Construction industry scheme (CIS)

Basics

The Construction Industry Scheme (CIS) is an HMRC scheme which applies if you work for a contractor in the construction industry but not as an employee, so for example as a self-employed individual. The CIS rules mean that the contractor is usually required to deduct tax from their payments to you, at a rate of either 20% if you are ‘registered’ or 30% if you are not.

This is different from other self-employed individuals not within the construction industry, who normally receive their payments without any tax being deducted before the payment is made to them (this is called gross payment).

It is important to be clear that even though a contractor is withholding tax under the CIS on payments made to you and you might receive documents very similar to payslips (see under the heading Pay statements below) you are not being treated as an employee and so will probably not be given any of the employment rights that usually go along with being an employee. There is more information on this under the heading Employment rights below. 

The CIS covers more than what you may typically think of as building and civil engineering work, for example it includes work in demolition, site clearing, repairs and decorating, traffic management for construction purposes and installing power systems. The HMRC CIS manual details what work is included within the CIS.

Note that if you supply construction industry type services directly to a homeowner (so not to a contractor), then this would not fall under the CIS and the customer would pay you in full (gross), usually on receipt of your invoice.

The amount of tax that must be deducted by the contractor depends on whether you register as a subcontractor under the CIS. See Registering with HMRC, below.

Who does the Construction Industry Scheme (CIS) apply to?

You should only pay tax under the Construction Industry Scheme (CIS) if you are genuinely self-employed.

Not everyone who works in the construction industry is self-employed. Contractors must decide if their workers are employed or self-employed.

Whilst most contractors would no doubt prefer to take on workers on a self-employed basis (as this means less cost/fewer responsibilities/paperwork etc for them), self-employment is a question of fact, not choice. You can read more about deciding employment status on our page Employed, self-employed or neither.

In situations where a person works exclusively for one contractor and does not have the risks of running a business, then they are likely to be an employee, rather than self-employed – even if the work arrangement is only for a very short time, or they have an existing unique taxpayer reference (UTR) or they provide their own small tools.

If you are regarded as an employee of the contractor, then income tax (and National Insurance contributions) will need to be withheld at source by the contractor under the pay as you earn (PAYE) system and you should receive payslips every payday. 

Working through an intermediary

If you find construction work through an agency and/or are paid through an umbrella company or another intermediary, then the rules may be modified slightly. However it is important to understand that there still has to be consideration of employment status in some form or another – CIS is not just the default for the contractual chain or payment method in question. In particular:

• Where services are provided through a personal service company (PSC), CIS may apply only where the engagement is outside the IR35/off payroll rules. Where the engagement is inside IR35/off payroll, payments are generally subject to PAYE and CIS does not apply. Also see the information under Limited companies, below.
• Where you work through an umbrella company, you are ordinarily treated as an employee of that umbrella company and therefore subject to PAYE. CIS will only apply in exceptional circumstances where you are, in substance, genuinely self-employed under the standard employment status tests. See also the bullet point below. 
• Where an agency forms part of the supply chain (whether or not there is also an umbrella company in it), CIS will only apply where you are not subject to (or the right of) supervision, direction or control by any party in the contractual chain. In practice, most agency workers are within supervision, direction or control so fall within PAYE rather than CIS.

Registering with HMRC

Both contractors and subcontractors need to consider whether they should register with HMRC under the Construction Industry Scheme (CIS).

It is possible to be both a contractor and subcontractor at the same time.

Contractors

If you are engaging other self-employed workers doing construction work, then you are a contractor and must register under the CIS. There is more information on how to register for the CIS as a contractor on GOV.UK.

Subcontractors

As a self-employed worker, it is more likely that you will be engaged, or taken on, by a contractor to perform some construction work. This will mean you are a subcontractor. If you are a subcontractor, then you can choose whether or not to register under the CIS.

GOV.UK explains how you can register for the CIS as a subcontractor and what information you will need to be able to register. There are different methods depending on whether or not you have already registered as self-employed and if you are working for yourself as a sole trader or through a different trading entity, such as a limited company (see our Limited companies section below) or a partnership.

Registration under the CIS is in addition to registration as self-employed for self assessment, not instead of registering as self-employed. This means for those new to both self-employment and the CIS, there are two separate registrations. However, both can be done at the same time.

