Guide

AI and CIS deductions for UK subcontractors

16 October 2026Shaun, 20+ years in UK construction

How Construction Industry Scheme deductions work for a UK trade: 20%, 30% and gross payment status, from HMRC's own pages.

A main contractor who pays you under the Construction Industry Scheme does not keep the deduction. They pass it to HMRC, and it counts towards your tax and National Insurance. A chat tool can turn the figures on a statement into a sentence you understand. It cannot tell you that you are on gross payment status, and it must not change 20% into 30% because the paragraph reads better.

The rates and rules below were read from GOV.UK on 16 October 2026. None of the links are affiliate links. This page is not tax advice for your own return. If the job is unusual, use the HMRC page rather than a draft.

Shaun, 20+ years in UK construction, still checks the deduction against the statement before he treats the money as paid. We search the AI world every week so you don't have to. The percentage is HMRC's. The sum is yours to check.

The three rates, and who they are for

HMRC's overview for subcontractors (opens in a new tab) says you should register for the Construction Industry Scheme if you work for a contractor and you are a sole trader, the owner of a limited company, or a partner in a partnership or trust. It says a contractor must deduct 20% from your payments if you are registered. That is net payment status, also called payment under deduction. Those deductions are advance payments towards your tax and National Insurance. If you do not register, the same page says contractors must deduct 30% instead.

You do not need to register if you are an employee. HMRC says to check your employment status if you are not sure. A labourer on your books, paid through PAYE, is not a CIS subcontractor. A chat tool that calls everyone on site a subcontractor is guessing at employment status. Do not paste that guess into a contract.

The page on getting paid (opens in a new tab) says the contractor takes 20% only if both of these are true: you are registered for CIS, and they can verify you. If either is not true, the rate is 30%. Verification uses the details you gave HMRC when you registered. Give the contractor your Unique Taxpayer Reference and your legal business or trading name, exactly as they are on the registration. A trading name you use on the van, if it is not the legal name, is how a verification fails and the rate becomes 30%.

Gross payment status means the contractor pays the invoice without a CIS deduction, and you pay your own tax. HMRC's gross payment page (opens in a new tab) says you have to show that you have paid tax and National Insurance on time, that the business does construction work or provides labour for it in the UK, and that the business is run through a bank account. Ignoring VAT and the cost of materials, turnover for the last 12 months must be at least £30,000 if you are a sole trader. For a partnership it is £30,000 for each partner, or at least £100,000 for the whole partnership. For a company it is £30,000 for each director, or at least £100,000 for the whole company. If the company is controlled by five people or fewer, the page says you must have £30,000 of annual turnover for each of them. HMRC says you could be fined for false information, and so could anyone who helps you make a false registration. A draft that says "you qualify for gross" because you typed a rough turnover is not an application. The form is CIS302 for a sole trader, and the registration guidance (opens in a new tab) says you cannot save your progress once you start the online form.

The contractor's own page says the same three rates, and that HMRC tells them which rate to use when they verify you. You do not pick 20% because that is what you were on for the last firm. If this contractor cannot match you, it is 30% until they can.

What the percentage is taken from

The deduction is not 20% of every line on the invoice. HMRC's page for contractors (opens in a new tab) says they start with the gross amount, then take off VAT, consumable stores, fuel used except for travelling, plant hired for this job, manufacturing or prefabricating materials, and materials the subcontractor paid for directly. The percentage comes off what is left.

The subcontractor page says the same exclusions, and that the contractor may ask for receipts. If you do not have evidence that you paid for the materials, the contractor estimates the cost. An estimate you do not recognise is a reason to speak to them, not a reason to ask a chat tool for a "fair" materials figure. Travelling fuel is not in the list of amounts they take off before the percentage. Do not let a draft move diesel for the van into the materials line.

If you pay a subcontractor yourself, you are in the contractor role for that payment. You verify them, you use the rate HMRC gives you, and you give them a payment and deduction statement. The bookkeeping guide is about Making Tax Digital and the record of income. It does not set the CIS rate. The invoice guide is about what a bill must contain and how to chase it. A CIS deduction is not a late-payment dispute. It is money sent to HMRC in your name.

The statement, and what stays out of the chat

If the contractor makes deductions, they must give you a payment and deduction statement within 14 days of the end of each tax month. HMRC's example: if the tax month was 6 May to 5 June, the statement is due by 19 June. It shows what they paid you and what they deducted. Keep it. HMRC may ask for it when you claim the deductions on your return. If the figures look wrong, HMRC says speak to the contractor. If you cannot get a statement, for example because the contractor has stopped trading, the same page tells you to write to HMRC with your name, address and UTR, the contractor's name and address, their tax reference if you know it, the dates or tax months, and why you do not have the statements. The postal address on that page is PT Operations, HM Revenue and Customs, BX9 1BX.

Do not put your UTR, your National Insurance number, or a contractor's bank details into a chat. A job name, the gross figure, the materials figure you can evidence, and the rate on the statement are enough. Read the answer against the statement. If the draft has moved a penny, use the statement.

The reverse charge guide is the separate question of VAT on an invoice between two VAT-registered construction businesses. CIS and the reverse charge can both apply to the same job. They are not the same deduction. One is income tax and National Insurance on account. The other is who accounts for the VAT.

Explain this Construction Industry Scheme payment in plain English. UK English. Use only the figures I type. Do not change a number.

Rules:
- Do not say I qualify for gross payment status.
- Do not suggest a different rate from the one on the statement.
- Do not add fuel, materials, or VAT that I have not typed.
- Do not include a UTR, a National Insurance number, or a bank account.
- If a figure is missing, write MISSING.

Gross on the invoice:
VAT on the invoice, or "none":
Materials I paid for and can evidence:
Other amounts HMRC says come off before the percentage (plant hire, consumable stores, fuel used except travelling):
Rate on the statement: 20%, 30%, or 0%:
Net I was paid:

Work the sum yourself before you accept the explanation. Take the gross, take off the amounts HMRC lists, then apply the rate on the statement. The net should match what reached the bank, allowing for any amount you agreed was not part of this payment. If it does not match, the next step is the contractor, not a second draft.

Common questions

What are the CIS deduction rates?

HMRC's pages, read on 16 October 2026, say 20% if you are registered and the contractor can verify you, 30% if you are not registered or they cannot verify you, and nothing if you have gross payment status. The contractor uses the rate HMRC gives them.

Is the 20% taken off materials?

No. HMRC says the contractor takes VAT, materials you paid for directly, plant hire, consumable stores, and fuel used except for travelling off the invoice before they apply the percentage. If you cannot show you paid for the materials, they estimate that cost.

Do I register for CIS if I am an employee?

HMRC says you do not need to register if you are an employee. Register if you work for a contractor as a sole trader, a company owner, or a partner. Check your employment status if you are not sure.

What turnover does gross payment status need?

HMRC's gross payment page says that, ignoring VAT and materials, turnover for the last 12 months must be at least £30,000 for a sole trader. Partnerships and companies have their own tests on that page, including £100,000 for the whole firm. You also have to show tax was paid on time, the work is UK construction, and the business uses a bank account.