Comparison · Self-Employed & Construction · 2026
CIS Gross Payment Status vs Standard 20% Deduction UK 2026
CIS subcontractors have a real choice: accept the standard 20% deduction at source, or apply for Gross Payment Status and receive full invoices, taking on the responsibility of saving for tax yourself. This guide compares the two using 2026/27 CIS rules and a worked GBP 60,000 labour-only example.
TL;DR -- 30-Second Summary
- • Standard deduction: 20% withheld for registered subcontractors, 30% if unregistered
- • Gross Payment Status: 0% withheld, paid in full, you settle tax yourself later
- • Qualifying tests: business, turnover (broadly GBP 30,000+), and compliance
- • GPS improves cash flow but requires discipline to save for a future tax bill
- • CIS deductions apply to labour only, never to genuine materials costs
Side-by-Side Comparison
| Feature | Gross Payment Status | Standard Deduction |
|---|---|---|
| Deduction rate on labour | 0% | 20% (registered) / 30% (unregistered) |
| Cash received per invoice | 100% of labour value | 80% of labour value (if registered) |
| Tax responsibility | You save and pay via Self Assessment/Corp Tax | Partly pre-paid via deduction, reconciled at year end |
| Qualifying requirements | Business, turnover (~GBP 30,000+) and compliance tests | None beyond CIS registration |
| Risk if undisciplined | Higher (shortfall at tax deadline) | Lower (tax largely pre-paid) |
| Materials | Excluded from CIS deduction in both cases | |
Worked Example: GBP 60,000 Labour-Only Subcontractor
Say a registered subcontractor invoices GBP 60,000 of labour-only work over a year, with no materials involved. Compare the cash received during the year under the standard 20% deduction against Gross Payment Status, before either subcontractor files their Self Assessment return and settles their actual tax and Class 4 National Insurance liability.
| Measure | Standard 20% deduction | Gross Payment Status |
|---|---|---|
| Labour invoiced over the year | GBP 60,000 | GBP 60,000 |
| CIS deducted at source | GBP 12,000 (20%) | GBP 0 |
| Cash received during the year | GBP 48,000 | GBP 60,000 |
| Money you must independently set aside for tax | None (already withheld) | Full estimated tax and NI liability |
| Outcome at Self Assessment | Refund if GBP 12,000 exceeds actual liability | Full tax and NI bill due, paid from savings |
Neither route changes the final tax bill: both subcontractors ultimately owe the same income tax and Class 4 National Insurance on their profits. The difference is timing and cash flow. Under standard deduction, GBP 12,000 has already gone to HMRC and any excess is refunded. Under Gross Payment Status, the subcontractor holds the full GBP 60,000 throughout the year but must have set aside enough, likely GBP 8,000 to GBP 12,000 or more depending on expenses and other income, to cover the bill when it falls due.
When Gross Payment Status Wins
Gross Payment Status wins for subcontractors who need working capital, for example to buy materials up front, pay their own staff, or fund business growth, and who are disciplined enough to set aside a portion of every payment for tax. Established businesses with consistent turnover well above the qualifying threshold and a clean compliance record are typically the best fit, since they can pass the tests and manage the cash flow reliably.
It also suits subcontractors who can put saved tax money to productive use in the meantime, such as reducing overdraft interest or reinvesting in equipment, provided the tax reserve itself is never touched.
When the Standard Deduction Wins
The standard 20% deduction wins for subcontractors who find it hard to save consistently, are newer to self-employment and have not yet built a buffer, or simply prefer the certainty of having tax handled automatically. It functions as forced saving: HMRC holds the money and you typically get a refund rather than facing a surprise bill.
It is also the only option if you do not yet meet the turnover or compliance tests for Gross Payment Status, or if you are not CIS-registered at all, in which case the higher 30% rate applies until you register.