What is the CIS deduction rate?

Under the Construction Industry Scheme, a contractor deducts 20% from a registered and verified subcontractor, 30% from an unregistered one, or 0% from a subcontractor with gross-payment status. The deduction is paid to HMRC as an advance on the subcontractor's tax and NICs.

Is the deduction taken on materials?

No. The CIS deduction is calculated on the labour element only. Materials, VAT, the CITB levy, and plant hire or fuel costs where applicable are all excluded, which is why the labour/materials split on an invoice matters so much.

Is the CIS deduction a final tax?

No. It is an advance payment toward the subcontractor's year-end liability. The subcontractor offsets the total deducted against their Self Assessment or Corporation Tax bill, and may receive a refund if too much was withheld.

How does a subcontractor get the 20% rate instead of 30%?

By registering with HMRC for CIS and being verified by the contractor. Verification returns the correct rate; an unverified or unregistered subcontractor is deducted at the higher 30% rate until they register.

What is gross-payment status?

Gross-payment status lets a subcontractor be paid in full with no CIS deduction, settling their tax through Self Assessment or Corporation Tax instead. It requires passing HMRC's turnover, compliance and business tests, and improves cash flow significantly.

UK CIS Deduction Calculator

The UK CIS Deduction Calculator works out how much tax a contractor must withhold from a subcontractor’s payment under the Construction Industry Scheme, and what the subcontractor actually receives. The two things that decide the answer are the labour/materials split and the subcontractor’s registration status.

How it works

CIS requires contractors to deduct tax from payments to subcontractors and pass it to HMRC. The rule the tool enforces is that the deduction applies to the labour element only:

deduction = labour charge × rate
net payment = labour + materials − deduction

The rate is 20% for a registered and verified subcontractor, 30% for an unregistered one, and 0% for a subcontractor with gross-payment status. Materials, VAT, the CITB levy and plant/fuel costs are never part of the calculation.

Example and notes

On an invoice of £2,000 labour and £500 materials from a registered subcontractor, the deduction is 20% of £2,000 = £400. The subcontractor is paid £2,000 + £500 − £400 = £2,100, and the contractor sends £400 to HMRC. The same invoice from an unregistered subcontractor is deducted at 30% (£600), leaving £1,900.

The deduction is not a final tax — it is an advance the subcontractor offsets against their year-end Self Assessment or Corporation Tax bill, often producing a refund. This is an estimate to help with invoicing and cash-flow planning; record the labour/materials split accurately on every CIS payment and statement.