CIS deductions explained in plain English
If a contractor takes a chunk off your pay before you see it, that's CIS. Here's what the deduction is, why it happens, and why most subcontractors get some of it back.
What this assumes
This estimate treats your CIS work as your only self-employed income for the year, applies the standard personal allowance, income tax bands and Class 4 National Insurance, and assumes Class 2 NI is covered by credit. It does not handle student loans, other income, or anything unusual in your tax code. Always check the result against your own records and HMRC.
Source: HMRC — Construction Industry Scheme
This is an estimate to help you plan, not financial, tax or legal advice.
How the refund is worked out
Under the Construction Industry Scheme, contractors take tax off your labour before they pay you — usually 20% if you’re registered, or 30% if you’re not. That deduction is a rough advance payment of your tax bill. The problem is it’s taken from your gross pay, before any of your costs are considered, and it ignores your tax-free personal allowance. By the end of the year, the tax you actually owe is often a fair bit lower.
This calculator takes your gross earnings, subtracts the expenses you can claim, and works out the income tax and Class 4 National Insurance due on what’s left. It then compares that to the CIS tax already taken off your pay. If you’ve overpaid, the difference is your estimated refund.
A quick worked example
Say you earned £32,000 over the year and had £6,000 of CIS tax deducted. You spent £3,000 on tools, van fuel and insurance. Your taxable profit is £29,000. After the personal allowance, the income tax and Class 4 NI on that come to well under the £6,000 already taken — so you’d be looking at a meaningful refund. Change the numbers above to match your own situation.
What counts as an allowable expense
The honest rule of thumb is: costs you had to pay to do the work. For most subcontractors that means tools and equipment, materials you bought yourself, mileage or van running costs, public liability insurance, protective clothing and safety gear, and a reasonable share of phone and admin costs. Personal spending doesn’t count, and if something is used for both work and personal life you can only claim the work share.
Claiming the refund
The refund comes through your Self Assessment tax return. You report your income, your CIS deductions and your expenses, and HMRC works out the balance. If you’ve overpaid, they refund it — often within a few weeks of filing, once any checks are done. Keep your CIS statements and receipts safe; they’re what back up the claim.
