CIS Tax Deduction Calculator 2026/27

Construction Industry Scheme (CIS) Calculator

✓ Verified for 2026/27

Invoice Details

£
£
CIS Tax Deducted
£1,600
at 20% rate
Net Net Paid to You
£8,400
total invoice payout
Taxable Labor Cost
£8,000
invoice minus materials
Materials Reimbursed
£2,000
paid in full

CIS Invoice Breakdown

Materials Reimbursement £2,000
Net Labor Paid £6,400
CIS Tax Withheld £1,600
Net Invoice Payout £8,400
Materials 20%
Net Paid 64%
Tax 16%
ℹ️ Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor's payments and pass it to HMRC. Deductions apply only to the labor portion of the invoice, not to materials, vat, or equipment hire costs.
🛡️
Verified for Accuracy (2026/27 Tax Year)
Fact-checked and audited by David Vance, CTA FCA, Chartered Tax Advisor & Accountant. Verified against official HMRC rules.

How We Calculated This

  1. Input variables: Enter the relevant amounts, rates, or percentages in the form.
  2. Real-time breakdown: The calculator applies HMRC rules and thresholds for the 2026/27 tax year to process the values.
  3. Display outputs: The visual graphs, donut charts, and tables are compiled dynamically to show your net take-home and deductions.

Real-World Examples

Standard Scenario

A basic calculation applying standard UK tax bands and allowances.

Calculation runs based on standard HMRC rules.
With Pension or Deductions

Factoring in a percentage of salary sacrifice or pension contributions.

Deductions are calculated and adjusted accordingly.

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Frequently Asked Questions & Detailed Tax Guide

What is the Construction Industry Scheme (CIS) and how does it work?

The Construction Industry Scheme (CIS) is a specialized tax scheme set up by HMRC to minimize tax evasion in the construction sector. Under CIS rules, contractors must deduct tax at source from payments made to subcontractors for construction work. Instead of the subcontractor receiving their full invoice value and paying tax later via Self Assessment, the contractor acts as a tax collector for HMRC, deducting a fixed percentage and paying it directly to HMRC. These deductions count as advance payments towards the subcontractor’s tax and National Insurance liabilities at the end of the tax year.

What are the CIS deduction rates?

The rate of tax deducted from the subcontractor’s invoice depends entirely on their registration status with HMRC:

  • Registered Subcontractors (Standard): **20% deduction** on all labor costs.
  • Unregistered Subcontractors (Higher): **30% deduction** on all labor costs. This rate is applied if the contractor runs a verification check and HMRC has no record of the subcontractor.
  • Gross Payment Status (0%): No tax is deducted at all. The subcontractor receives 100% of their invoice and pays tax later. To qualify for gross status, you must pass a business test, a turnover test (minimum £30,000 net per partner/director), and have an impeccable tax compliance record.

Step-by-Step Mathematical Calculation: CIS Invoice

Let’s calculate the CIS deduction and net payment for a registered subcontractor invoicing £5,000 (comprising £4,000 labor and £1,000 materials):

  • 1. Total Invoice: £5,000 (£4,000 labor + £1,000 materials).
  • 2. Deduct Materials: CIS tax is **only** deducted from labor costs, not materials or equipment hire. Taxable labor: £4,000.
  • 3. Calculate CIS Deduction at 20%: £4,000 * 20% = **£800 deduction**.
  • 4. Calculate Net Payment to Subcontractor: £5,000 total invoice – £800 tax = **£4,200**.
  • 5. The contractor pays the subcontractor £4,200 and sends the £800 directly to HMRC. At the end of the tax year, the subcontractor will claim this £800 as credit against their Self Assessment tax bill.

Tax Expert Pro-Tips: Claiming CIS Refunds for Limited Companies

David Vance, CTA FCA, recommends: “For subcontractor businesses operating as Limited Companies, CIS deductions can create severe cash flow strain because the company receives 20% less cash on every invoice. However, Limited Companies can offset their suffered CIS deductions against their own PAYE, employee NI, and CIS liabilities due to HMRC monthly. If your suffered CIS deductions exceed what you owe, you can claim a cash refund from HMRC’s CIS unit at the end of the tax year (typically processed in April/May).”

Legislative References

  • Finance Act 2004 – Chapter 3 (Construction Industry Scheme).
  • HMRC Construction Industry Scheme Guide (CIS340) – Scope of construction work and verification rules.