CIS Contractors: How to File Self Assessment Without Overpaying Tax

Quick answer

If you work in construction as a CIS subcontractor, you are almost certainly having 20% deducted from every payment a contractor makes to you. That deduction sits with HMRC as a tax payment on your behalf. The problem is that 20% is calculated on your gross income — before you subtract any of your business expenses.

If your allowable expenses are significant (tools, van, materials, insurance), your actual tax bill can be far lower than the amount already deducted. The difference comes back to you as a tax refund, and for many CIS workers it runs to thousands of pounds each year.

To get it, you must file a Self Assessment return. This guide walks through exactly how.

How the Construction Industry Scheme works

CIS is a withholding tax scheme operated by HMRC that applies to payments from contractors to subcontractors in the construction industry. The scheme covers:

• Building, alteration, repair, extension, demolition, or dismantling of structures
• Installation of systems in buildings (heating, lighting, air conditioning, drainage)
• Painting and decorating of the inside or outside of a building
• Civil engineering work
• Site preparation, groundwork, and landscaping

Who is a contractor under CIS? Any business that pays subcontractors for construction work, including main contractors, developers, and certain businesses (like local authorities and housing associations) that spend over £1 million a year on construction.

Who is a subcontractor? Any individual, partnership, or company that does construction work for a contractor.

CIS deduction rates

When a contractor pays a CIS subcontractor, they are required to verify the subcontractor's status with HMRC and apply the appropriate deduction rate:

The 20% deduction is the norm for the vast majority of CIS subcontractors. If you are having 30% deducted, check your registration details with HMRC urgently — the mismatch is usually a name or UTR issue that can be resolved quickly.

The overpayment problem

Here is the fundamental issue. The 20% deduction is applied to the gross payment amount, not to your profit. Consider this example:

• Gross CIS payments received in the year: £40,000
• CIS deductions made at source: £8,000 (20% × £40,000)
• Allowable business expenses: £8,000 (tools, van, insurance, etc.)
• Actual taxable profit: £32,000 (£40,000 − £8,000 expenses)
• Personal Allowance: £12,570
• Taxable profit above PA: £19,430
• Income tax at 20%: £3,886
• Class 4 NI: (£32,000 − £12,570) × 6% = £1,166
• Total tax and NI due: £5,052
• CIS already paid: £8,000
• Refund: £2,948

This is not a trick or loophole — it is simply HMRC returning the excess it has already collected. But you only get it if you file.

Documents you need before you start

CIS monthly deduction statements

Every contractor who deducted CIS tax from your payments must give you a monthly deduction statement. These statements show:

• The contractor's name and UTR
• Your name and UTR
• The gross amount paid
• The amount deducted
• The net amount you received

These are your proof of the CIS deductions you are claiming as a tax credit. HMRC will not accept the credit without them. If any are missing, contact the relevant contractor now — they are legally required to provide them. HMRC's CIS helpline is 0300 200 3210 if a contractor refuses.

Income records

Keep your own record of every CIS payment received — date, contractor name, gross amount, deduction, and net received. Cross-reference against your bank statements. Discrepancies between your records and what a contractor has reported to HMRC are common and need to be resolved before you file.

Expense receipts

Every expense claim must be backed by a receipt or invoice. Digital photos of paper receipts are acceptable. For mileage, a mileage log (date, start/end points, business purpose, miles) is required.

Allowable expenses for CIS subcontractors

Getting your expenses right is where most of the money is. These are the main categories:

Tools and equipment

Tools used for work are a business expense. For equipment that lasts more than two years (capital equipment), you claim through capital allowances rather than as a direct expense:

• Annual Investment Allowance (AIA): 100% of the cost in the year of purchase, up to £1 million. For most CIS workers, all tool and equipment purchases qualify for 100% relief in the year they are bought.
• Examples: drills, saws, ladders, scaffolding equipment, specialist testing equipment, work-specific machinery.

Consumable tools with a short life (saw blades, drill bits, paint brushes used up in the work) can be claimed as a direct revenue expense.

Van and vehicle costs

If you use a van or car for work, you can claim the business proportion of running costs:

• Fuel
• Insurance
• Servicing and repairs
• MOT
• Road tax
• Loan interest on a vehicle loan (business proportion)

You must split total costs between business and private use. A common approach: if you do 15,000 miles total per year and 12,000 are genuinely business miles, 80% of costs are deductible.