Tax deductions at 20%

If you decide to register for the CIS, then the contractor must deduct and withhold tax at a rate of 20% of the amount of your invoices. If your invoice includes direct expenses such as for materials or tool hire, then tax should not be withheld from these amounts, so you should be paid 100% of these costs. If you are VAT registered see the heading on VAT below.

Note that informal ‘self-billing invoices’ are quite common in the construction industry – rather than you issuing an invoice for your services, the contractor raises a self-billing document and forwards a copy to you with your payment. You should always check ‘self-billing invoices’ to make sure that they agree to your records and show what you expected to be paid.

The 20% tax deducted by the contractor is paid by them to HMRC who treat it as an advance payment towards your income tax and National Insurance contributions for the particular tax year as shown by your self assessment tax return (or, from 2026/27 onwards, your end of year tax return under Making Tax Digital for income tax.) We explain how the withheld tax payments are taken into account when working out your overall tax position under the heading Self assessment below.

You should receive 80% of the invoice paid directly to you, according to your agreed invoice terms, along with the full amounts for any additional costs, such as materials. 

Tax deductions at 30%

If you decide not to register under the CIS then the contractor must deduct and withhold tax at a rate of 30% of the amount of your invoices for your work (but not any amounts you invoice for direct expenses such as materials or tool hire, etc). 

As illustrated in the example above, the advantage of registering under the CIS is that the contractor only withholds tax at a rate of 20% instead of 30%.

Gross payment status

If you register for the Construction Industry Scheme (CIS) and your tax affairs are up to date then you can apply to HMRC to have gross payment status in some circumstances, which will allow the contractor to pay you without making any deductions for tax at all. GOV.UK explains the conditions you must meet for HMRC to agree to your application for gross payment status.

You can apply for gross payment status at the same time as registering as a subcontractor.

Self assessment

Under the Construction Industry Scheme (CIS), contractors are required to check whether self-employed subcontractors are registered with HMRC. In order for the contractor to do this, they will need your unique taxpayer reference (UTR) and National Insurance number.

If you are a self-employed subcontractor, the payments you receive under the CIS may be subject to tax deductions (see Registering with HMRC above): 

• 20% for CIS registered subcontractors,
• 30% for subcontractors not registered with the scheme.

The amounts withheld by the contractor are paid to HMRC who treat them as advance payments towards your individual income tax and National Insurance contributions bill for the relevant tax year.

As you will usually need to complete a self assessment tax return or, from 2026/27, an end of year tax return under the new Making Tax Digital for income tax rules, you will need to include your gross self-employment income on the return. This is your total sales income, which will be the amount that you have invoiced, not the amount you received after the CIS deductions. This is the case even if your invoice includes amounts for things like materials, tool hire etc. Your tax return must also include any business expenses that are to be deducted from your self-employed income to arrive at your self-employed profit.

Self assessment tax return

If you complete a self assessment tax return, the amount of tax that has been deducted under the CIS from your payments should be entered in box 38 on page SES2 of the self-employment (short) pages and box 81 on page SEF5 of the self-employment (full) pages. This will mean that when your tax and National Insurance contributions are calculated the advance payments that have been made through the CIS deductions will be taken into account. 

We show how this works in the example below.

Moira’s tax position, (of overpaying tax through the CIS deductions and being due a refund), is common to many self-employed sole traders who are registered for the CIS but do not have gross payment status. It usually arises because CIS deductions are based on sales income and therefore do not take account of the tax-free personal allowance or business expenses. 

See our page Construction Industry Scheme (CIS) tax refunds for more information on how repayments can be obtained. 

Making Tax Digital end of year tax return (from 2026/27 onwards) 

As part of the new  Making Tax Digital for income tax process, HMRC will pre-populate the end of year tax return with information on CIS deductions that it holds on its own records (from CIS contractor reports). You should check this pre-populated information to make sure it agrees with your own business records.  When your tax and National Insurance contributions are calculated the advance payments that have been made through CIS deductions will be taken into account in the same way as shown above in the example of Moira. 

Scotland and Wales

Devolution of some tax powers means that Scotland now sets its own rates of tax, known as Scottish income tax, and Wales introduced the partial devolution of income tax, the Welsh rate of income tax, in the 2019/20 tax year.

The interaction between the CIS deductions, using the UK rates, and Scottish income tax and the Welsh rate of income tax are explained in our Tax and NIC section.

