CIS Deduction Rates 2026: 20%, 30% or Gross?

CIS Deduction Rates 2026: 20%, 30% or Gross Payment?

Under the Construction Industry Scheme, a contractor deducts money from a subcontractor’s pay and sends it to HMRC as an advance on the subcontractor’s tax — and in 2026 the rate deducted is 20%, 30%, or nothing at all. Which one applies to you depends entirely on your registration status. Being registered instead of unregistered is the difference between a 20% and a 30% deduction, and that gap comes straight out of your cash flow. This guide explains the three rates, who falls into each, and how to move to a lower one. It is general information, not tax advice.

The three rates

20% — registered subcontractors. If you are registered with HMRC under the Construction Industry Scheme, the standard deduction from your labour is 20%.

30% — unregistered subcontractors. If you are not registered under CIS, the contractor must deduct 30%. That extra 10% is not a penalty as such, but it is money out of your pocket now that you only get back later, so there is rarely a good reason to stay unregistered.

0% — gross payment status. If you qualify for and hold gross payment status, the contractor pays you in full with no deduction, and you settle your tax through your own return instead. This is the best position for cash flow, but you have to meet HMRC’s tests to get it.

Deductions are taken from the labour element of your invoices, not from materials, so it matters that your invoices separate the two.

What CIS is, briefly

The Construction Industry Scheme is HMRC’s way of collecting tax from construction subcontractors at source. A contractor paying a subcontractor for construction work deducts the relevant percentage and pays it to HMRC on the subcontractor’s behalf. It counts as an advance payment towards the subcontractor’s Income Tax and National Insurance, which is why registered subbies often find they have overpaid across the year and are owed a refund.

Contractor, subcontractor, or both

If you pay other subcontractors for construction work, you are a contractor and must register as one, verify your subcontractors with HMRC, make the right deductions, and file monthly returns. If you are paid for construction work by a contractor, you are a subcontractor. Plenty of trades are both — for example a builder who takes work from a main contractor and also pays their own subbies. If that is you, you have obligations on both sides.

Why registering is almost always worth it

The jump from 30% to 20% is the single easiest saving in CIS. Registering as a subcontractor is straightforward, and once done, contractors deduct 20% rather than 30%. For a subbie invoicing significant labour each month, that 10% difference is a meaningful chunk of working capital kept in the business rather than sitting with HMRC until you reclaim it.

Gross payment status: paid in full

Gross payment status means no deduction at all — you are paid the full amount and account for your own tax. To get it, HMRC applies tests covering your business, your turnover, and your compliance history: broadly, you need to be running a genuine construction business, meet a turnover threshold, and have a clean record of paying your own tax and filing on time. It is worth pursuing if you qualify, because it transforms cash flow, but it comes with the responsibility of getting your own tax right without the safety net of deductions along the way.

Getting your deductions back

Because CIS deductions are an advance on your tax, registered subcontractors frequently end up having paid more through the year than they owe, especially once expenses and allowances are counted. That surplus is reclaimed through your Self Assessment. Keeping every deduction statement from your contractors is essential — they are the proof of what has already been paid on your behalf, and they are what your refund is built on.

Frequently asked questions

What are the CIS deduction rates in 2026? 20% for registered subcontractors, 30% for unregistered subcontractors, and 0% for those with gross payment status.

Why am I being deducted 30%? Because you are not registered under CIS. Registering as a subcontractor brings the deduction down to the standard 20%.

Are deductions taken from materials too? No, deductions apply to the labour element, not materials — provided your invoices separate the two clearly.

How do I get gross payment status? You apply to HMRC and must pass its business, turnover, and compliance tests. It means being paid in full with no deduction, but you take on full responsibility for your own tax.

Do I get CIS deductions back? Often, yes. They are an advance on your tax, so registered subbies frequently overpay across the year and reclaim the difference through Self Assessment. Keep all your deduction statements.

Related reading: how to register for CIS as a subcontractor · subcontractor vs employee · tax deductions for tradesmen · domestic reverse charge VAT