors and contractors stay compliant while maximising refunds. We handle:

• CIS registration
• Monthly CIS returns (for contractors)
• Self Assessment submissions
• Expense tracking
• Gross Payment Status applications

With offices in Bolton and Manchester, we work with construction professionals across the UK.

Book a Free CIS Review

Don't leave your hard-earned money with HMRC unnecessarily. Let us handle your CIS compliance and refund claims.

Book your free CIS consultation

Serving Bolton, Manchester, and UK subcontractors nationwide.

Related Articles

• Understanding Allowable Expenses for CIS Subcontractors
• Self Assessment Tax Return Services