The CIS scheme confuses a lot of subcontractors. The paperwork is a tax mechanism, not optional admin — and getting it wrong costs money.
Here is the plain-English version.
What CIS is
The Construction Industry Scheme (CIS) is HMRC's way of collecting income tax from construction subcontractors at source. Instead of you paying a tax bill in January, your contractor deducts it from your payment and passes it to HMRC.
If you are registered: 20% deduction.
If you are not registered: 30% deduction.
If you have gross payment status: 0% deduction — you pay your own tax directly.
Who it applies to
Subcontractors doing construction work for contractors. "Construction" is broadly defined: building, demolition, installation (plumbing, electrical, heating), decoration, site prep, scaffolding.
It does not apply if you are working directly for a homeowner (end user). The scheme only activates in contractor-to-subcontractor relationships.
The registration question
Register: HMRC deducts 20% (your basic rate) and you reclaim any overpayment via Self Assessment. Straightforward.
Do not register: 30% deducted. That is 10% more than necessary, sitting with HMRC until you file. It is essentially an interest-free loan to the government.
Register. There is no reason not to.
Gross payment status
If you are a reliable subcontractor with a good tax compliance record, you can apply for gross payment status — no deductions at source. You invoice the full amount and pay your own tax via Self Assessment.
Requirements: pass HMRC's compliance tests (filed returns on time, no outstanding liabilities). Turnover thresholds apply (£30,000 for sole traders).
Worth pursuing once you are established. The cash flow benefit is significant.
The monthly return headache
Contractors must file monthly CIS returns, even if they have paid nothing in a month (nil return). Miss a return: £100 penalty. Miss several: up to £3,000.
If you are a contractor using subcontractors, this is mandatory admin. Set a calendar reminder for the 19th of each month.
Making Tax Digital and CIS
From April 2026, CIS subcontractors within the MTD for Income Tax threshold (£50k+ turnover) will need to submit quarterly digital updates. The CIS deductions still apply — they sit alongside the MTD obligations.
The CIS Contractor MTD Survival Kit covers both: monthly return templates, gross payment status application guide, and MTD compatibility checklist. £14.
Are you on gross payment status? What did the application process look like?
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