Alternatively, HMRC's simplified mileage rate of 45p per mile for the first 10,000 business miles (25p above that) avoids the need to apportion actual costs. Use one method consistently — you cannot switch mid-year.

Travel to a regular workplace is not deductible. If you work at one site every day, that is ordinary commuting regardless of how far it is. Travel between different sites in the same day, or to an irregular site, is business travel.

Materials

If you supply materials as part of your work — for example, a tiler who provides tiles, adhesive, and grout — those material costs are deductible. The key test is whether you have ownership and risk for the materials.

Labour-only subcontractors cannot claim materials. If you only supply your own labour and the contractor provides all materials, there are no material costs to claim. Claiming materials you did not buy is fraud.

Note: HMRC separates materials from labour on CIS deduction statements. Only the labour element is subject to CIS deduction — materials listed on an invoice should not have CIS deducted from them. If your contractor is deducting from the full invoice including materials, raise it with them.

Protective clothing and safety equipment

Specific safety and protective gear required for your trade is deductible:

• Hard hats, hi-vis vests, safety boots with steel toecaps
• Waterproof overalls worn only for work
• Ear defenders, safety goggles, dust masks
• Harnesses and fall protection equipment

Ordinary clothing is not deductible — even if you only wear work clothes on the job. Jeans, standard boots, sweatshirts, and polo shirts are clothing with a dual-purpose, and HMRC disallows the claim. The test is whether the item can be worn outside work — if it can, it is personal clothing.

Phone and communication

You can claim the business proportion of your mobile phone bill. A reasonable split for a sole-trader CIS worker might be 50–70% business, depending on usage. Keep your bills.

If you buy a phone exclusively for business use, the full cost is deductible. Personal phones that are sometimes used for business require apportionment.

Insurance

• Public liability insurance: fully deductible
• Employer's liability insurance (if you take on labour): fully deductible
• Income protection or accident insurance for your trade: deductible
• Personal life insurance: not deductible

Accountancy and professional fees

Fees paid to an accountant for preparing your Self Assessment return are deductible. Legal costs for business-related matters (contract disputes, debt recovery) are also deductible.

Training

Training courses that update or maintain existing skills in your current trade are deductible — a plumber refreshing their gas safety certification, an electrician taking a new wiring regulations course. Training that qualifies you for a new trade is not deductible.

What CIS workers cannot claim

Being clear on what is not deductible saves you from enquiries:

Food and drink exception: if you are working away from home overnight — staying in a hotel or B&B at a temporary site — reasonable subsistence costs (meals, drinks) become deductible under the travel and subsistence rules. Day-to-day lunch on a local site does not qualify.

The 24-month rule: the trap that catches long contracts

This is one of the most commonly missed rules in construction tax.

HMRC's temporary workplace rules allow you to deduct travel costs to a site only if that site is a temporary workplace — meaning you expect to work there for less than 24 months, or it is not a fixed, regular base.

If you work at one site continuously for more than 24 months (or it becomes clear early on that you will), that site becomes a permanent workplace for tax purposes. From that point — or from the point you knew it would last beyond 24 months — travel costs to that site are no longer deductible.

Why this matters for CIS workers:

Large infrastructure projects, housing developments, and commercial builds can run for years. If you are tied to one site for the duration, you could be three or four years into a contract before the 24-month rule bites. But once it does, going back and amending earlier returns is not straightforward.

The rule applies to the site, not the project — working for different contractors on the same physical site does not reset the clock.

If you anticipate working at one location for more than 24 months, set travel costs to zero for that site from the point the expectation becomes clear.

How to complete the Self Assessment return

CIS subcontractors use SA103 (self-employment supplementary pages), not SA105 (which is for landlords). One SA103 per trade.

On SA103:

• Box 9 (Turnover): your gross CIS income — the full gross amount before deductions, matching your CIS statements
• Boxes 17–30: your allowable expenses by category
• Box 32 (Net profit): calculated automatically

On the main SA100 return:

• Box 38 (CIS deductions): the total CIS tax deducted across all contractors for the year, from your monthly statements

HMRC's online Self Assessment system will net the CIS deductions off against the tax calculated on your profit. If the deductions exceed the tax bill, the system shows a repayment.

