CIS deductions explained: a simple guide for subcontractors

If you work as a subcontractor in construction, the contractor deducts 20% from your pay before they pay you. That goes to HMRC. This guide explains it plainly so you can avoid costly mistakes.

How CIS works

Simple example: you invoice £1,000. The contractor pays you £800. The other £200 is sent to HMRC as an advance against your eventual tax bill. At Self Assessment time, those CIS deductions are credited against what you owe. If too much was deducted, you can get a refund.

CIS rates are usually:

• 20% for registered subcontractors.
• 30% if you are not registered (register quickly to avoid this).
• 0% for gross payment status when compliance criteria are met.

What you need to track

For every CIS payment, keep:

• Contractor name and UTR.
• Gross amount.
• Deduction amount.
• Net amount received.
• Date paid.

Keep every deduction statement from each contractor. Without those statements, year-end claims become far harder than they need to be.

The monthly headache

Working for multiple contractors means tracking deductions by contractor and by month. A realistic month might look like this:

• ABC Builders: 3 payments, £3,200 gross, £640 deducted.
• Smith Construction: 2 payments, £1,800 gross, £360 deducted.
• Jones Civils: 1 payment, £900 gross, £180 deducted.

That one month is already £1,180 deducted. Over a full year, many subcontractors are tracking £10,000+ of CIS deductions that must be reconciled and claimed accurately.

Common mistakes

• Not registering for CIS (and losing 30% instead of 20%).
• Not keeping deduction statements.
• Not reconciling totals monthly.
• Forgetting to claim CIS deductions in Self Assessment.

If you want the wider compliance context, read our MTD guide for sole traders. For how this data flows into filing software, see how Billdr and FreeAgent work together.

How Billdr handles CIS

In Billdr, you can mark an invoice as CIS and the app calculates the 20% deduction, shows expected net payment, and logs totals per contractor. Monthly summaries are ready for review and included in the accountant pack PDF. Data syncs to FreeAgent so your records stay aligned for MTD workflows.

£9/month. 30 days free. Start at billdr.co.uk/signup.