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Because HMRC told your contractor to. In October 2026, 30% applies when you are not registered for CIS or the contractor's verification did not match your registration, often over a name or UTR difference.
Under the Construction Industry Scheme (CIS), contractors do not choose the rate. Before paying a new subcontractor, the contractor verifies them with HMRC, and HMRC replies with gross, 20% or 30%. The higher rate is HMRC's answer when it cannot find a CIS registration that matches the details it was given.
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The usual reasons
| Reason | What is happening | The fix |
|---|---|---|
| You have not registered for CIS | Being self-employed is not the same as CIS registration | Register for CIS |
| Name mismatch | The contractor used a trading name, nickname or different spelling | Give the exact name you registered with |
| Wrong or missing UTR | A digit is wrong, or a company UTR was used for a sole trader | Give your own UTR exactly |
| National Insurance number problem | Temporary numbers starting with TN or 2 digits cannot be verified | Give your permanent number |
| You registered after you were verified | The contractor's 30% instruction stays until HMRC updates it | Ask the contractor to re-verify you |
| Your business structure changed | A new company or partnership needs its own registration | Register the new business |
A contractor who has paid you in the current or last 2 tax years does not need to verify you again, and keeps paying on the same basis. So an old 30% result can carry on until something changes it.
The verification number
When HMRC cannot match a subcontractor, CIS 340 says it gives the contractor a verification reference with one or two letters on the end, such as V1234567890/A. The contractor must show it on your payment and deduction statement whenever 30% is taken. Keep it: HMRC uses it to link those payments to your record once you are matched.
What it costs you
On £2,000 of labour, 20% is £400 and 30% is £600. That is £200 more held by HMRC on every £2,000 you earn.
The money is not lost. Every deduction counts towards your Income Tax and National Insurance, and over-deducted CIS is claimed back through your tax return. The sooner after 5 April you file, the sooner HMRC can repay you.
HMRC's manual allows an earlier route in one case. If you were already entitled to 20% or gross payment when the extra was taken, HMRC can repay the excess without waiting for your tax return. You need the statements, and the contractor must have filed the monthly return and paid over the deductions. If you were not registered when the deductions were made, they are credited through your tax return instead.
What this means for you
Act on the first statement that shows 30%. Each month it goes unfixed, another 10% of your labour sits with HMRC until you file. The fix is almost always a phone call and the right details, not a dispute.
Check whose details are wrong before blaming anyone. If your registration is under your legal name but your invoices use a trading name, the contractor may have verified the trading name. GOV.UK tells subcontractors to give contractors the exact details used when registering.
Steps to get back to 20%
- Check your statement. If it shows a verification number ending in a letter, HMRC could not match you.
- Check you are registered. If you are not sure, contact the CIS helpline, or register for CIS now.
- Give your contractor the exact legal name, UTR and National Insurance number from your CIS registration.
- Ask the contractor to verify you again. Once HMRC matches you, future payments should drop to 20%.
- If you have just registered, ask HMRC to notify your contractors of your new status.
- Keep every 30% statement, including the verification number, for your tax return or an early repayment claim.
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
I am registered for CIS. Why am I on 30%?
Usually because HMRC could not match the details your contractor gave when verifying you. GOV.UK says you get 20% only if you are registered and the contractor can verify you. The name, UTR and National Insurance number must exactly match your registration.
Can my contractor just switch me to 20%?
Not on their own. They must re-verify you, or receive a notice from HMRC of your new status. Once HMRC confirms 20%, it applies to payments from then on.
Will my contractor refund the extra 10%?
No. The contractor has paid it to HMRC. HMRC's manual says the form telling contractors about a changed status advises them not to refund deductions already made. You get the credit from HMRC.
Do I lose the extra money?
No. All CIS deductions count towards your tax and National Insurance, and any overpayment is repaid after you file your tax return. Keep the statements, including the verification number shown on them.
I changed from sole trader to a limited company. Is that why?
It can be. GOV.UK says you usually need to register again for CIS when your business structure changes, because the registration cannot be transferred.
Sources
- What you must do as a CIS subcontractor: Get paid (GOV.UK)
- What you must do as a CIS contractor: Verify subcontractors (GOV.UK)
- Construction Industry Scheme: a guide for contractors and subcontractors, CIS 340, sections 3.1 to 3.10 (GOV.UK)
- CISR51120: Unmatched verification (HMRC manual)
- CISR72090: Subcontractor entitled to gross payment or standard rate has an incorrect deduction made (HMRC manual)
- CISR72100: Newly registered subcontractor has deduction made at the higher rate (HMRC manual)
- What you must do as a CIS subcontractor: Changes you need to report (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
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- Questions about this page? Email hello@rightotax.co.uk.