Do I Need to Register for CIS? Subcontractor Guide

Do You Need to Register for CIS? A Subcontractor Guide

If you do construction work for another business as a subcontractor, you almost certainly need to register for the Construction Industry Scheme (CIS) — and if you don’t, the contractor paying you has to deduct 30% from your labour instead of 20%. Registration is free, takes a few minutes, and puts real money back in your pocket every month. This guide covers who has to register, the difference between a contractor and a subcontractor, how your deduction rate changes, and how to sign up.

What CIS actually is

The Construction Industry Scheme is HMRC’s way of collecting tax from subcontractors in the building trade before it goes missing. Under CIS, a contractor who pays a subcontractor takes a slice off the labour portion of the invoice and sends it straight to HMRC. That deduction is an advance payment against the subcontractor’s Income Tax and National Insurance for the year.

It is not an extra tax. It is your own tax, paid early. When you file your Self Assessment, those deductions are set against what you owe — and if too much has been taken, HMRC refunds the difference. But the rate at which it comes off depends entirely on whether you have registered.

Contractor or subcontractor — which are you?

CIS splits everyone into two roles, and plenty of trades are both at once.

You are a subcontractor if you do construction work for another business and get paid for it. A sole-trader plasterer skimming walls for a builder is a subcontractor. So is a jobbing electrician second-fixing on a developer’s site.

You are a contractor if you pay other subcontractors to do construction work for you. A builder who brings in a plasterer, a groundworker and a sparky is a contractor and has duties of their own: verifying subcontractors with HMRC, making the right deductions, and filing a monthly CIS return.

If you take on subcontractors and work for other firms yourself, you wear both hats and have to handle both sides. Most one-van trades start life purely as subcontractors and only become contractors once they scale up and start paying others.

Do you need to register?

Here is the straight answer. If you work as a subcontractor in construction, you should register — it is not legally compulsory, but staying unregistered costs you money on every payment. Contractors are legally required to register before they take on their first subcontractor.

CIS covers most construction work in the UK and Channel Islands: site preparation, groundworks, building, alterations, repairs, decorating, demolition, and installing systems for heating, lighting, power, water and ventilation. It applies to permanent and temporary structures, and to civil engineering work like roads and bridges.

Some work sits outside the scheme. Architecture and surveying, scaffolding hire (without labour), carpet fitting, delivering materials, and running a site canteen or office are generally not caught. If your work is purely one of those, CIS may not apply — but if you are on a building site with a tool in your hand, assume it does and check.

There is also a distinction that trips people up: CIS is separate from your employment status. Registering as a CIS subcontractor does not make you self-employed by itself, and it does not replace registering for Self Assessment. You still need to be set up as self-employed with HMRC and file a tax return each year.

The 30% vs 20% difference

This is the part that matters to your cash flow.

If you register as a CIS subcontractor, contractors deduct 20% from the labour element of your invoices. If you do not register, they must deduct 30%. That 10-point gap comes straight off your payments all year, tying up money you could be using to buy materials, cover the van, or simply get paid properly.

There is a third rate. If you meet HMRC’s turnover and compliance tests, you can apply for gross payment status, where contractors pay you in full with 0% deducted and you settle your whole tax bill through Self Assessment. Gross status is worth chasing once you are established — it transforms cash flow — but you have to have a clean record with HMRC and hit a minimum turnover to qualify.

One thing to remember on all three rates: CIS deductions only apply to labour. The cost of materials, plant hire and certain other items is stripped out before the percentage is worked out, so you are not taxed on the bricks and cable you paid for. Itemise materials clearly on every invoice so the contractor deducts from the right number.

How to register as a subcontractor

Registration is free and done through HMRC. Before you start, make sure you are already registered as self-employed and have your Unique Taxpayer Reference (UTR) and National Insurance number to hand.

You register for CIS through your HMRC online account, or by phone via the CIS helpline. You will confirm your business details, your UTR and, if you have one, your VAT number. Once you are registered, HMRC holds your details so that when a contractor verifies you, they are told to deduct at 20% rather than 30%.

If you already have a Government Gateway account for Self Assessment, adding CIS is quick. If you are brand new to working for yourself, register as self-employed first, wait for your UTR to arrive, then add CIS — trying to do it all in the wrong order is the usual cause of delays.

Keeping it clean for your tax return

Whatever gets deducted under CIS is money you have already paid HMRC, so keep the paper trail. Contractors must give you a payment and deduction statement (often monthly) showing what they paid and what they took. Keep every one.

At the end of the year those statements let you claim the deductions back against your tax bill on Self Assessment. Get this right and CIS often produces a refund for subcontractors, because the flat 20% taken across the year is frequently more than the tax actually due once your expenses are counted. Good records are the difference between reclaiming that money and losing track of it — and with Making Tax Digital for Income Tax now landing for higher-earning sole traders, tidy digital records are worth building the habit for anyway.

FAQs

Is registering for CIS the same as registering as self-employed?

No. They are two separate registrations with HMRC. You must be registered as self-employed for Self Assessment first, then register for CIS on top. CIS handles how you are paid; Self Assessment handles your tax return.

What happens if I don’t register?

Nothing illegal, but every contractor who pays you must deduct 30% from your labour instead of 20%. You get the difference back eventually through your tax return, but you are handing HMRC an interest-free loan all year for no reason.

Do CIS deductions come off my materials too?

No. Deductions apply only to the labour part of your invoice. Materials, plant hire and similar costs are taken out before the percentage is calculated — so always itemise materials clearly.

Can I get paid with no deductions at all?

Yes, if you qualify for gross payment status. You need a clean compliance record with HMRC and to meet a minimum turnover threshold. It is worth applying for once your business is established because it removes the deduction entirely.

I’m a subcontractor but I sometimes hire a mate to help — does that change things?

Yes. The moment you pay someone else to do construction work for you, you are acting as a contractor for that work and take on contractor duties: verifying them, deducting correctly, and filing monthly CIS returns. Many trades are subcontractor and contractor at the same time.

Get work without paying a subscription for it

Sorting your CIS status keeps more of every payment in your pocket. The next step is a steady flow of work to invoice. Trade Pilot is free to join and only charges when a real local job lands in your inbox — pay-per-lead credits, never a monthly subscription — and each lead is sold to no more than three trades in your area, so you are not fighting twenty others for the same job. Set your trades and your patch, and let the work come to you.

Related reading: CIS deduction rates · how to register as self-employed · subcontractor vs employee · tax deductions for tradesmen