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In 2026-27, a CIS subcontractor pays Income Tax and Class 4 National Insurance on profit after costs. On £45,000 of labour with £8,000 of costs, that is £6,351.80, against £9,000 taken in CIS deductions.
The Construction Industry Scheme (CIS) deduction is not your tax bill. GOV.UK calls it an advance payment. After the tax year ends, your tax return works out what you really owe on your profit, takes off the CIS already deducted, and either repays the difference or asks for the balance.
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The 2026-27 rates
| Rate | Applies to | |
|---|---|---|
| Personal allowance | 0% | The first £12,570 of income |
| Basic rate Income Tax | 20% | £12,571 to £50,270 |
| Higher rate Income Tax | 40% | £50,271 to £125,140 |
| Class 4 National Insurance | 6% | Profits from £12,570 to £50,270 |
| Class 4 National Insurance | 2% | Profits above £50,270 |
| Class 2 National Insurance | Treated as paid | Profits of £7,105 or more |
These are GOV.UK's figures for England, Wales and Northern Ireland, checked on 16 October 2026. The personal allowance shrinks by £1 for every £2 of income over £100,000.
Three worked examples
Each subcontractor is a labour-only sole trader, registered for CIS at 20%, living outside Scotland, with no other income and the full personal allowance.
| Example 1 | Example 2 | Example 3 | |
|---|---|---|---|
| Gross pay before CIS | £25,000.00 | £45,000.00 | £85,000.00 |
| Business costs | £4,000.00 | £8,000.00 | £12,000.00 |
| Profit | £21,000.00 | £37,000.00 | £73,000.00 |
| Income Tax at 20% | £1,686.00 | £4,886.00 | £7,540.00 |
| Income Tax at 40% | £0.00 | £0.00 | £9,092.00 |
| Class 4 National Insurance at 6% | £505.80 | £1,465.80 | £2,262.00 |
| Class 4 National Insurance at 2% | £0.00 | £0.00 | £454.60 |
| Total tax and National Insurance | £2,191.80 | £6,351.80 | £19,348.60 |
| CIS deducted at 20% | £5,000.00 | £9,000.00 | £17,000.00 |
| Result | £2,808.20 repayable | £2,648.20 repayable | £2,348.60 to pay |
How example 2 works. Profit of £37,000 less the £12,570 personal allowance leaves £24,430. Income Tax at 20% is £4,886.00 and Class 4 at 6% on the same £24,430 is £1,465.80. CIS took £9,000, so £2,648.20 was overpaid.
Why example 3 owes. £22,730 of the £73,000 profit sits above £50,270, taxed at 40% plus 2%. The 20% CIS deduction does not keep up, so there is a balance to pay by 31 January 2028.
Scotland is different
If you live in Scotland, Scottish Income Tax uses its own bands and rates. For 2026-27 it starts with a 19% starter rate on £12,571 to £16,537 and has more bands above that. The Income Tax lines in the examples above do not apply. GOV.UK's Income Tax in Scotland page has the full table.
What this means for you
Most subcontractors with profit in the basic rate band pay less in total than the 20% taken from their gross pay, because the personal allowance and their costs come off first. That is why many get money back. Before you join Making Tax Digital, over-deducted CIS is claimed back through your Self Assessment tax return, and the sooner after 5 April you file, the sooner HMRC can repay you. 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.
Higher earners are the exception. Once profit goes well past £50,270, expect a bill instead, and HMRC may also ask for payments on account towards the next year. Putting some money aside each month avoids a surprise in January.
Your costs make the biggest difference you control. In example 2, every extra £100 of allowable expenses saves £26: £20 of Income Tax and £6 of National Insurance.
These are examples only. Student loans, other income or a reduced personal allowance will change your own figures.
Steps to work out your own bill
- Add up your gross pay before CIS deductions from your monthly statements.
- Add up your allowable business costs: materials, tools, van or mileage, phone, insurance and so on.
- Take costs from gross pay to get your profit.
- Take off the £12,570 personal allowance, then apply the Income Tax and Class 4 rates in the table above.
- Compare the total with your CIS deductions. If deductions are higher, you are due money back; if lower, you owe the difference.
- File soon after 5 April 2027 so any refund comes sooner, or so you know how much to pay by 31 January 2028.
Use the free MTD check to see when Making Tax Digital starts for you, and see the trades section for more on CIS.
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Questions people ask
Is 20% CIS the tax I pay?
No. The 20% is an advance payment. Your real bill is Income Tax and Class 4 National Insurance on your profit after costs and your personal allowance, worked out on your tax return.
What are the 2026-27 rates for a self-employed subcontractor?
Outside Scotland, Income Tax is 20% on taxable income from £12,571 to £50,270 and 40% from £50,271 to £125,140. Class 4 National Insurance is 6% on profits from £12,570 to £50,270 and 2% above.
Do I pay Class 2 National Insurance?
Not as a charge. For 2026-27, Class 2 is treated as paid if your profits are £7,105 or more. Below that, you can choose to pay voluntary Class 2 at £3.65 a week.
Why do higher earners on CIS often owe more tax?
Because profit above £50,270 is taxed at 40% plus 2% National Insurance. Once enough profit falls in that band, the 20% taken during the year no longer covers the bill and the balance is due by 31 January.
Is it different in Scotland?
Yes. Scottish Income Tax has its own bands and rates, starting with a 19% starter rate from £12,571 to £16,537 in 2026-27, so the examples on this page do not apply in Scotland.
Sources
- Income Tax rates and Personal Allowances (GOV.UK)
- Self-employed National Insurance rates (GOV.UK)
- Income Tax in Scotland (GOV.UK)
- What you must do as a CIS subcontractor: Pay tax and claim back deductions (GOV.UK)
- Expenses if you're self-employed (GOV.UK)
- Understanding your Self Assessment tax bill: Payments on account (GOV.UK)
- Submit your tax return: Making Tax Digital for Income Tax (GOV.UK)
This is general information to help you understand the rules. It isn't tailored to your circumstances, so check your own position before acting on it.
Righto Tax is a trading name of NJG Consultancy Ltd, registered in England and Wales, company number 16095900. Registered office: Jubilee House, East Beach, Lytham St Annes, FY8 5FT.
All CIS guides for subcontractors
What happens next
- Use the free Making Tax Digital checker to see your own start date and deadlines.
- See what Righto Tax for Trades does for you, and join the waitlist.
- Questions about this page? Email hello@rightotax.co.uk.