If you are a CIS-registered subcontractor, there is a fair chance HMRC is holding money that belongs to you. Every contractor you invoice takes 20% off your labour and sends it straight to HMRC. That is not a tax on your profit; it is a rough advance, collected before anyone has counted your personal allowance or a single one of your expenses. At the end of the year the sums almost never match, and the difference usually comes back to you.
This calculator puts a number on that difference. Adjust your figures above and watch your estimated refund move in real time.
How the CIS refund actually works
Under the Construction Industry Scheme, a contractor must deduct 20% from the labour element of a registered subcontractor's invoices and pay it to HMRC. (If you are not registered, the rate is a steeper 30%, which is the first reason to register.) Crucially, the deduction is taken from your labour, not your materials, so your contractor should strip out genuine material costs before applying the 20%.
That deducted money sits with HMRC as an advance payment of two things: your Income Tax and your Class 4 National Insurance. Neither of those is actually worked out until you file your Self Assessment return for the year.
Why subbies almost always overpay
The 20% is charged on your gross labour with no reliefs applied. But your real tax bill is built the other way around:
- The first £12,570 of profit is covered by the Personal Allowance and taxed at 0%.
- Only profit above that is taxed, at the 20% basic rate (the 40% higher rate does not start until £50,270).
- Class 4 National Insurance is 6% on profit between £12,570 and £50,270.
- And every allowable expense, materials, van, tools, insurance, comes off your profit before any of that is calculated.
Stack those reliefs up and the actual liability on, say, £45,000 of labour with £8,000 of expenses is far below the £9,000 of CIS suffered. The gap is your refund.
A worked example
Take the calculator's defaults: £45,000 turnover, £8,000 of expenses, £9,000 of CIS deducted. Your taxable profit is £37,000. Knock off the £12,570 personal allowance and you are taxed on £24,430, giving roughly £4,886 of Income Tax. Class 4 National Insurance at 6% on the £24,430 above the threshold adds around £1,466. Your total liability is about £6,352, against £9,000 already handed to HMRC. The estimate: roughly £2,648 back. Change any input and the headline figure updates instantly.
Claiming it: Self Assessment
The refund does not arrive automatically. You claim it on your Self Assessment return, where you declare your income, your expenses and the total CIS your contractors deducted. HMRC offsets the CIS against your bill and repays the surplus. The single most valuable habit is keeping every payment-and-deduction statement your contractors issue, because that is the proof of tax already paid on your behalf. Sloppy records are how subbies leave money on the table.
Get your expenses right and the refund grows
Because every allowable expense lowers the profit you are taxed on, recording costs properly is not admin, it is money. Materials, tools, van running costs, insurance, your phone, your accountant: all of it counts. If your bookkeeping is a shoebox of receipts, you are almost certainly under-claiming and shrinking your own refund.
This is exactly the kind of leak that tidy operations close. If you want to see your real position with your own numbers on the table rather than the defaults, talk to us.
Next steps
- Work out what the 20% deduction looks like on a specific invoice with the CIS tax deduction calculator.
- Make sure you are charging enough in the first place with the hourly rate calculator.
- Tighten the quotes that feed all of this in quotes that win more jobs.
This tool is a directional estimate, not tax advice. Always verify the current allowances and rates on gov.uk and confirm your figures with a qualified accountant before relying on them.