Class 4 National Insurance

CIS subcontractors pay Class 4 NI on their profits above the Lower Profits Limit (£12,570 in 2025/26). The rate for 2025/26 is 6% on profits between £12,570 and £50,270, and 2% above that.

Class 2 NI was abolished from 6 April 2024. If you were previously paying £3.45/week Class 2, that is no longer applicable.

Worked example: CIS painter 2025/26

Income:

• Gross CIS payments received from contractors: £52,000
• CIS deductions shown on statements (20%): £10,400
• Net received into bank account: £41,600

Allowable expenses:

Tax calculation:

That £3,112 arrives in the painter's bank account within approximately 5 working days of HMRC accepting the online return — assuming they have provided bank account details on the return.

Gross payment status: how to stop deductions at source

If you establish yourself as a reliable CIS subcontractor and your business grows, you can apply for gross payment status — meaning contractors pay you 100% of the invoice without any deduction.

Requirements for sole traders:

• Annual turnover of at least £30,000 from CIS construction work
• Satisfactory compliance record: no late Self Assessment returns and no outstanding tax payments in the 12 months before application
• All tax and NI returns filed and payments up to date
• Business bank account in use for construction payments

Apply through your HMRC Business Tax Account online. HMRC reviews annually and can withdraw gross payment status if your compliance slips — even one late return can cost you the status and put you back on 20% deductions.

Limited company subcontractors can also hold gross payment status, and it is generally easier to maintain because corporation tax deadlines differ from personal self-assessment deadlines. However, running a limited company involves significantly more administration and additional costs (company accounts, corporation tax return, director's Self Assessment on salary and dividends).

Sole trader versus limited company under CIS

Most CIS subcontractors start as sole traders and stay that way. A brief comparison:

The decision typically becomes relevant once profits consistently exceed £50,000–£60,000, at which point the corporation tax rate and ability to pay dividends at lower rates may save meaningful amounts. Below that level, sole trader simplicity usually wins.

Common mistakes CIS workers make on Self Assessment

1. Not keeping CIS deduction statements

You cannot claim the CIS credit without them. Contractors are legally obliged to provide them within 14 days of the end of each tax month. If you have lost them, contact the contractor or check whether they use an online portal. HMRC will cross-reference contractor reports, but if there is a mismatch between your claimed credit and what the contractor reported, HMRC will query it.

2. Claiming all van costs as 100% business

HMRC regularly challenges vehicle expense claims. Unless the van never goes anywhere except work sites and is not available for private use, you must apportion. A written mileage log protects you in an enquiry.

3. Claiming materials as a labour-only subcontractor

If you do not buy the materials — if the main contractor supplies everything and you only bring your labour — you have no material cost to claim. Claiming materials you did not pay for is false accounting.

4. Missing the 24-month rule on a long project

Easily done. If you started on a large site two years ago and the project runs another year, check whether the rule has been triggered. If so, remove travel costs from that site from the correct date.

5. Not registering as self-employed promptly

Some CIS workers receive their first payments on a one-off basis and assume registration can wait. It cannot. You must notify HMRC of self-employment by 5 October of the year following the first year you earned self-employed income. Late registration can trigger penalties.

6. Claiming a refund by cheque

There is no tax reason to request a cheque. Online refunds to a bank account arrive in approximately 5 working days. Cheques are posted and take up to 6 weeks. Always provide bank account details when filing.

Deadlines for the 2025/26 tax year

Payments on account: if your Self Assessment tax bill exceeds £1,000 and less than 80% of your tax was deducted at source, HMRC requires you to make advance payments towards next year's bill. For most CIS workers, the high CIS deductions mean a large portion of tax was deducted at source, often preventing payments on account from being triggered — but check your calculation.

Try the calculator

Before you file, run your estimated income and expenses through the self-employed tax calculator to see what you should owe — and cross-reference against your CIS deduction statements to estimate your refund.

To model your take-home under different income or expense scenarios:

Sources

• HMRC: Construction Industry Scheme (CIS)
• HMRC: CIS — how to work out your payments and deductions
• HMRC: Gross payment status for CIS
• HMRC: Temporary workplaces — travel expenses
• HMRC: Capital allowances — Annual Investment Allowance
• HMRC: Self Assessment: self-employment (short) (SA103S)