CIS Tax Deduction Calculator UK

This is where most of the money gets lost. A CIS deduction applies to the labour element of the payment and nothing else. Everything below is excluded, provided it's shown separately on the invoice:

• VAT charged on the invoice
• Materials the subcontractor paid for
• Consumable stores used up doing the work
• Plant hire, where the plant is hired in from a third party
• Fuel, except fuel used for travelling
• Manufactured or prefabricated materials
• The CITB levy

The catch is that these only come out of the calculation if they're itemised. Send an invoice that says "Groundworks to rear extension, £3,500" and a contractor running CIS by the book will deduct from the whole £3,500, because nothing on the paperwork tells them otherwise. Split labour and materials on every invoice line, every time.

One thing most guides skip: the materials figure you exclude depends on whether you're VAT registered. If you are, you reclaim the VAT on your materials, so you exclude the net cost. If you're not VAT registered, that VAT is money you actually spent and never get back, so the figure you exclude is the VAT-inclusive cost. Getting this backwards on a £960 materials bill costs a non-registered subbie about £32 in over-deducted CIS on a single invoice.

Takeaway: itemise labour separately on every invoice, and if you're not VAT registered, use the gross materials cost.

The rates haven't changed for 2026/27. The 30% rate isn't a penalty and it isn't a different tax. It's the same money, held by HMRC until you reclaim it. The damage is purely to cash flow, and on a busy year it's the difference between funding your own materials and going to the merchant on credit.

Gross payment status needs construction turnover of at least £30,000 in the past 12 months, excluding VAT and materials (companies can qualify on £30,000 per director or £100,000 in total), a UK construction business, a business bank account, and a clean tax compliance record.

Takeaway: if you're on 30%, registering is the single highest-return admin job on your list.

Marek runs a two-man groundworks gang in Nottingham. He's registered for CIS, verified at the standard rate, and VAT registered. He invoices a main contractor for footings on a rear extension:

• Labour: £2,400
• Materials (concrete and rebar from Travis Perkins): £960
• Plant hire (whacker plate and mixer from HSS Hire): £140
• Invoice subtotal: £3,500

Both businesses are VAT registered and the contractor isn't an end user, so the domestic reverse charge applies. Marek charges no VAT. The contractor accounts for the £700 themselves.

The amount subject to CIS is the labour only: £2,400. Materials and plant hire are excluded.

• CIS deduction: £2,400 × 20% = £480
• Net payment to Marek: £3,500 − £480 = £3,020
• The contractor pays HMRC £480 by the 22nd of the following month

Now run the same invoice unverified. The rate becomes 30%, the deduction is £720, and Marek gets £2,780. Same work, same invoice, £240 less in the bank on one job, purely because HMRC couldn't match him.

And if he'd bundled it all as one £3,500 line? The contractor deducts 20% of £3,500, which is £700 rather than £480. That's £220 of his own materials money sitting with HMRC until January.

Takeaway: the labour split is worth more than the rate. Fix the invoice before you worry about the percentage. See the full guide to CIS deductions for a complete breakdown of how the scheme works.

The rates stayed the same. The compliance rules didn't.

• Nil returns are mandatory again. If you're a contractor and you paid no subcontractors in a tax month, you file a nil CIS300 or pre-notify HMRC. This requirement was scrapped in 2015 and came back in April 2026.
• Gross payment status can be pulled instantly. Where HMRC decides a business knew, or should have known, that a transaction was connected to fraudulent tax evasion, it can cancel gross payment status with no advance notice, charge a penalty of up to 30% of the tax lost, and bar reapplication for five years. The old wait was one year.
• Making Tax Digital for Income Tax started. From 6 April 2026, subcontractors with qualifying income above £50,000 in 2024/25 keep digital records and file quarterly updates. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028. There's a penalty grace period for late quarterly submissions in 2026/27 only.

The trap: your MTD qualifying income is what you invoiced, not what landed in your account. Invoice £55,000 and receive £44,000 after 20% CIS and you're still in the April 2026 cohort. Plenty of subbies have looked at their bank statements, seen under £50,000, and assumed they're out. They're not.

A second point worth being clear on, because a lot of pages muddle it: MTD quarterly updates have not replaced the monthly CIS300. If you're a contractor, you still file a CIS300 by the 19th of every month. They're separate obligations doing different jobs.

Takeaway: check your gross invoiced total against the £50,000 line, not your bank balance.