Construction industry scheme CIS guide UK 2026
CIS guide UK, short answer: the Construction Industry Scheme is how HMRC collects tax on many construction payments from contractors to subcontractors. Who pays decides whether CIS applies: a CIS contractor paying for construction operations may deduct CIS; a private householder paying for work on their own home is usually not CIS and is never treated as the CIS contractor for that home. CIS rates are typically 0% / 20% / 30% depending on status. Soften with HMRC’s CIS overview and your accountant. VAT is separate: the VAT registration threshold is £90,000. CIS is calculated on the payment for labour / construction operations excluding VAT — not after VAT has been added.
This page is the practical CIS overview for UK trades (registration, rates, invoices, records). Sister depth: CIS explained for subcontractors and when to register for VAT UK (2026). Need the PDF shape? Open the free invoice generator (Free: 5 invoices; Pro £7.99 / Pro+ £12.99). Figures below are illustrative only. InvoiceAdept does not file CIS300, VAT returns, MTD or Self Assessment.
Who pays, CIS and VAT (first screen)
Start with who is paying you and whether the work is construction operations under CIS.
Who pays you | Typical job | CIS? | VAT if registered |
|---|---|---|---|
Private householder | Own-home building / fitting / repairs | Usually no — never treat them as CIS contractor for own home | Often 20% on ordinary domestic works — soften Notice 708; do not invent 0% |
Main contractor / CIS contractor | Subcontract labour on a construction contract | May be in CIS base when ops are in scope | Show net / VAT / gross; CIS is on the CIS-liable amount excluding VAT |
Client / developer | Direct engagement for construction ops | Depends whether the payer is a CIS contractor | Normal VAT rules if you are registered |
Deemed contractor | Business spending large sums on construction | May need to operate CIS — HMRC uses a £3 million construction-spend framing (not £1 million) | Same VAT rules |
CIS and VAT are separate systems. Registering for one does not automatically register you for the other. Soften both with your accountant.
What CIS is (and is not)
CIS requires certain contractors to deduct money from payments to subcontractors for construction operations and pay that deduction to HMRC. Subcontractors set deductions against their own tax / NIC via Self Assessment or corporation tax. CIS is not PAYE employment, not a substitute for a written contract, and not a reason to invent deductions on a householder invoice.
Role | What they typically do under CIS |
|---|---|
Contractor | Verify subcontractors, deduct when due, file monthly CIS300, pay deductions to HMRC |
Subcontractor | Register for CIS (to avoid the higher unregistered rate), invoice clearly, keep statements, reclaim via tax return |
Householder | Usually outside CIS when paying for their own home |
CIS deduction rates (illustrative)
Status | Typical deduction | Cash-flow note |
|---|---|---|
Gross payment status | 0% | Paid in full; still keep records |
Registered subcontractor | 20% | Most common registered rate |
Unregistered / verification fails | 30% | Higher deduction until status is fixed |
Illustrative: £10,000 CIS-liable labour (ex-VAT). Registered 20% → £2,000 deducted, £8,000 paid. Unregistered 30% → £3,000 deducted, £7,000 paid. Soften your own status with HMRC / your accountant.
Correct CIS and VAT order on the invoice
Correction (important): older copy on this page wrongly said CIS is taken “after VAT has been added.” That is incorrect. In normal CIS + VAT invoices, you show the CIS-liable net for construction ops, calculate CIS on that CIS-liable amount excluding VAT, and show VAT separately when you are VAT-registered. Never invent reverse charge on a householder.
Topic | Practical rule |
|---|---|
CIS base | Payment for construction operations / labour in scope — exclude VAT |
Materials | Often treated differently from labour — follow the contract and HMRC materials rules; do not invent a shortcut |
VAT threshold | £90,000 |
Householder PDF | Usually no CIS narrative |
Domestic reverse charge | Contractor-to-contractor when tests met — never on a householder |
Deemed contractor | £3 million construction-spend framing — not £1 million |
Copy-paste arithmetic (illustrative): sole trader, CIS registered 20%, VAT-registered. Labour net £5,000 + VAT £1,000 = £6,000 gross invoice. CIS @ 20% on £5,000 = £1,000. Amount the contractor typically pays you = £6,000 − £1,000 = £5,000 (VAT still shown on the invoice; CIS does not “eat” the VAT line). Soften edge cases with your accountant.
