HMRC will compare the CIS tax already deducted with the Income Tax and National Insurance you actually owe. If too much has been taken, you will receive a refund. If not enough has been deducted, you will need to pay the remaining balance. This guide explains the CIS rates, how to report the deductions, how refunds work and what Making Tax Digital means for subcontractors.
Key Takeaways
Do CIS Subcontractors Have to File a Self-Assessment Tax Return?
In most cases, yes. If your gross trading income is more than £1,000 in the tax year, you will normally need to complete a Self-Assessment tax return. A subcontractor who wants to reclaim CIS tax deducted by contractors will normally choose to complete the self-employment pages, boxes 1 to 8 and box 38 on the SA103S (short) form, or the equivalent boxes and box 81 on the SA103F (full) form since this is the mechanism HMRC uses to credit or refund the deduction. Partners in a business partnership must also file a return. This still applies even if contractors have already deducted CIS tax from your payments.
CIS deductions are advance payments towards your Income Tax and National Insurance, rather than your final tax bill. When completing your return, you report the full amount you invoiced, claim your allowable business expenses and enter the CIS deductions separately. HMRC then works out your final liability and compares it with the tax already deducted. You may receive a refund, or you may need to pay an additional amount.
Before making payment, a contractor will usually check your CIS status with HMRC. Registered and verified subcontractors are normally subject to a 20% deduction. A 30% deduction may apply if you are not registered or cannot be verified, while no deduction is normally made if you have gross payment status. If you do not yet have a Unique Taxpayer Reference, you can register for Self-Assessment and CIS at the same time.
CIS Deduction Rates: 20%, 30% or No Deduction
The CIS deduction rate depends on the status HMRC confirms when your contractor checks your details:
The 20% and 30% deductions are advance payments towards your tax and National Insurance, not your final tax bill. CIS is usually calculated after removing VAT and certain qualifying costs, such as materials you paid for directly and eligible plant hire. Keeping receipts and invoices will help make sure the deduction is worked out correctly.
What Happens if You Are Not Registered for CIS?
If you are not registered for CIS, your contractor will usually deduct 30% from your payments instead of 20%. The same rate may apply if HMRC cannot verify your details.
This is not a penalty. It is an advance payment towards your tax and National Insurance. When you complete your Self-Assessment return, HMRC will work out whether you are due a refund or need to pay more. Registering for CIS can reduce the deduction to 20% once HMRC verifies you.
Where CIS Deductions Go on Your Self-Assessment Return
Report the full amounts shown on your invoices as business income before CIS deductions. Then claim your allowable expenses and enter the total CIS tax deducted during the year separately. Do not report only the amount that reached your bank account, as this would understate your turnover.
For the 2025/26 paper return, enter the deductions in box 81 of SA103F or box 38 of SA103S. If you file online, the software will usually ask for your CIS deductions directly. Add together the figures from all your monthly payment and deduction statements to get the correct annual total.
Worked Example: A Property Refurbishment Subcontractor’s Refund
Suppose Alex purchases a second home in Wales for £270,000. The LTT would be calculated as follows:
Trading Profit
Calculation | Amount |
|---|---|
CIS income before deductions | £45,000.00 |
Less allowable business expenses | (£9,000.00) |
Trading profit | £36,000.00 |
Income Tax
Calculation | Amount |
|---|---|
Trading profit | £36,000.00 |
Less Personal Allowance | (£12,570.00) |
Taxable income | £23,430.00 |
Income Tax at 20% | £4,686.00 |
Class 4 National Insurance
Calculation | Amount |
|---|---|
Income Tax | £4,686.00 |
Class 4 National Insurance | £1,405.80 |
Total tax and National Insurance due | £6,091.80 |
Less CIS already deducted | (£9,000.00) |
Estimated repayment | £2,908.20 |
Priya has already paid £9,000 through CIS, while her calculated Income Tax and Class 4 National Insurance total £6,091.80. This gives an estimated repayment of £2,908.20.
This simplified example assumes that Priya receives the full Personal Allowance, has no other income, student loan repayments or outstanding tax liabilities, and is not a Scottish taxpayer. It also assumes that the full £45,000 is labour subject to CIS and that all £9,000 of expenses are allowable. HMRC may verify the CIS deductions and offset the repayment against any other amounts due.
How to Claim Back Overpaid CIS Tax
If you are a sole trader, you normally claim CIS deductions through your Self-Assessment tax return. Enter the full amounts you invoiced as income and show the CIS tax deducted separately. HMRC will compare your figures with the information submitted by your contractors and set the deductions against your Income Tax and National Insurance. If you have paid too much, you may receive a refund after any HMRC checks and other tax owed are taken into account.
Keep all monthly CIS statements, invoices, bank records and receipts for allowable business expenses. If a statement is missing, ask the contractor for another copy. If you still cannot get it, contact HMRC with details of the contractor, payments and deductions.
How UKPA Can Help?
Only claim expenses that meet HMRC’s rules and are supported by records. UKPA can help organise your CIS statements, review your expenses and prepare your Self-Assessment return accurately.
Note
Limited companies use a different process. They normally claim CIS deductions through payroll using an Employer Payment Summary, rather than through Self-Assessment or the Corporation Tax return.
How Making Tax Digital Affects CIS Subcontractors Since April 2026
Since April 2026, some self-employed CIS subcontractors will need to use MTD compatible software to keep digital records, submit quarterly updates and complete their tax return at the end of the year. The rules will first apply where combined gross income from self-employment and property exceeded £50,000 in 2024/25, followed by lower thresholds in later years.
CIS deductions will still count towards the final tax bill, but it is important to check HMRC’s figures against your monthly CIS statements. Partnerships will be brought in later, limited companies are not included, and exemptions may be available in certain circumstances.
Get Ready for Making Tax Digital with RentalBux
RentalBux helps landlords and self-employed professionals keep digital records, organise income and expenses, and stay prepared for Making Tax Digital. Start using RentalBux today and make your tax reporting simpler, clearer and easier to manage.
Conclusion
CIS deductions are advance tax payments, not your final bill. Report your full income, claim allowable expenses and enter the tax deducted separately so HMRC can calculate whether you owe more or are due a refund.
Good records make the process much easier. Keep your CIS statements, invoices and expense receipts organised, especially as Making Tax Digital brings more reporting online.
Frequently Asked Questions
Not always. A sole trader will normally need to file a Self-Assessment return if gross trading income is more than £1,000 before expenses, while partners must also file. If a return is required, it must still be submitted even where CIS deductions appear to cover the final tax bill.
There is no fixed HMRC processing time for a CIS refund. HMRC may check the deductions against information submitted by contractors and may use any credit against other tax owed before issuing a repayment.
Ask the contractor for a replacement payment and deduction statement. If you still cannot obtain it, contact HMRC with details of the contractor, payments and deductions, and keep invoices and bank statements as supporting evidence.
A UTR, or Unique Taxpayer Reference, is a 10-digit number HMRC uses to identify you or your business for tax purposes. You will usually receive one when you register for Self Assessment or Corporation Tax. Under CIS, contractors use your UTR and business details to check your status with HMRC before paying you. They will then usually deduct tax at 20%, 30% if you are not registered, or make no deduction if you have gross payment status. Any CIS tax deducted is credited against your final tax bill.
- Statutory Residence Test (SRT) Explained for UK Tax Resident and Non-Resident - 14 October 2026
- Deed of Variation: IHT, CGT & SDLT on Inherited Property - 13 October 2026
- UK Budget 2026 and Iran War: What Landlords Need to Know - 12 October 2026
