CIS Subcontractor Registration Guide for UK Tradespeople

If you do construction work for a contractor in the UK, you will probably meet the Construction Industry Scheme, usually shortened to CIS. Under CIS, the contractor takes a deduction from your payments and sends it to HMRC as an advance towards your tax and National Insurance. Registering as a subcontractor is not complicated, but doing it correctly affects how much is taken from your pay. This guide walks you through who needs to register, what to prepare and what happens afterwards.

Key takeaways

• CIS is a scheme where contractors deduct tax from payments to subcontractors and pay it to HMRC.
• Registered subcontractors have a lower deduction than unregistered ones.
• Some subcontractors can apply for gross payment status and be paid with no deduction, if they meet HMRC's tests.
• Deductions are not extra tax. They count towards your final bill and can often be refunded if too much is taken.
• Keep your statements, because you will need them for your tax return.

What is the Construction Industry Scheme?

CIS is an HMRC scheme for payments between contractors and subcontractors in the construction industry. A contractor is a business that pays subcontractors for construction work. A subcontractor is the self-employed person or company doing that work. The contractor deducts an amount from each payment, before paying you, and sends it to HMRC. It is treated as a payment on account of your tax.

Which work counts is defined in the scheme rules. Read the current definition on GOV.UK's Construction Industry Scheme guidance if you are not sure that your jobs are covered.

Why registering matters

You are not legally forced to register as a CIS subcontractor, but your contractor must deduct tax from your payments anyway. If you are registered, the deduction is 20%. If you are not registered, it is 30%. If you qualify for gross payment status, the deduction is 0%. HMRC sets these rates, so confirm them on GOV.UK before relying on them. The practical point is simple: not registering means you hand over more of each payment up front, which hurts cash flow even if you can reclaim some later.

What you need before you register

Before you contact HMRC, make sure you have the basics ready:

• Your business set up with HMRC as self-employed, which gives you a Unique Taxpayer Reference (UTR).
• Your National Insurance number.
• Your business name and address, and your trading start date.
• Your business bank details, if you plan to apply for gross payment status later.
• If you trade through a limited company, the company details, since companies register differently from sole traders.

If you are brand new to self-employment, you will need to register for Self Assessment first. Our guide to the Self Assessment registration deadline explains the timing.

How to register, step by step

1. Register as self-employed with HMRC if you have not already, and wait for your UTR.
2. Register for CIS as a subcontractor through HMRC's online service or by phone.
3. Give your contractor the details they ask for. They will verify you with HMRC to see whether to apply the registered rate.
4. Receive payment and deduction statements from your contractor, usually monthly.
5. Keep those statements safe for your tax return.

The current process, forms and contact routes are on GOV.UK's CIS guidance for subcontractors. Use that page as the source of truth for the steps.

Registered, unregistered and gross status compared

Gross payment status is not automatic. HMRC checks things such as whether your tax affairs are up to date and whether your business meets the turnover test. The details can change, so read the latest conditions on GOV.UK. If you lose gross status for non-compliance, such as late returns, you can slip back to deductions.

What happens after registration

Each month the contractor sends HMRC a return listing what they paid to subcontractors and what they deducted. They should give you a statement showing the same figures. Your own tax return then includes your income and the CIS tax already taken. If the deductions exceed your actual liability, you are due a refund. If they fall short, you pay the difference. Our guide to CIS monthly return deadlines is mainly for contractors, but it helps subcontractors understand the timetable that sits behind their statements.

You can still claim allowable expenses, such as tools, work clothing, travel and insurance, against your CIS income. That is why the deduction is not the end of the story. See our sole trader allowable expenses guide for the general approach.

Worked example (illustrative)

"Ibrahim", an illustrative example, is a self-employed electrician who invoices a contractor £1,000 for labour in a month. If he is registered, the contractor deducts 20% of the labour element, so £200 goes to HMRC and Ibrahim receives £800. If he were unregistered, the deduction would be 30%, so £300 would go to HMRC and he would receive £700. Both amounts count as tax paid on his behalf. At the end of the year, if his actual tax bill is lower than the total deducted, he can claim the difference back. The example ignores materials and VAT, which are treated separately.

Sole trader or limited company?

Subcontractors can work as sole traders, in partnerships or through limited companies, and the CIS process differs a little for each. Sole traders register using their own UTR and National Insurance number. A limited company registers under the company's details, and deductions taken from the company's invoices can usually be offset against its payroll liabilities, including PAYE and National Insurance, through the company's payroll submissions. This is less familiar to many new directors, so ask for advice before you start.

The choice of structure affects far more than CIS, such as how profit is taxed and how much admin you take on. Our guide to limited company versus sole trader was written with drivers in mind, but the same comparison logic applies to tradespeople.

Keeping your CIS records in order

Treat each CIS statement as a tax document. For every payment you receive, record the gross amount invoiced, the materials element if any, the deduction and the net amount paid. Check each month that your bank receipts match what the contractor says they paid. If a statement is missing or shows the wrong deduction, ask the contractor to correct it rather than waiting until the tax return, because they are legally required to provide statements.

Many subcontractors find a simple monthly reconciliation enough. Add up invoices issued, payments received and deductions taken, then make sure the difference is explained. Doing this each month also helps you set aside money for any extra tax you may owe at year end, since the deduction may not cover the whole bill, especially if you have other income.

Materials, VAT and the deduction

The CIS deduction is normally taken from the labour part of an invoice, not from the cost of materials you bought for the job, provided the materials are shown separately and are genuinely your own cost. This is why a clear invoice matters. Show labour and materials as separate lines, and keep supplier receipts for the materials. If a contractor deducts from the whole invoice by mistake, ask them to correct it.

VAT is a different matter. If you are VAT registered, VAT is charged on your invoice in the usual way, and the CIS deduction is calculated on the amount excluding VAT. Some construction services also fall under special VAT reverse charge rules, so the invoice may not show VAT at all. Ask your accountant to check how this applies to your jobs.

Common mistakes

• Not registering and losing 30%. Registering takes little time and improves cash flow.
• Throwing away statements. You need them to prove the tax already paid.
• Missing your tax return. Late returns can put gross status at risk and lead to penalties.
• Treating the deduction as your whole tax bill. It is an advance payment, so you may still owe more or be owed a refund.
• Forgetting to claim expenses. Genuine business costs can reduce your taxable profit.

If you would rather have someone handle the paperwork, our CIS service covers registration, statements and returns. You can also contact us to talk through your situation.