If you work in construction as a subcontractor, the Construction Industry Scheme affects how you get paid and how much tax is deducted before you even see the money. This guide explains exactly what CIS means for you, what you need to have in place, and what happens if things have slipped.

Why CIS accounting matters for subcontractors

The Construction Industry Scheme (CIS) is HMRC’s system for collecting tax from subcontractors before it reaches your bank account. If you are paid by a contractor rather than directly by an end client, the contractor is legally required to deduct tax from your labour payments before passing them on to you. That deduction sits with HMRC as a credit against your tax bill.

The deduction rate depends entirely on your registration status. Subcontractors who are not registered with CIS are deducted at 30%. Registered subcontractors are deducted at 20%. Subcontractors who qualify for gross payment status pay nothing upfront and settle their own tax bill directly. The difference between 20% and 30% on a large contract is a serious amount of cash.

Where most subcontractors go wrong

Most CIS problems start from one of two places: not registering at all, or registering but then doing nothing else. Both create headaches that cost money to resolve. The encouraging news is that they are entirely fixable once you know what you are dealing with.

Not registering for CIS

If you are operating as a subcontractor and you have not registered for CIS, your contractor is required to deduct 30% from every labour payment. That is 10 percentage points more than the standard 20% rate. Registering is straightforward and stops the higher deduction immediately from your next payment cycle. Failure to register is consistently listed as the most common CIS mistake made by subcontractors across the industry.

Not claiming back what you are owed

CIS deductions are credits, not a final tax payment. When you file your Self Assessment return at the end of the tax year, those deductions are offset against your actual tax liability. If more was deducted than you owe, HMRC refunds the difference. Many subcontractors either do not file at all or file without properly accounting for CIS credits, leaving money with HMRC that belongs to them. Gross payment status is another option worth reviewing if your turnover is consistent and your tax affairs are in order, as it removes the deduction entirely.

What to do, step by step

Getting your CIS accounting in order follows a logical sequence. Each step builds on the last, and none of them are complicated when you take them one at a time.

1. Register for CIS with HMRC if you have not already done so. You do this through your Government Gateway account under the CIS section. Once registered, your contractor verifies you through HMRC and applies the 20% deduction rate rather than 30%. This alone can make a significant difference to your monthly take-home.
2. Collect your CIS deduction statements from every contractor you work with. They are required to give you a monthly statement showing what they paid you, what the deduction was, and what was passed to HMRC. Keep every one of these. They are the evidence you need to claim your credits at year-end through your Self Assessment return.
3. File your Self Assessment tax return at the end of the tax year and include all CIS deductions as credits. Your taxable profit is calculated on your income minus allowable expenses. The CIS amounts already deducted are then offset against your total tax bill. If the credits exceed what you owe, HMRC issues a repayment.

If you are also employing workers on a subcontract basis yourself, the rules shift significantly. You take on contractor responsibilities, including verifying your subbies through HMRC and making your own CIS monthly returns. From April 2026, contractors must file a nil return in any month where no subcontractor payments are made, unless they have given HMRC prior notice. Missing that filing creates a late filing penalty even when no money changed hands.

Costs and what to expect

The honest choice for most subcontractors is between managing CIS themselves and handing it to an accountant. Both are valid, depending on your confidence with numbers, your time, and how much the risk of an error would cost you. HMRC can recover under-deducted CIS tax for up to six years from the end of the tax year it relates to, with interest and penalties on top. That is the real cost of getting it wrong.

How to get started today

You do not need everything perfect before taking the first step. The most important thing is to establish where you currently stand, because that determines what needs doing and in what order. Many people who contact me think they are further behind than they actually are.

• Gather your CIS deduction statements. Contact every contractor you have worked with and ask for a statement for each month you were paid under CIS. If you do not have them, contractors are legally required to provide them.
• Check whether you are registered for CIS with HMRC. Log into your Government Gateway account and look under the CIS section. If you are not registered, you can do it there and then. Registration is free and reduces your deduction rate from 30% to 20% from the following payment.