Pay statements

The rules of the Construction Industry Scheme (CIS) require the contractor to provide at least one ‘payment and deduction’ statement, sometimes called a PDS, each tax month (a tax month runs from 6th of one month to the 5th of the next, for example 6 May 2026 to 5 June 2026). This should be given to the subcontractor within 14 days of the end of the tax month, (so for the tax month ending 5 June 2026 you should receive your statement by 19 June 2026).

The statement must show the contractor's name, details of the payment(s) made, the cost of any materials incurred, and the deduction(s) made from the payment(s).

It is very important that you retain these statements (as well as details of your expenses unless you are claiming the trading allowance) as you will need them to complete your tax return. If you do not keep adequate records or complete your tax return correctly or on time, you may have to pay a penalty.

How to find your CIS details

If you have lost or are missing statements, then you need to approach the contractor first to ask for them. They have a legal obligation to provide them to you. If you aren’t sure how to contact the contractor, you could try the following:

• Check any old paperwork for their contact information.
• Search online for their name to see if they are still in business. If they have a website, check the "About Us" or "Contact Us" sections to find their contact details or the company's main contact information.
• Check local business directories or the phone book.
• If they are part of any professional associations or groups, such as the National Federation of Builders, you might find their contact information through those channels.
• If they are a limited company you could also search for their details on the Companies House website.
• Reach out to any former colleagues or contacts who may still be in touch with the contractor. They may have updated contact information for the contractor.
• Use social media platforms like Facebook, Twitter, or Instagram to search for the company or any former colleagues who may have connections to the old contractor.

The contractor should be reporting and paying over any CIS deductions that they have withheld from you to HMRC. This means that HMRC should have a copy of your pay and tax details. HMRC will only provide you with information from their own systems where it can be shown that you have a genuine need and you’ve made every effort to get the missing information.  HMRC will no longer provide this information to subcontractors using the CIS helpline. Instead, you must write to HMRC to request any missing Payment and deduction statements using the following address: 

HMRC say they will aim to respond to the written requests for pay and tax details within fifteen working days. 

We have produced a template letter that you can send to HMRC. As stated above, you should only write to HMRC for the details after trying to get them from your contractor.

Please bear in mind that we cannot take any responsibility if you choose to use this template. It is up to you to ensure that whatever letter you send is appropriate in your particular case. Where you need to choose options in the letter or consider tailoring it to your own circumstances, we have given instructions (in brackets).

If all else fails, then it may be possible to work out the amounts you need for your tax return from looking at your bank statements. For example, if you are a CIS registered, labour-only worker not using the gross payment scheme and received £260 into your bank account, then as this is the amount after 20% tax, you can work out that the ‘gross’ payment will have been £325 by doing the sum £260 x100/80. The difference – £65 – will be the amount of CIS withheld.

What if it looks like my contractor hasn’t reported or paid my CIS deductions to HMRC?

If it looks like your contractor hasn’t reported or paid your CIS deductions to HMRC then you could try talking to the contractor in the first instance (see above for how to contact them). If your direct supervisor or manager isn’t helpful, you could try asking the HR or accounts team about the status of your tax payments. They may be able to provide clarification or help resolve any discrepancies. If this proves to be unsuccessful then if tax has been deducted from you but not paid to HMRC by the contractor, then the law says this should be HMRC’s problem to sort out with the contractor – you will not have to pay the tax again. HMRC’s own guidance manual confirms “If a contractor makes a deduction from a subcontractor payment but does not pay the sum over to HMRC, it will be treated as having been paid when calculating the subcontractor’s liability: SI2005/2045 reg 9(10).”

GOV.UK has information on how to report the contractor to HMRC so they can investigate.

In terms of your own tax position, the law means that you can take a credit for the tax and National Insurance contributions that were deducted from you through CIS in your tax return. You may have to explain what has happened in the ‘additional information’ section of your tax return and indicate the use of estimated figures. If you need help with completing a tax return in these circumstances, you may need to ask a professional adviser. You can find information about how to contact a tax adviser, including one from TaxAid on our getting help page.

Limited companies

You may have heard about supplying your services through your own limited company as a way of saving some tax. However, setting up a limited company is very different from just being 'self-employed'.

You can read more detailed information about running a limited company on our limited companies page. However this, generally, may not be a suitable way to trade for the lower-profit making business because of all the administrative considerations (and you should also note that if you are supplying your services to primarily one contractor, then you may well fall under IR35/the off-payroll rules, which makes things even more complicated).

