What is CIS?

CIS is set by law, in the Finance Act 2004 and the CIS Regulations 2005. It isn't an extra tax. It collects some of a subbie's tax early, at the moment they are paid, instead of all at once at the end of the year.

It can feel like you need to be an accountant to follow it. You don't. For a contractor it comes down to a few jobs each month, and the rest of this page lists them. Each part ends with a link to the full guide.

You are a contractor if your business does construction work and you pay subbies to do some of it. HMRC calls this a mainstream contractor. You can be a sole trader, a partnership or a limited company.

A business that doesn't do construction work can be a contractor too. That happens when it spends over £3 million on construction in 12 months. HMRC calls this a deemed contractor.

Private householders paying for work on their own home are not contractors, so CIS doesn't apply to them.

You must register before you pay your first subbie. How to do it is in Register as a CIS contractor.

A subbie is anyone who does construction work for a contractor, or supplies people to do it. They can be a sole trader, a partnership or a limited company. A business can be a contractor on one job and a subbie on another, and then it registers as both.

A subbie registered with HMRC has 20% taken from their pay. One who isn't registered has 30% taken. A subbie with gross payment status is paid in full, with nothing taken.

CIS is only for people in business for themselves. If someone works like an employee, they should be on your payroll instead, and you can be fined if they should have been.

Before you pay a new subbie, you check them with HMRC. See Verify a subcontractor.

CIS covers most work on buildings, structures and civil engineering, such as roads and bridges. That includes:

• preparing the site, such as foundations and access
• demolition and dismantling
• building work, alterations and repairs
• painting and decorating
• installing heating, lighting, power, water and ventilation
• cleaning inside a building after construction work

Some jobs on a building site are not covered. These include:

• architects and surveyors
• scaffolding hire with no labour
• carpet fitting
• making or delivering materials
• site jobs that are clearly not construction, such as running the canteen

HMRC's full list is on GOV.UK: Who is covered by CIS.

CIS runs on tax months, from the 6th of one month to the 5th of the next. In each one you:

1. Verify each new subbie with HMRC before you pay them. HMRC tells you which rate to use.
2. Take the deduction from each payment: 20%, 30% or nothing. It comes off what is left after taking away VAT, materials, plant hire, consumables and fuel.
3. File the CIS300, the monthly return, by the 19th. It lists every subbie you paid and what you took.
4. Pay HMRC what you took by the 22nd if you pay electronically, or by the 19th by post.
5. Give each subbie a statement of what you paid and took, within 14 days of the end of the tax month.
6. Keep the records, payments, deductions and materials, for at least 3 years after the end of the tax year.

The dates for each month are in CIS deadlines. What counts as materials is in CIS materials deduction.

The money you take isn't lost to the subbie. It is tax paid in advance on their behalf. A sole trader or partner puts the deductions on their Self Assessment return, and HMRC takes them off the tax they owe. If too much was taken, HMRC pays the rest back.

A limited company takes its deductions off what it owes HMRC through its payroll each month instead.

That is why your statements matter: they are the subbie's proof of what was taken. See CIS payment and deduction statements.

A return filed one day late costs £100. The fine goes up at 2 months, 6 months and 12 months late. You can also be fined up to £3,000 if you can't show HMRC your CIS records. What each step costs is in CIS late filing penalties.

Nil returns are back: in a month when you pay no subbies, you file one by the 19th, unless you told HMRC in advance. Payments to councils and other public bodies are now outside CIS. And gross payment status is easier to lose. The detail is in CIS changes from 6 April 2026.