CIS Tax Refund: How Subcontractors Claim Back the 20%

A CIS tax refund is the money you get back after filing a Self Assessment return, because the 20% your contractor deducted was taken from your gross labour payments before your £12,570 Personal Allowance and before a single expense was counted. Once your real profit and National Insurance are worked out, the deductions almost always exceed the tax due, and HMRC repays the difference. You claim it on your tax return after the tax year ends on 5 April, and most repayments are paid straight into your bank account within a few weeks of the return being processed.

• CIS is deducted at 20% if you are registered, 30% if you are not, and 0% if you hold gross payment status.
• Deductions come off labour only — materials, plant hire, fuel for plant and VAT should be excluded.
• Your Personal Allowance of £12,570 and your business expenses are only applied when you file, which is what creates the refund.
• Sole traders and partners claim through Self Assessment; limited companies claim through their payroll submissions instead.
• You can usually go back four years if you have missed returns with CIS deductions in them.

Why CIS over-taxes almost every subcontractor

Under the Construction Industry Scheme, the contractor paying you is legally required to withhold tax from the labour element of your invoice and pay it to HMRC on your behalf. It is not a final tax. It is a payment on account against whatever you eventually owe, and it is calculated with no regard for your personal circumstances.

Three things make the deduction too big:

• No Personal Allowance. A PAYE employee gets £12,570 of tax-free pay spread across the year through their tax code. CIS gives you nothing — the 20% starts on the first pound of labour you invoice.
• No expenses. Tools, insurance, van running costs, protective gear and site travel all reduce your taxable profit, but the contractor deducts tax from your turnover, not your profit.
• The wrong rate for many. Once the allowance and expenses are applied, a lot of subcontractors are taxed at 20% income tax plus 6% Class 4 National Insurance on only part of their income — an effective rate well below the flat 20% of turnover.

What CIS should and should not be deducted from

Deductions apply to the labour charge. Materials you have genuinely paid for, plant hire, equipment you hire in, and VAT charged on the invoice should all be taken out of the figure before the percentage is applied. If a contractor deducts 20% from your whole invoice including £2,000 of materials, that is £400 of tax deducted unnecessarily — you will get it back eventually, but only after you file.

If you are on the 30% rate because you never registered as a subcontractor, registering fixes the rate going forward and the extra 10% already taken is recovered through your return. Registration is free through GOV.UK.

Keep every deduction statement

Contractors must give you a payment and deduction statement each month showing gross pay, materials and tax deducted. These are your evidence. If statements are missing, ask the contractor for duplicates before you file — HMRC can query a refund claim where the deductions on the return do not match what contractors have reported.

The expenses that make your refund bigger

Every pound of allowable expense cuts your taxable profit, and at basic rate that is worth 26p back once income tax and Class 4 NI are combined. Common claims for trades:

One trap: travel to a site you attend for a long, continuous period can be treated as ordinary commuting rather than business travel, particularly if you work at the same site for most of a contract. Keep a mileage log with dates, sites and distances so each journey can stand on its own. The mileage allowance calculator converts a year's log into a figure for the return.

Claiming your CIS refund through Self Assessment

1. Register for Self Assessment if you have not already — the deadline is 5 October after the end of the tax year in which you started.
2. Add up the year's figures: total gross payments, total materials, total CIS deducted, and your expenses.
3. Complete the self-employment pages with turnover and expenses, then enter the CIS tax deducted in the box for deductions taken from payments by contractors. Missing this box is the single most common reason a refund never arrives.
4. Give your bank details in the repayment section so HMRC can pay directly rather than issuing a cheque.
5. File from 6 April once the tax year has ended. You do not need to wait for the 31 January deadline, and filing early is the fastest route to the money.

Worked example

Rob is a self-employed plasterer in England. In 2026/27 he invoices £48,000, of which £3,000 is materials. Contractors deduct 20% from the £45,000 of labour, so £9,000 of CIS tax is withheld and he is paid £39,000 plus his materials.

• Turnover £48,000 less materials £3,000 and other expenses £6,000 (van, tools, insurance, phone) = profit £39,000
• Income tax: £39,000 − £12,570 = £26,430 taxable at 20% = £5,286
• Class 4 NI: £26,430 at 6% = £1,585.80
• Total due: £6,871.80. Class 2 is not payable as profits are above the £7,105 small profits threshold.
• CIS deducted £9,000 − £6,871.80 = £2,128.20 refund

If Rob were a Scottish taxpayer, the same £26,430 would be taxed through the starter (19%), basic (20%) and intermediate (21%) rates, giving income tax of £5,341.07 rather than £5,286 — about £55 more, so a refund of £2,073.13. National Insurance is the same across the UK. You can test your own figures with the CIS tax refund calculator.

One useful side effect: because CIS counts as tax already deducted at source, subcontractors whose deductions cover at least 80% of their liability are not asked for payments on account, which is why many CIS returns produce a clean repayment rather than a bill for the following January.

How long does a CIS refund take?

The clock only starts when you file. For the 2026/27 tax year you can submit from 6 April 2027, and the return is due online by 31 January 2028. Most repayments are issued within a few weeks of the return being processed, and going into a nominated bank account is quicker than waiting for a cheque.

Things that slow a CIS refund down:

• Security checks. First-time claims and large refunds are routinely reviewed, which can add several weeks. HMRC may write asking for deduction statements or bank evidence.
• Mismatched deductions. If the CIS figure on your return does not agree with contractor returns, the claim is held.
• Other debts. HMRC will offset a repayment against unpaid tax, penalties or, in some cases, other liabilities before paying the balance.
• Missing UTR or unverified identity. You cannot file, and therefore cannot be repaid, without a UTR and Government Gateway access.

Limited company subcontractors

If you work through a limited company, the CIS deducted belongs to the company, not to you personally. You must not put it on your own tax return — doing so creates a mismatch that HMRC will unpick.

Instead, the company reports the deductions suffered each month on an Employer Payment Summary through its payroll. Those amounts are set against the company's PAYE, employee and employer National Insurance and any CIS the company itself has deducted from its own subcontractors. If deductions suffered exceed those liabilities at the end of the tax year, the company can ask HMRC to refund the excess or set it against Corporation Tax. Repayment claims after 5 April are generally made in writing to HMRC's CIS team, and they typically take longer than a personal Self Assessment repayment.

Two points worth knowing. First, the company must be running a payroll scheme to claim through the EPS route, even if the only wage is a small director's salary. Second, gross payment status removes deductions altogether: it requires the business to pass a business test, a turnover test (broadly £30,000 of net construction turnover per director, or £100,000 for the company as a whole) and an ongoing compliance test covering tax returns and payments. Losing compliance loses the status, so the cash-flow gain comes with a filing discipline.

What to do next

Gather your monthly deduction statements, total your expenses, and run the numbers through the CIS tax calculator to see the likely refund before you file. When you are ready, the Self Assessment guide walks through the boxes that matter, and the self-employed tax calculator shows how income tax and Class 4 NI combine on your profit. File as soon as the tax year ends — the refund cannot arrive any earlier than the return.