If you work as a subcontractor in UK construction, the number on your invoice is rarely the number that lands in your account. The Construction Industry Scheme (CIS) makes the contractor withhold a slice of your payment and send it straight to HMRC. It is not a tax you have lost, but it is cash you do not see until later, and getting the maths wrong on a job can leave you short.
This calculator does that maths for you. Enter your figures above and watch, in real time, exactly how much the contractor withholds, how much you take home now and the effective rate on your whole invoice.
How to read the results
- CIS deduction withheld is the headline figure: the amount the contractor takes off your labour and pays to HMRC on your behalf.
- Labour amount is your total invoice minus materials. This is the only part CIS touches.
- Materials (paid in full) is passed to you untouched, which is why itemising materials protects your cash flow.
- Net payment to you now is what actually hits your account: the total invoice minus the deduction.
- Effective rate on total shows the deduction as a percentage of your whole invoice, which is always lower than the headline 20% or 30% because materials are excluded.
How CIS actually works
Under CIS, a contractor paying a subcontractor must check your status with HMRC and deduct money from the labour element of your invoice at source. That deducted amount is an advance payment towards your Income Tax and National Insurance, not an extra charge. The contractor reports it on a monthly CIS return and gives you a payment and deduction statement, which is your evidence when you come to reclaim it. The scheme covers most construction work in the UK, from groundwork and bricklaying to plastering, decorating and site clearance.
Labour only: materials are never deducted
This is the single most important rule, and the one most subcontractors get wrong. CIS is deducted from labour only. The direct cost of materials, plant you hired in, VAT and the CITB levy are all excluded from the deduction base. So if you invoice £2,000 with £600 of materials, the deduction is calculated on the £1,400 of labour, not the full £2,000. Keep your material receipts: if you cannot evidence them, the contractor is entitled to estimate the materials cost, and a low estimate means more of your invoice gets deducted than it should.
Registered, unregistered or gross
Your CIS status decides your rate, and the gap between them is real money:
- Registered subcontractor — 20%. Once you register for CIS with HMRC, the standard deduction is 20% of your labour.
- Not registered — 30%. If you do not register, the contractor must deduct 30%. That extra ten points is a pure cash-flow penalty for not registering, and there is no upside to it.
- Gross payment status — 0%. If you qualify for and hold gross payment status, the contractor deducts nothing and pays your full invoice. You then settle all your tax through Self Assessment. You can apply once you pass HMRC's turnover, compliance and business tests, and for established firms it transforms cash flow.
The lesson is simple: register at the very least, and if your turnover supports it, apply for gross status. Optimising this one piece of admin can free up thousands in working capital across a year.
VAT and the reverse charge
VAT never forms part of the CIS deduction base. For most business-to-business construction work the VAT domestic reverse charge applies, which means you do not add VAT to the invoice you send the contractor: they account for it themselves. Whether or not you are VAT registered, your CIS deduction is the same, because it is calculated on net labour. If you are unsure whether the reverse charge applies to a particular job, run it through the VAT reverse charge checker before you invoice.
How to reclaim what was withheld
The withheld amount is recoverable. If you are a sole trader, you report your total CIS deductions suffered on your Self Assessment return; HMRC offsets them against your tax and National Insurance, which often produces a refund. If you trade through a limited company, you reclaim CIS suffered against your PAYE and CIS liabilities through your payroll submissions, or claim a repayment after the tax year ends. To estimate what you might get back across a year, try the CIS refund estimator.
What to do with the number
If the deduction surprised you, the fix is rarely about the job in front of you, it is about your setup. Make sure you are registered so you are on 20% not 30%, itemise materials so they are never deducted, and look at whether gross payment status is within reach. The operations page covers how tighter invoicing and record-keeping protect your cash, and the guide on quotes that win more jobs helps you present labour and materials clearly so deductions land where they should.
If you run a building or renovation firm and want to put your numbers on the table, see how we work with builders and renovators, explore the rest of the free tools, and when you are ready, talk to us.