CIS Tax Deduction Calculator United Kingdom

What the CIS tax deduction calculator does

The calculator works out how much a contractor must deduct from a subcontractor’s payment under the Construction Industry Scheme, and what the subcontractor receives. Enter the labour charge, the materials charge and the subcontractor’s status, and the tool shows the deduction, the net payment and the rate applied. Contractors can use it to get the deduction right, and subcontractors to check they have been paid correctly.

Getting a deduction wrong causes problems on both sides: a contractor can face penalties for under-deducting, and a subcontractor can be underpaid. The calculator applies the right rate to the right part of the invoice.

How the Construction Industry Scheme works

Under CIS, contractors deduct a percentage from the labour element of each payment and pass it to HMRC as an advance towards the subcontractor’s Income Tax and National Insurance. The subcontractor reconciles this against their actual tax bill when they file, reclaiming any overpayment or setting it against what they owe.

The rate depends on the subcontractor’s status with HMRC. A subcontractor registered under CIS and verified is deducted at the standard rate of 20%. One who is not registered or cannot be verified is deducted at the higher rate of 30%, which is meant to encourage registration. A subcontractor with gross payment status is paid in full.

Labour versus materials

The deduction applies only to the labour part of an invoice. The cost of materials the subcontractor supplies is paid in full, as are certain other items such as plant hire, fuel for that plant and manufacturing or prefabrication costs.

That is why the calculator asks for labour and materials separately. If a £2,500 invoice is £2,000 of labour and £500 of materials, the deduction comes only from the £2,000. Lumping the two together would overstate the deduction and underpay the subcontractor. Invoices must split the two, and the materials figure must be the actual direct cost, not a marked-up price.

Reading the deduction and net payment

The calculator returns three figures. The CIS deduction is what the contractor withholds and pays to HMRC. The net payment is what the subcontractor receives: labour plus materials, minus the deduction. The deduction rate confirms which percentage was applied.

For a registered subcontractor invoicing £2,000 of labour and £500 of materials, the deduction is 20% of £2,000, or £400, and the net payment is £2,100. Unregistered, the deduction would be £600 and the net payment £1,900; with gross payment status the full £2,500 is paid. Changing the status in the calculator recomputes the figures straight away.

What to enter for an accurate result

Enter figures net of VAT. CIS is worked out on amounts before VAT, and in most construction supply chains VAT is handled through the domestic reverse charge, where the contractor accounts for it instead of paying it to the subcontractor.

Split the invoice honestly. The materials figure should be the real direct cost of materials the subcontractor provides, not a figure inflated to shrink the deduction; HMRC can challenge an unrealistic split. If an invoice is labour only, leave materials at zero and the whole amount is subject to the deduction.

Why status matters

Over a year of invoices, the difference between registered and unregistered treatment adds up. An unregistered subcontractor loses a larger slice of every labour payment up front, which hurts cash flow even though the money is only an advance on their tax bill. Registering and being verified moves them to the 20% rate.

For established businesses, gross payment status removes deductions altogether, so the subcontractor keeps their cash and pays tax through their own returns. Qualifying means passing HMRC’s business, turnover and compliance tests. The calculator shows in pounds what each status is worth on a typical invoice.

What happens to the money deducted

A CIS deduction is a prepayment, not an extra tax. The contractor pays it to HMRC, and it is credited against the subcontractor’s Income Tax and National Insurance for the year. When the subcontractor files their Self Assessment return, the deductions are set against the tax due; if more was deducted than the final bill, the difference is refunded, and if less, the balance is paid.

A subcontractor trading through a limited company offsets CIS deductions against the PAYE and other amounts the company owes HMRC each month instead of reclaiming them through Self Assessment. Either way, keep every payment and deduction statement as evidence for the credit claimed, and use the calculator to check each statement matches what should have been deducted.

When to use this tool

• To work out the correct CIS deduction before paying a subcontractor.
• To check a payment or a CIS statement you have received as a subcontractor.
• To compare the effect of registered, unregistered and gross payment status.
• To split an invoice correctly between labour and materials.

It runs in your browser and stores nothing you enter, so you can check invoices one after another.

This is general information only and not financial advice.

About This CIS Tax Deduction Calculator

Use this CIS tax deduction calculator to get an instant, accurate estimate. The figures follow official HMRC guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.