The Complete CIS Guide for Construction Subcontractors: How to Claim Your Tax Refund and What Changes with Making Tax Digital in 2026
If you work as a subcontractor in UK construction, money is taken off almost every payment you receive and sent straight to HMRC before it ever reaches your bank account. That money is your tax, paid in advance under the Construction Industry Scheme (CIS). The good news is that most subcontractors have too much deducted during the year, which is exactly why a CIS tax refund is one of the most common repayments HMRC makes to self-employed builders.
This guide explains how the Construction Industry Scheme works, why you are so often owed money back, how to claim your CIS refund through Self Assessment, and what changes from April 2026 when Making Tax Digital for Income Tax starts to apply to construction subcontractors.
What is the Construction Industry Scheme (CIS)?
The Construction Industry Scheme is a set of HM Revenue and Customs (HMRC) rules for how payments for construction work are handled between contractors and subcontractors. If you are self-employed in the building trade and work for a contractor rather than as a direct employee, you almost certainly work under the construction industry scheme and should be registered as self-employed with HMRC. Under these CIS rules, a contractor must withhold tax on its payments to a subcontractor and pay that money directly to HMRC. Those deductions count as advance payments towards the subcontractor's Income Tax and National Insurance contributions for the tax year.
CIS covers most construction work across the United Kingdom, including England, Scotland, Wales and Northern Ireland: site preparation, building, repairs, decorating and demolition. It applies whether you are a sole trader, a partnership or a limited company. Crucially, CIS deductions are taken from the labour element of your invoice only, not from the cost of materials, plant hire or Value Added Tax (VAT).
Employment status: are you genuinely CIS self-employed?
Before you claim tax back, it is worth checking your employment status. The CIS rules apply to genuinely self-employed subcontractors. If a contractor in the construction industry controls your hours and how you work like an employer, HMRC may argue you are really employed. Some workers are engaged through an umbrella company, which runs Pay As You Earn (PAYE) and applies tax withholding at source like an employer rather than paying you under CIS, and the off-payroll rules known as IR35 can apply where a limited company sits in the chain. Your status decides whether you pay the tax under the CIS and claim tax back through Self Assessment at all.
CIS deduction rates: 20%, 30% and gross payment status
CIS is an HMRC scheme for collecting your tax in advance, so how much a contractor must deduct, and therefore how you pay tax under the construction industry scheme, depends on whether and how you are registered with HMRC. A registered subcontractor faces a deduction rate of 20%:
| Your CIS status | Deduction rate | When it applies |
|---|---|---|
| Registered (net payment status) | 20% | You have registered as a CIS subcontractor and given your contractor your correct UTR. |
| Not registered | 30% | You have not registered, or your details do not match HMRC's records. The higher rate is a strong reason to register. |
| Gross payment status | 0% | You meet HMRC's turnover and compliance tests, so you are paid in full and settle all your tax through Self Assessment instead. |
Why subcontractors are owed a CIS tax refund
The 20% (or 30%) deducted from your payments is a blunt instrument. It is taken off your labour income before any allowances or costs are considered. When you complete your Self Assessment tax return at the end of the year, your real tax bill is worked out properly, and it is almost always lower than the total deducted, for two reasons:
- Your tax-free personal allowance. Everyone can earn £12,570 (2024/25 and 2025/26) before paying any Income Tax. CIS deductions ignore this entirely.
- Your business expenses. Tools, protective clothing, insurance, travel and other allowable costs give you tax relief by reducing your taxable profit, but these tax deductions are not accounted for when the 20% is taken.
The difference between the tax you actually owe and the larger amount deducted at source is repaid to you. That repayment is your CIS tax refund, and it is settled after the end of the tax year when you file.
How much CIS tax will I get back?
