Answers · UK 2025/26

How does the Construction Industry Scheme (CIS) work in the UK for 2026/27?

Under CIS, contractors deduct tax at source from payments to subcontractors: 20% for registered subcontractors, 30% for unregistered ones, and 0% for those with gross payment status. Deductions are paid to HMRC monthly and count as advance payments against the subcontractor's tax and NI liability. The scheme covers most construction work in the UK.

Last updated: 10 June 2026Last reviewed: 10 June 2026How we verify

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The Construction Industry Scheme (CIS) is administered by HMRC under the Income Tax (Construction Industry Scheme) Regulations 2005. It applies to contractors and subcontractors working in the construction industry, including building, demolition, repair, decoration, civil engineering, and installation of systems in buildings. Key roles: Contractor -- any business that pays subcontractors for construction work, including businesses that spend more than £1m per year on construction (deemed contractors). Subcontractor -- any individual or company paid by a contractor for construction work. Registration and deduction rates: Unregistered subcontractor: contractor deducts 30% from the labour element of the payment (not materials). Registered subcontractor: 20% deduction rate. Gross payment status: 0% deduction -- only available if the subcontractor passes HMRC's turnover test (£30,000/year for sole traders, £30,000 per partner for partnerships, £30,000 per director or £100,000 overall for companies) and has a good compliance record. Contractor obligations: verify each subcontractor with HMRC before first payment; deduct the correct amount; file monthly CIS returns online; give subcontractors a deduction statement. Subcontractor treatment: deductions are not a final tax -- they count as advance payments of Income Tax or Corporation Tax. A self-employed subcontractor includes CIS deductions suffered on their Self Assessment return and receives a credit. A limited company subcontractor offsets CIS deductions against its PAYE/NI liability or claims a refund. VAT: note that for VAT-registered subcontractors working for VAT-registered contractors, the domestic reverse charge (DRC) may also apply -- see the separate VAT reverse charge guide. Failure to operate CIS correctly can result in the contractor being personally liable for the tax that should have been deducted, plus penalties.