If you do trade as a limited company, then you should be aware that the CIS applies to companies as well as to individuals. Where the CIS tax has been withheld at source from payments made to a company, then the deductions made may be set against the company's other liabilities such as any PAYE liabilities (or where the subcontractor itself uses further subcontractors, CIS), and corporation tax. For more information, see GOV.UK.

If you are trading as a limited company which has CIS deductions, then you should seriously consider obtaining professional assistance with your tax position.

VAT

Some self-employed people are registered for VAT (either on a mandatory basis or voluntarily) and must add VAT to their invoices. 

VAT is a complex tax – any ‘benefits’ there are of entering the VAT regime can be reduced or wiped out by additional administration, accountancy fees or penalties for getting things wrong. Voluntarily entering the VAT regime is therefore not something to be undertaken lightly. 

If you are VAT registered subcontractor, then, since 1 March 2021 the domestic reverse charge rules may apply to some supplies of specified services between VAT registered businesses within CIS. This is an anti-fraud measure.

Under these rules, you do not add VAT to your invoice to the contractor. The contractor accounts for the VAT instead. CIS continues to apply to the labour element. 

There are a number of factors to consider when working out if you need to apply the domestic reverse charge rules. These include:

• Whether the contractor is VAT registered;
• Whether the supply of services is standard rated, reduced rated or zero rated for VAT purposes;
• If the contractor is an ‘end-user’ or intermediary supplier.

HMRC provides a helpful flowchart on GOV.UK which you can use to see if you need to apply the domestic reverse charge or account for VAT in the ‘normal way’.

The examples below show how to account for VAT in the normal way and how to if you must use the domestic reverse charge.

For more general information on VAT when self-employed see our page VAT when running a business. This also covers voluntarily registering for VAT and the Flat Rate Scheme. 

You can watch a HMRC webinar on GOV.UK for more information on the VAT reverse charge rules.

Employment rights

Employment rights depend on an individual’s employment status for employment law purposes. This can be different to employment status for tax law purposes. This is because tax law only recognises two types of status – employed and self-employed. For employment law, there are three potential statuses to consider – employee, ‘worker’ and self-employed.

Construction industry workers within the scope of the Construction Industry Scheme (CIS) are often classified as self-employed. This means that as far as employment rights go, they have very little protection under employment law. 

There are some people working in the construction industry who should be treated as an employee but are being treated as self-employed incorrectly. Even where they are being treated as self-employed correctly for tax purposes, they might be a ‘worker’ for employment law purposes. 

See our Employment rights page for more information on the employment rights associated with each employment status.

There is more general information on ‘worker’ status on GOV.UK.

A warning about unscrupulous agents

We are aware of some unscrupulous tax agents operating in the CIS sphere. While we appreciate that both the CIS and self assessment systems (including the new Making Tax Digital reporting rules) can be quite daunting and the offer of help with registration and ongoing compliance may feel very welcome, their services are not always in your best interests. 

Some agents target subcontractors because:

• CIS deductions can often result in income tax repayments, and 
• VAT-registered subcontractors may also be in a VAT repayment position (see VAT and CIS for subcontractors above) 

Agents may therefore benefit financially from providing ongoing tax services. However, in some cases, these agents will charge high fees or take a percentage of any refund, reducing the amount you receive. In other cases they may make false repayment claims on your behalf and/or then disappear with the money. 

We provide detailed guidance on common pitfalls with unscrupulous tax refund agents, including what to do if you have a problem and how to choose a reputable tax agent. We also have a page of guidance deducted to CIS refunds, which contains helpful information about using an agent. 

More information

There is more information on the CIS on GOV.UK including information on: 

• registering as a sole trader subcontractor, 
• what you must do as a CIS subcontractor, 
• the domestic reverse charge technical guide and 
• CIS 340 which contains detailed guidance and examples for both contractors and subcontractors.

HMRC runs webinars about the CIS and you can also contact HMRC’s CIS Helpline. HMRC have produced a Tax Facts film which explains the CIS for school leavers.

The way some self-employed individuals will need to report their tax information to HMRC is changing under new Making Tax Digital for income tax rules. Our detailed guidance on Making Tax Digital explains who must use these new reporting rules and what you need to do.

You may find our guide to self-employment helpful. It explains the less common tax rules and contains more detailed information, including a case study showing how to prepare accounts and what to include on your 2025/26 tax return.