Every situation is different, but a worked example shows why refunds are so common. Take a registered subcontractor with the following year:
| Figure | Amount |
|---|---|
| Gross labour income (turnover) | £40,000 |
| CIS deducted at 20% during the year | £8,000 |
| Allowable business expenses | £6,000 |
| Taxable profit (£40,000 − £6,000) | £34,000 |
| Less personal allowance (£12,570) | £21,430 taxed |
| Income Tax + Class 4 NIC actually due (approx.) | ≈ £5,900 |
| CIS already paid | £8,000 |
| Estimated CIS refund | ≈ £2,100 |
How to claim a CIS tax refund as a sole trader
Self-employed CIS subcontractors claim back overpaid tax through the annual Self Assessment tax return, not through a separate form. Here is the process step by step:
- Register for Self Assessment and get a UTR. If you have not already, register as self-employed with HMRC. You will receive a Unique Taxpayer Reference and be set up to file a return. You also need a National Insurance number.
- Keep your payment and deduction statements. Your contractor must give you a payment and deduction statement (PDS) within 14 days of the end of the tax month. These prove how much CIS was deducted, keep every one.
- Record your allowable business expenses. Keep receipts and a simple record of your costs throughout the year so nothing is missed.
- Complete the self-employment pages. On your tax return you report your gross income (the full amount invoiced, before CIS was deducted) on the self-employment pages, and enter your expenses.
- Enter the CIS deductions made by contractors. There is a dedicated box for the total CIS tax deducted during the year. HMRC offsets this against your final Income Tax and National Insurance bill.
- Submit your claim and receive your refund. File your tax return to HMRC. If the CIS deducted is more than your tax due, HMRC refunds the difference and you get a tax refund paid to your bank account; if too little was deducted you simply pay the extra tax.
How long does it take to get a CIS refund from HMRC?
Once your tax return is filed and processed, an online repayment is often issued within a few working days, though busier periods and security checks can extend this to a few weeks. The single best thing you can do is file early, as soon as possible after the fiscal year (the tax year) ends on 5 April. Early filers find out sooner whether they are owed money, and early returns are typically processed faster than the January rush.
Allowable expenses for CIS subcontractors
Claiming the right business expenses is what turns a modest refund into a fair one. Common allowable costs for construction subcontractors include:
- Tools and equipment you buy or hire for the job.
- Protective clothing and personal protective equipment (boots, hi-vis, hard hats, gloves).
- Public liability and tool insurance.
- Travel and mileage. If you use your own vehicle, you can claim 45p per mile for the first 10,000 business miles in the year, then 25p per mile after that, instead of working out actual running costs.
- Phone, stationery and a proportion of home admin costs.
- Materials you paid for that were not reimbursed separately.
- Accountancy and bookkeeping fees.
If your total self-employment income is very low, the £1,000 trading allowance may be simpler than itemising costs, but most subcontractors are better off claiming their real expenses. Keep records either way.
CIS for limited companies
The picture is different if you trade through a limited company. A company cannot reclaim CIS through Self Assessment. Instead, the CIS deductions suffered are set against the PAYE, National Insurance and CIS the company owes to HMRC each month through its payroll scheme. Any excess can then be reclaimed from HMRC after the tax year, separate from your Corporation Tax return. Getting the monthly payroll reporting right is essential, which is where an accountant earns their fee.
What changes with Making Tax Digital for Income Tax from 2026
The biggest change coming to CIS subcontractors is not about CIS itself, it is Making Tax Digital for Income Tax (MTD ITSA). The new Making Tax Digital reporting replaces the single annual return: from 2026/27 onwards you report your self-employment income on an end of year tax return under Making Tax Digital, and you complete your tax return digitally rather than the old way. From 6 April 2026, sole trader subcontractors are pulled into MTD in waves based on their gross income:
| From | Applies if your qualifying income is over | What it means |
|---|---|---|
| 6 April 2026 | £50,000 | Wave 1: digital records and quarterly updates begin. |
| 6 April 2027 | £30,000 | Wave 2: the threshold drops. |
| 6 April 2028 | £20,000 | Wave 3: most full-time subcontractors are likely to be in. |
Under MTD you keep digital records in HMRC-compatible software and send four quarterly updates (due 7 August, 7 November, 7 February and 7 May), followed by a Final Declaration by 31 January, the same date Self Assessment is due today. Your CIS deductions are reconciled against your final bill at the Final Declaration stage, so the refund mechanism does not disappear, it just runs through a digital process.
