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For contractors: calculate the exact CIS amount to deduct from subcontractor payments and pay to HMRC — covering all verification statuses and materials splits, with a monthly liability summary.
The gross invoice amount before any deductions
CIS applies to labour only — materials are excluded
CIS Deduction
£200.00
Pay to HMRC
Net to Subcontractor
£800.00
After deduction
Labour
£1200.00
CIS deduction
£240.00
Net to pay
£1260.00
Labour
£800.00
CIS deduction
£240.00
Net to pay
£560.00
Next step
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CIS deduction rules are set by HMRC under the Construction Industry Scheme. This calculator implements the scheme rules exactly as described in HMRC CIS guidance.
CIS deductions apply only to the labour element of a subcontractor's payment. Materials the subcontractor supplies can be excluded — but only verified genuine materials costs. Labour = total invoice amount − materials. If no materials breakdown is provided, HMRC treats the full payment as labour. Plant hire (where the operator drives the plant) is treated as labour under CIS.
Three rates apply: 0% for subcontractors with gross payment status; 20% for registered subcontractors verified as standard; 30% for subcontractors who cannot be verified or are not registered with HMRC. Always verify before the first payment using CIS Online or the HMRC CIS Helpline (0300 200 3210). If HMRC cannot match the subcontractor's details, apply 30% regardless.
CIS deduction = labour element × deduction rate. Net payment to subcontractor = total invoice − CIS deduction. The deduction is held by the contractor and paid to HMRC as part of the monthly CIS return. Note: the deduction is from the subcontractor's gross payment — the contractor does not absorb the cost. The subcontractor receives less; the deduction is offset against their future tax liability.
Contractors must file a monthly CIS return with HMRC by the 19th of the following month, showing all payments made to subcontractors in the tax month (6th–5th). The total deductions must be paid to HMRC by the same deadline (22nd for electronic payment). A nil return must be filed even if no subcontractor payments were made. Deductions are reported on the EPS (Employer Payment Summary) for contractors also running payroll, or via the standalone CIS return.
WORKED EXAMPLE
Steve runs a building company in Bristol. He pays a plastering subcontractor £2,400 for a month's work. The invoice includes £400 of materials (plasterboard, plaster). The subcontractor is registered standard with HMRC (20%).
Total invoice
£2,400
Materials deducted
£400
Labour element
£2,000
CIS deduction (20%)
£400
Net to subcontractor
£2,000
Steve pays HMRC
£400
HMRC payment due by 19th
£400
Effective rate 16.7% on total invoice · Subcontractor reclaims via Self Assessment
Always use HMRC-verified rates and keep records of all CIS deduction statements issued to subcontractors. The subcontractor must receive a deduction statement showing the gross amount, materials, labour, and deduction within 14 days of the end of each tax month.
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Common questions about CIS deductions and the Construction Industry Scheme.
The Construction Industry Scheme (CIS) is an HMRC scheme that requires contractors in the construction industry to deduct money from a subcontractor's payment and send it to HMRC. These deductions count as advance payments towards the subcontractor's tax and National Insurance bill. CIS applies to most construction work — building, demolition, repairs, decorating, civil engineering — but not to architecture, surveying, scaffolding hire (without erection), or carpet fitting.
A contractor is a business that pays subcontractors for construction work. A subcontractor is a business or individual who carries out work for a contractor. The same business can be both — a company that is paid by a main contractor (so is a subcontractor) and also pays its own subbies (so is a contractor). The CIS obligation to deduct falls on the contractor. Subcontractors can reclaim CIS deductions against their own tax liabilities at year-end.
Contractors must verify subcontractors with HMRC before making the first payment. Verification is done via CIS Online (Government Gateway), the HMRC CIS Helpline (0300 200 3210), or your payroll/accounting software. You provide the subcontractor's name, UTR (Unique Taxpayer Reference), and NI number (for individuals). HMRC confirms their registration status and tells you which rate to deduct: gross (0%), standard (20%), or unverified (30%). Keep a record of the verification number.
Contractors must file a monthly CIS return with HMRC by the 19th of each month following the tax month in which payments were made (the tax month runs from the 6th to the 5th). The CIS deductions must also be paid to HMRC by the 19th (or 22nd for electronic payment). For example, deductions made in the tax month 6 June – 5 July must be reported and paid by 19 July. Failure to file on time incurs automatic penalties starting at £100 for the first month.
Gross payment status (GPS) means a subcontractor receives payments in full — no CIS deductions are made. To qualify, a business must have had a net CIS turnover of £30,000 or more in the previous 12 months (£100,000 for companies with 3+ directors), have been compliant with its tax obligations for the past 3 years, and be run by someone with no serious criminal record. HMRC reviews GPS status annually. Loss of GPS due to non-compliance results in immediate reversion to the 20% deduction rate.
CIS deductions apply only to the labour element of a subcontractor's payment. Materials that a subcontractor supplies and includes in their invoice can be deducted from the total payment before applying the CIS rate — but only if they are genuine material costs the subcontractor actually paid for. Plant hire (where the operator is included) is treated as labour. If a subcontractor cannot demonstrate the cost of materials, HMRC may treat the entire payment as labour. Always ask for a breakdown of labour vs. materials on every subcontractor invoice.
From October 2019, most construction services between VAT-registered businesses are subject to the domestic reverse charge. Under the reverse charge, the subcontractor does not charge VAT on their invoice — the contractor self-accounts for the VAT. CIS deductions are applied to the payment excluding VAT. So if a subcontractor invoices £1,000 + VAT with the reverse charge, CIS is applied to the £1,000 net figure (or to the labour element after deducting materials). CIS has no effect on the VAT amounts themselves.
Automatic penalties for missing the CIS monthly return deadline (19th of the month) are: £100 for the first month late; £200 for 2 months late; £300 (or 5% of the CIS liability, whichever is higher) for 3 months late; £300 (or 5%) for 6 months late; and further escalating penalties for longer delays. HMRC can also charge daily penalties. If you made no payments in a tax month, you must still file a nil return to avoid penalties. The penalties apply per return, not per subcontractor.