CIS Deductions Explained: 20%, 30% and 0%
Updated: Aug 26
Key Takeaways
CIS is deducted at one of three rates: 30% if you're not registered, 20% if you're registered, and 0% if you hold gross payment status.
Your rate is set by your registration and compliance status with HMRC — not by the contractor — so it's within your control.
CIS is only ever deducted from labour — materials, VAT, and plant hire are excluded when itemised separately.
CIS deductions aren't an extra tax — they're an advance payment towards your Income Tax and National Insurance, credited against your bill when you file.
Registering as a subcontractor takes you from 30% to 20%; gross payment status takes you to 0%.
CIS deductions are the tax a contractor takes off a subcontractor's pay and sends to HMRC under the Construction Industry Scheme. The rate depends on your status: 30% if you're not registered, 20% if you are, and 0% with gross payment status. The deduction comes off your labour only, and it counts as an advance towards your tax bill rather than an extra tax.
The three CIS rates
Your status with HMRC | CIS deduction rate |
Not registered / can't be verified | 30% |
Registered as a subcontractor | 20% |
Gross payment status | 0% |
Every rate is a deduction from your labour only. Materials, VAT, and plant or equipment hire are excluded, provided they're shown separately on your invoice.
What each rate means
30% — the unregistered rate. If you haven't registered as a CIS subcontractor, or the contractor can't verify you with HMRC, they must deduct 30%. It's not a penalty as such, but it costs you an extra 10% of every labour payment compared with a registered subbie.
20% — the standard registered rate. Once you register as a subcontractor, contractors deduct 20%. This is where most sole traders and subcontracting companies sit. Registration is free and usually active within a few working days.
0% — gross payment status. With gross payment status, contractors pay you in full with nothing deducted, and you account for your own tax at the end of the year. You have to qualify by passing HMRC's turnover and compliance tests.
How the deduction is worked out
CIS applies to the labour element of your invoice only. So if you invoice £6,000 for labour plus £2,000 for materials, the deduction is worked out on the £6,000 — at 20% that's £1,200, and you're paid £6,800. The materials are paid in full.
Applied to a straight £10,000 labour invoice, the three rates look like this:
Rate | Deducted | You receive |
30% (unregistered) | £3,000 | £7,000 |
20% (registered) | £2,000 | £8,000 |
0% (gross payment status) | £0 | £10,000 |
CIS deductions are an advance, not an extra tax
Whatever rate applies, the money deducted isn't a separate tax — it's an advance towards the Income Tax and National Insurance you'd owe anyway. Sole traders have it credited against their bill through Self Assessment; limited companies set it against their PAYE or Corporation Tax. Because it's taken from your gross labour before your costs are counted, the amount withheld is often more than your final bill, which is settled up when you file.
Frequently Asked Questions
Why am I being charged 30% CIS? Almost always because you're not registered as a CIS subcontractor, or the contractor couldn't verify you with HMRC. Registering drops the rate to 20% and is free. If you're already registered but still on 30%, ask the contractor to re-verify you — your details may not have matched HMRC's records.
Is CIS deducted from materials? No. CIS is deducted from the labour part of your invoice only. Materials, VAT, and plant or equipment hire are excluded, as long as they're itemised separately. Bundling everything into one figure can mean CIS is deducted from costs it shouldn't touch.
What's the difference between the 20%, 30% and 0% CIS rates? It comes down to your status with HMRC. Unregistered subcontractors are deducted at 30%, registered ones at 20%, and those with gross payment status at 0%. The rate isn't chosen by the contractor — it's whatever HMRC confirms when they verify you.
Is CIS an extra tax? No. CIS deductions are an advance payment towards your Income Tax and National Insurance, not an additional tax. The money counts towards your final bill and is reconciled when you file your return, so if too much was taken you get the difference back.
Can I be paid with no CIS deducted? Yes, with gross payment status, which sets your rate to 0% so contractors pay you in full. You have to qualify by passing HMRC's turnover and compliance tests. It's worth having a construction-specialist accountant check whether you'd qualify before you apply.
Not sure you're on the right CIS rate?
If you're being deducted at 30%, or you're not sure you're on the rate you should be, it's worth a quick check. Talk to the SiteLedger team on 01706 595 370 and we'll get you registered, verified, and on the lowest rate you're entitled to. As construction-specialist accountants, CIS is what we deal with every day.
Written by the SiteLedger team — construction-specialist accountants. Last reviewed: July 2026. Figures and rates apply to the 2026/27 UK tax year. This is general guidance, not personal tax advice; your position depends on your circumstances, so speak to us about your specific business.