| Dimension | CIS under Self Assessment (now) | CIS under MTD (from April 2026) |
|---|---|---|
| Records | Paper, spreadsheets or an app | Mandatory digital records in compatible software |
| Reporting | One annual tax return | Four quarterly updates + a Final Declaration |
| CIS deductions | Entered once on the annual return | Tracked digitally, reconciled at Final Declaration |
| Your refund | Calculated when you file | Still calculated, at the Final Declaration |
There is a transitional easing: the Autumn Budget 2025 confirmed HMRC will not issue late-submission penalty points for quarterly updates during the 2026/27 tax year. That grace does not cover late payment of tax or a late annual return, so the underlying deadlines still matter.
We cover the new rules in depth in our companion guides: Making Tax Digital for Income Tax: a guide for sole traders and landlords and from Self Assessment to MTD: thresholds, costs and steps to 2028.
How an accountant helps CIS subcontractors
Most subcontractors do not have a tax problem so much as a time-and-paperwork problem. A good accountant or tax agent will register you correctly, keep your records straight, claim every allowable expense, file your return early to speed up your refund, and get you ready for Making Tax Digital before it is mandatory. Using an agent also means HMRC correspondence and quarterly updates are handled for you.
Frequently asked questions about CIS tax refunds
Do subcontractors claim back CIS?
Yes. Self-employed subcontractors reclaim overpaid CIS through their Self Assessment tax return. Because the 20% (or 30%) deducted at source ignores your personal allowance and expenses, most subcontractors are due a refund once their real tax bill is calculated.
How do I get a CIS refund from HMRC?
Register for Self Assessment, keep your payment and deduction statements and expense records, then file a tax return reporting your gross income, your expenses and the total CIS deducted. HMRC offsets the CIS against your Income Tax and National Insurance and refunds any excess to your bank account.
How long does a CIS tax refund take?
Once your return is filed and processed, an online repayment is often made within a few working days, although it can take a few weeks during busy periods or if HMRC runs security checks. Filing early, soon after 5 April, is the fastest route to your money.
How much CIS tax will I get back?
It depends on your income, expenses and how much was deducted, so there is no fixed figure. As a rough pattern, a registered subcontractor on around £40,000 turnover with normal expenses can often expect a four-figure refund, because the flat 20% deducted is usually more than the tax actually due.
Do I pay tax if I am on CIS?
Yes. CIS is not a separate tax, it is a way of collecting your Income Tax and National Insurance in advance. The deductions count towards your final bill. If too much was taken you get a refund; if too little was taken (for example with extra untaxed income) you may owe more.
Does a CIS tax refund include my Self Assessment tax return?
They are part of the same process. Your CIS refund is calculated on your Self Assessment tax return, the return is where the CIS deducted is set against your liability. You do not file a separate refund claim as a sole trader.
Do I still need to file a tax return as a CIS subcontractor?
Yes. Even though tax is deducted at source, you must still file an annual return (and, from April 2026, follow Making Tax Digital if your gross income is over the threshold). Filing is also how you actually receive your refund.
Does CIS apply to construction work outside the UK?
The Construction Industry Scheme applies to construction work carried out in the UK. Businesses based outside the UK that do construction work in the UK are also within CIS. Work physically carried out abroad is generally outside the scheme, but your UK tax position can still be affected, so take advice.
Will Making Tax Digital change how I claim my CIS refund?
The refund itself does not disappear. From April 2026, if your gross income is over the threshold you will keep digital records and send quarterly updates, and your CIS deductions will be reconciled at the Final Declaration instead of on a single annual return. The result, getting back any tax you overpaid, is the same.
Construction is hard enough without losing money to tax you never owed. Whether you simply want this year's refund claimed properly or you want to be ready for Making Tax Digital, contact Emilia Accountancy and we will take the paperwork off your hands.