What a CIS-aware UK invoice should show
Field | Always? | CIS note |
|---|---|---|
Your name / business name | Yes | Match Self Assessment / Companies House |
Address and contact | Yes | Helps contractor AP / verification queries |
Customer name and address | Yes | Registered name for Ltd; site address if different |
Unique sequential invoice number | Yes | e.g. INV-CIS-2026-0012 |
Invoice date / tax point | Yes / if needed | Tax point if VAT-registered and different |
Description of construction work | Yes | Site, period, labour vs materials split if relevant |
Net, VAT, gross | If VAT-registered | Show VAT separately from CIS |
CIS UTR / deduction narrative | When a CIS contractor pays within scope | Omit on true householder PDFs |
Bank details | Strongly recommended | Sort code and account name matching the invoice |
Registration and monthly returns (high level)
Subcontractors register for CIS via GOV.UK so verification can return the correct rate. Contractors verify subcontractors before paying, deduct when due, and file monthly returns (CIS300). Deadlines and penalties sit with HMRC — do not guess filing dates from a blog. Soften registration steps and monthly duties with your accountant.
Related reading: CIS explained for subcontractors. For VAT timing, see when to register for VAT.
Gross payment status
Some subcontractors qualify for gross payment status (0% CIS deduction). HMRC applies turnover, compliance and business tests. Meeting them can help cash flow; failing them later can revoke status. Soften eligibility with HMRC guidance / your accountant — do not treat a blog checklist as a guarantee.
Common CIS mistakes
Mistake | Fix |
|---|---|
Saying CIS is deducted after VAT is added | Calculate CIS on the CIS-liable amount excluding VAT |
Putting CIS lines on a householder invoice | Usually remove CIS narrative for own-home householders |
Using a £1 million deemed-contractor figure | Use HMRC’s current £3 million construction-spend framing |
Mixing VAT registration with CIS registration | Treat them as separate; VAT threshold is £90,000 |
Vague “labour as agreed” with no CIS narrative when due | Show net, CIS rate/status, and amount payable clearly |
Broken / localhost tool links on old posts | Use live product URLs such as the free invoice generator |
Frequently asked questions
Does CIS always apply to construction invoices?
No. CIS may apply when a CIS contractor pays you for construction operations. Private householders on their own home are usually outside CIS.
Is CIS deducted after VAT?
No. That older wording was wrong. CIS is normally calculated on the CIS-liable payment excluding VAT. Show VAT separately if you are registered.
What VAT threshold should I use in 2026?
£90,000. Soften registration timing with your accountant.
What are the usual CIS rates?
Typically 0% (gross payment status), 20% (registered) and 30% (unregistered / failed verification). Soften your status with HMRC.
Can I reclaim CIS deductions?
Often yes, via your tax return when deductions exceed your liability — soften the reclaim route with your accountant.
Is a householder a CIS contractor for their own home?
Usually no. Do not invent CIS on a domestic own-home invoice.
Does InvoiceAdept file CIS300 for me?
No. InvoiceAdept helps you create clear invoices; it does not file CIS300, VAT, MTD or Self Assessment.
Where can I build a CIS-aware invoice quickly?
Use the InvoiceAdept free invoice generator — Free covers 5 invoices; Pro £7.99 / Pro+ £12.99.
Next step: invoice clearly under CIS
Confirm who pays, whether construction ops sit in CIS, show CIS arithmetic only when due (on the amount excluding VAT), and show VAT only if registered (£90,000 threshold). Open the free invoice generator, keep householder vs contractor facts straight, and soft-check edge cases with your accountant. Last reviewed: 17 September 2026.
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