CIS deduction rates explained
20%, 30% or nothing: how CIS rates work, what they apply to, and how to get gross payment status.
Under the Construction Industry Scheme, contractors deduct money from subcontractors' payments and pass it to HMRC. The rate depends on the subcontractor's registration.
| Status | Deduction |
|---|---|
| Registered for CIS | 20% |
| Not registered | 30% |
| Gross payment status | 0% |
What the deduction applies to
Only the labour part of the payment. Materials the subcontractor paid for, and VAT, are not included.
A worked example
A registered subcontractor invoices £1,200: £1,000 labour and £200 materials. The deduction is 20% of £1,000, which is £200. The subcontractor receives £1,000, and the £200 deducted counts towards their tax bill.
Getting gross payment status
To be paid without deductions, a business must pass three HMRC tests (GOV.UK):
- Business test: it does construction work, or supplies labour for it, in the UK, through a bank account.
- Turnover test: at least £30,000 net turnover in the last 12 months for a sole trader; for partnerships and companies, £30,000 per partner or director, or £100,000 in total.
- Compliance test: tax and National Insurance paid on time in the past.
The deduction is not the final bill
CIS deductions are advance payments. The subcontractor's Self Assessment return works out the actual tax due, which can mean paying more or getting a refund.
Try the CIS calculator, or read HMRC's guide to CIS.
Frequently asked questions
Why am I being charged 30%?
Usually because you are not registered for CIS, or HMRC could not match your details. Registering normally brings the rate down to 20%.
Are materials taxed under CIS?
No. The deduction applies to the labour element only.
Need help with this? Our payroll and compliance team can talk it through with you. Try the CIS calculator.
Last reviewed 9 October 2026. General information, not legal or tax advice.