The straightforward guide most subcontractors actually need
If you’re a CIS subcontractor, the CIS tax deducted from your payments almost certainly isn’t your final bill, and most people are owed money back. Here’s how to get it
Why you’re almost certainly owed a refund
Your contractor deducts CIS at a flat rate of 20% if you’re registered, 30% if you’re not. That percentage is taken off your labour income before you see a penny of it. It completely ignores two things that your actual tax bill absolutely must account for.
First, your personal allowance. Everyone gets to earn £12,570 before paying a penny of Income Tax. If your annual profit is £30,000, you’re only taxed on £17,430, but 20% CIS was being deducted on the full £30,000 worth of labour payments throughout the year. That gap alone often creates a significant refund.
Second, your allowable business expenses. Tools, fuel, protective clothing, phone bills, insurance every legitimate cost reduces the profit your tax is calculated on. CIS tax deductions don’t factor any of this in. They’re calculated on gross labour payments, full stop.
“CIS isn’t a tax. It’s a deposit on a tax bill that hasn’t been worked out yet – and for most subcontractors, the actual bill is considerably lower.”
Still on 30%? Fix this first
If you’re unregistered as a CIS subcontractor, your deduction rate is 30% – 10 percentage points higher than it needs to be. Simply registering with HMRC as a CIS subcontractor drops you to 20%. If you’re being deducted at 30%, registering for CIS is the single most impactful thing you can do before anything else. Call the CIS helpline or ask your accountant to register you – it takes a matter of days.
Two different routes depending on your setup
Here’s what most people miss: how you reclaim CIS tax depends on whether you’re operating as a sole trader or as a limited company. The result can be similar, but the mechanics are completely different.
Sole trader / self-employed
- Claim through your annual Self Assessment tax return
- Enter CIS deductions as a tax credit, not an expense
- Refund paid directly to your bank account after HMRC processes your return
- File from 6 April – earlier filing = faster refund
Limited company
- Offset CIS deductions against your company’s monthly PAYE and NIC bill
- Submit an Employer Payment Summary (EPS) to HMRC each month declaring deductions suffered
- Surplus after PAYE offset can be reclaimed against Corporation Tax
- Real-time offset – no waiting until year end
Do you know which route applies to you? Getting this wrong – especially trying to claim through Self Assessment when you’re operating as a limited company -is one of the most common errors we see.
Step-by-step: claiming as a sole trader
This is the route the vast majority of CIS subcontractors use. Walk through these steps in order, and you won’t miss anything.
- Register for Self Assessment if you haven’t already
CIS registration and Self Assessment registration are separate. You need both. Register for Self Assessment by 5 October following the first tax year you worked as a subcontractor. Late registration doesn’t stop you from claiming, but it can trigger penalties and slow things down. - Collect your CIS payment and deduction statements
Every contractor you worked for must provide you with a monthly statement showing the gross payment, materials deducted, and CIS tax deducted. You need these for every contractor across the whole tax year. Missing one means missing that refund amount. Chase contractors early – they’re legally required to provide them. - Gather your business expense records
Bank statements, receipts, invoices, fuel logs – anything that supports the expenses you’re claiming. The more legitimate costs you can evidence, the lower your taxable profit, and the larger your refund. Don’t guess. Get the records together before you start the return. - Complete your Self Assessment tax return – correctly
On the self-employment pages, enter your gross income, the full amount before CIS was deducted. Not the net amount you received. The CIS tax deductions go in a separate box and are treated as a tax credit against your bill. On the short form SA103S, that’s box 21; on SA103F it’s box 81. Getting this wrong is common and expensive. - File as early as possible after 6 April
You don’t have to wait until January. Filing in April or May means HMRC processes your refund while things are quiet, typically within 2–4 weeks. January filers often wait 6–12 weeks in the queue. Early filing consistently gets refunds back faster. - Receive your refund by bank transfer
HMRC pays most refunds directly to your bank account once they’ve processed the return and any verification checks. Make sure your bank details are correct in your HMRC online account before filing – wrong details cause delays that take weeks to sort out.
Example
A plasterer contacted us in October 2025. He’d been working under CIS for three years and had never filed a Self Assessment return because he assumed he’d already paid his tax through the deductions. In three years, he’d had 20% deducted from every payment, never claimed his personal allowance, and never claimed a single business expense. Tools, van fuel, workwear nothing.
