How do I work out a CIS deduction?

Start with the invoice total, take off VAT and what you paid for materials, hired plant, consumables and job fuel, then apply 20%, 30% or 0%. In 2026-27, labour-only work of £1,500 at 20% loses £300.

Under the Construction Industry Scheme (CIS), the contractor makes the deduction and pays it to HMRC, but you can work it out yourself in a minute. It is worth doing for every payment, because a wrong figure on one statement carries through to your tax return.

The calculation in three parts

What is left after the deduction is your net payment. The legal basis is section 61 of the Finance Act 2004, which applies the percentage to the part of a payment not shown to be the direct cost to you of materials.

Two rules sit on top of this. If you are not VAT registered, the VAT you paid on materials counts as part of their cost. If you are VAT registered, materials come off without VAT. And travel, fuel for travelling and subsistence that the contractor pays you, or pays on your behalf, stay in the amount the deduction is taken from (CIS 340, section 3.11, and HMRC's manual at CISR15080).

Three worked examples

A plasterer, labour only. You invoice £1,500 for skimming a block of flats and supply no materials.

A roofer, not VAT registered. You invoice £2,500: £1,500 labour, £720 of battens, membrane and tiles (£600 plus £120 VAT you paid), £180 to hire a tower scaffold from a hire firm (£150 plus £30 VAT), and £100 travel agreed with the contractor.

The £100 travel stays in, which is why the deduction is worked out on £1,600 and not £1,500.

A VAT-registered joiner under the reverse charge. You invoice £2,000 labour and £500 of timber and ironmongery excluding VAT, a total of £2,500. Under the VAT domestic reverse charge your invoice shows the VAT but does not add it, so the total due is £2,500. The deduction is 20% of £2,000, which is £400, and you are paid £2,100. If you had charged VAT, the deduction would still be £400, because VAT is left out first. Our guide on how CIS works with VAT goes through this.

Things that change the starting figure

Mark-up on materials. Only the direct cost of materials comes off, meaning what you can show you paid. HMRC's manual says a contractor can estimate the cost if you will not disclose it, for example to hide a mark-up.

Work held back for poor quality. HMRC's manual calls this a set-off. If £400 of a £2,000 payment is withheld because of a breach of contract, the deduction is taken from £1,600.

Goods the contractor gives you. A contra charge, such as surplus materials taken off your payment, does not reduce the amount the deduction is taken from, as long as you do not use those materials on the job.

What this means for you

Your figures and the contractor's should match to the penny. If the deduction is higher than your own sum, look for a missing or estimated materials figure, a mark-up on materials, or HMRC telling the contractor to use 30%. Also check you did not take off plant you own: it cannot come off, although fuel it uses on the job can.

The deduction is not a final tax bill. GOV.UK calls it an advance payment towards your tax and National Insurance. Before you join Making Tax Digital, over-deducted CIS is claimed back through your Self Assessment tax return. Once you are in Making Tax Digital, HMRC adds your CIS deductions to your tax return, and any refund is requested separately through HMRC online services. Either way, the sooner after 5 April the return is filed, the sooner HMRC can repay you.

Steps to check a CIS deduction

1. Find the invoice total and take off any VAT you charged.
2. Take off materials, consumables, job fuel and hired plant, at what you paid.
3. Leave in any travel or subsistence the contractor paid you.
4. Multiply what is left by your rate: 20%, 30% or 0%.
5. Compare your answer with the payment and deduction statement for that tax month.
6. If they differ, ask the contractor which figure they used for materials, and send receipts if they estimated.

The CIS deduction calculator does steps 1 to 4 for you. Use the free MTD check to see when Making Tax Digital starts for you, and the trades section for more on CIS.