We filed three years of returns together. By the time we’d applied his personal allowances, his expense records, and the actual CIS credits against each year’s liability, HMRC owed him just over £7,200 across the three years. He was stunned. That money had just been sitting with HMRC, unclaimed, because nobody had told him the deductions weren’t his final tax bill. Don’t be that person for even one year.
The expenses most CIS workers forget to claim
In my experience, the single biggest difference between a decent refund and a great refund is the expense claim. Most CIS subcontractors claim tools and leave it at that. There’s a lot more on the table.
- Tools and equipment
- Van/vehicle costs
- Fuel to job sites
- PPE & workwear
- Work phone & calls
- Public liability insurance
- Professional memberships
- Training & qualifications
- Home office (proportion)
- Materials you purchased
- Accounting software
- Accountancy fees
One rule that trips people up
Materials that your contractor has already excluded from the CIS tax calculation on your deduction statement are not also claimable as a business expense on your Self Assessment return. That would be claiming the same cost twice. Materials you purchased yourself and invoiced to the contractor are different, and those can be claimed. If you’re unsure, check with your accountant before filing. A double-claim triggers HMRC queries you don’t want.
Estimate your CIS refund
Put in your own numbers for a rough idea of what might be coming back to you.
CIS Refund Estimator
A rough guide – your actual refund depends on your full tax picture
Gross CIS income (total invoiced, before deductions)………………………………………….£40000
Total CIS tax deducted by contractors…………………………………………………………………….£8000
Estimated business expenses………………………………………………………………………….£6000
Any other income this year?…………………………………………………………………………….£5000
Estimated taxable profit………………………………………………………………………………..£39,000
Estimated Income Tax due……………………………………………………………………………£5,286
Estimated Class 4 NIC due…………………………………………………………………………..£1,586
Total tax liability…………………………………………………………………………………………..£6,872
CIS already deducted………………………………………………………………………………….£8,000
Estimated refund due from HMRC……………………………………………………………..£1,128
Uses 2025/26 rates: personal allowance £12,570; basic rate 20% up to £50,270; Class 4 NIC 6% on profits £12,570-£50,270. This is an estimate only – speak to SKZ CIS Accountants for an accurate figure.
The MTD change affecting CIS subcontractors from April 2026
One more thing you need to know, especially if your gross CIS income is over £50,000. Making Tax Digital for Income Tax kicked in from 6 April 2026 for sole traders and landlords above that threshold.
Here’s the CIS-specific trap: your qualifying income for MTD is your gross invoiced amount before any CIS is deducted. If you invoice £55,000 but only receive £44,000 in your bank after 20% deductions, your qualifying income is £55,000. Many CIS subcontractors are in MTD scope earlier than they realise.
What MTD means practically for CIS workers
Instead of one annual Self Assessment return, you’ll submit four quarterly updates through MTD-compatible software, followed by a Final Declaration by 31 January. Your CIS deductions are still credited against your tax bill – that mechanism doesn’t change. They’re reconciled at the Final Declaration stage. The refund route is the same; the reporting rhythm is different. The threshold drops to £30,000 gross from April 2027.
The honest verdict
Every year, UK CIS subcontractors leave millions of pounds sitting unclaimed with HMRC. Not because the rules are complicated. Because nobody explained that the deductions aren’t their final tax bill – they’re a payment on account that almost always overshoots the actual liability once expenses and allowances are applied.
The plasterer I mentioned earlier with £7,200 sitting unclaimed across three years isn’t unusual. Honestly, it’s representative. The construction industry runs on cash, expenses are real and significant, and the personal allowance is substantial. When you factor all of that in against flat-rate CIS deductions, the gap between what’s been taken and what’s actually owed is almost always in the subcontractor’s favour.
The bottom line
File your Self Assessment return. File it early. Claim every legitimate expense. Enter your CIS deductions as a tax credit, not an income reduction. And don’t let another year go by without doing it.
The deadline to file is 31 January, but you can file from 6 April and should. Every month you delay after April is a month your refund sits in HMRC’s pocket instead of yours. That’s not a small thing when we’re talking about £2,000, £3,000, £5,000 or more that should be in your account right now.
If you’ve missed previous years, it’s not too late. You can file returns going back four tax years and claim refunds for each. At SKZ CIS Accountants, we’ve helped subcontractors recover money they didn’t even know they were owed, sometimes from years ago. Get in touch and let’s work out exactly what you’re owed.
Ready to claim what HMRC owes you? Talk to SKZ Accountants.
We’re CIS specialists based in Ilford, East London. We handle CIS refund claims for sole traders and limited company subcontractors, including backdated claims for up to four previous tax years.
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