How much is the standard CIS deduction in 2026/27?

20% for subcontractors registered with HMRC under CIS. 30% for unregistered subcontractors. 0% for subcontractors with Gross Payment Status (GPS). These rates have not changed since 2007 and remain the same for 2026/27. Contractors verify subcontractor status online before the first payment.

Can I get Gross Payment Status (GPS)?

You must pass three HMRC tests: business test (UK construction work via a bank account), turnover test (£30,000 net construction turnover for sole trader, more for partnerships and companies), and compliance test (all tax obligations met on time for 12 months). Apply via the CIS contractor portal after meeting the thresholds. HMRC reviews GPS annually - lose compliance and you lose GPS.

How do I reclaim overpaid CIS as a subcontractor?

Sole traders include CIS deductions on their Self Assessment return (SA103). The total deducted is offset against the year’s tax bill; any excess is refunded by HMRC, typically within 4-8 weeks of filing. Limited company subcontractors offset CIS deductions against PAYE/NI monthly via the Employer Payment Summary. Year-end surplus is reclaimed via EPS annual reconciliation.

Construction Industry Scheme (CIS) UK guide 2026/27

Last reviewed by the UK Tax Drag editorial team · 12 May 2026 · How we review · Next review due 12 November 2026 · See what changed · Report an error

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What you need to know: Construction Industry Scheme ( CIS ) - UK guide 2026/27

Quick answer: Under CIS 2026/27 : contractors deduct 20% from registered subcontractors and 30% from unregistered subcontractors before paying them. Subcontractors with Gross Payment Status (annual turnover £30,000+ and clean compliance record) receive payments in full. Contractors must file monthly CIS300 returns to HMRC by the 19th of each month and pay deducted tax…

Key points:

Subcontractors: any business carrying out construction work for a contractor. Registration is optional but unregistered = 30% deduction instead of 20%
Both: some businesses are both contractor (paying others) and subcontractor (receiving payments from larger contractor)

Under CIS 2026/27: contractors deduct 20% from registered subcontractors and 30% from unregistered subcontractors before paying them. Subcontractors with Gross Payment Status (annual turnover £30,000+ and clean compliance record) receive payments in full. Contractors must file monthly CIS300 returns to HMRC by the 19th of each month and pay deducted tax to HMRC. Subcontractors reclaim overpaid CIS via their Self Assessment or, for limited companies, via PAYE offset.

The three CIS deduction rates

CIS deduction status - decision flow

CIS deduction rate by subcontractor status. Verify status before paying - HMRC penalises wrong-rate deductions.

The contractor verifies subcontractor status via HMRC’s online "Verify a subcontractor" service before the first payment. The verification result locks the rate for that contract.

Who must register and when

Contractors: any business paying subcontractors for construction work, OR any non-construction business spending over £3m a year on construction over a rolling 12-month period ("deemed contractor" rules)
Subcontractors: any business carrying out construction work for a contractor. Registration is optional but unregistered = 30% deduction instead of 20%
Both: some businesses are both contractor (paying others) and subcontractor (receiving payments from larger contractor)

Gross Payment Status (GPS) - the high-value option

GPS lets a subcontractor receive payments in full with no CIS deduction. The subcontractor settles all tax via Self Assessment or corporation tax instead. To qualify, three tests must be passed:

Test	Threshold
Business test	Construction work in the UK, run through a bank account
Turnover test	Net construction turnover (excluding VAT and materials) of £30,000+ for sole trader. £30,000 per partner or £100,000 for partnership. £30,000 per director or £100,000 for company.
Compliance test	All tax obligations met on time for the last 12 months (no late SA returns, no overdue tax)

Why GPS matters for cash flowWithout GPS, a subcontractor invoicing £10,000 of labour receives only £8,000 in their bank (£2,000 CIS deducted). They wait until Self Assessment to reclaim the £2,000. With GPS, they receive £10,000 and settle tax themselves at year-end. For active subcontractors with £200,000+ annual turnover, GPS frees £40,000+ of working capital.

Monthly CIS returns (CIS300)

Tax month ends5th of each monthTax months run from the 6th of one calendar month to the 5th of the next.

CIS300 return filedBy 19th of the following monthOnline via HMRC CIS portal. Even nil-payment months require a return (£100 fine for missing nil returns).

Deducted tax paidBy 22nd of the following month (electronic) / 19th (cheque)To HMRC under the same Accounts Office Reference as PAYE.

Annual reconciliationP14 / FPS final submissionEnd of tax year (early April) - confirm yearly totals.

Monthly CIS300 deadlines are strict.HMRC issues an automatic £100 penalty for each month a return is late, escalating to £200, £300 then higher amounts for repeat offences. Many small contractors are caught by missing nil-return months.

Subcontractor: how to reclaim overpaid CIS

Worked example: sole trader subcontractor, £80,000 annual turnover

Tarek runs a plastering business. Standard 20% CIS deductions all year:

Gross turnover: £80,000
CIS deducted at source: £16,000 (20%)
Net received in bank: £64,000
Profit after allowable expenses: £52,000
Tax on £52,000 (after PA): £7,486 IT + £2,367 Class 4 NI = £9,853
CIS already paid: £16,000
CIS refund due: £16,000 - £9,853 = £6,147

Tarek files Self Assessment by 31 January and HMRC pays the £6,147 refund (typically 4-8 weeks after filing). The cash-flow cost of waiting is real - many self-employed tradespeople use GPS specifically to avoid this.

Limited company subcontractors - PAYE offset

If you operate through a limited company, CIS deductions are offset against the company’s PAYE and Class 1 NI liability each month via the Employer Payment Summary (EPS). The remaining net liability is paid normally. If CIS deductions exceed PAYE/NI in a month, the surplus carries forward.

If surplus CIS remains at year-end, the company claims a refund via the annual EPS reconciliation. Plan ahead - large CIS refunds can wait 8-16 weeks for HMRC processing.

What counts as "construction" under CIS

HMRC’s definition is broader than common usage. CIS applies to most work on:

Site preparation, demolition, dismantling
Building work (residential, commercial, industrial)
Alterations, repairs, extensions
Installations - heating, lighting, plumbing, electrical
Cleaning interior or exterior of buildings during/after construction
Painting and decorating
Civil engineering (roads, bridges)

CIS does NOT apply to: architecture, surveying, scaffolding hire (without labour), carpet fitting, manufacturing components off-site, professional consulting (unless integral to construction work).

Common CIS mistakes

Mistake 1: Skipping verification.Paying a "registered" subcontractor at 20% without verifying their current status via HMRC online. If status has changed to higher-rate (30%), HMRC charges the contractor for the under-deduction.

Mistake 2: Not filing nil returns.If you’re a registered contractor but had no subcontractor payments in a month, you still owe a nil CIS300. £100 penalty for missing.

Mistake 3: Including materials in deduction base.CIS is deducted only on labour, not materials. If a subcontractor invoices £8,000 labour + £2,000 materials, the deduction is 20% of £8,000 = £1,600, not 20% of £10,000.

Mistake 4: Forgetting VAT reverse charge for construction services.Since March 2021, VAT on most construction services between VAT-registered businesses uses the reverse charge - the customer accounts for VAT, the supplier doesn’t charge it. This interacts with CIS reporting.

Calculate your tax position

The sole trader tax calculator handles CIS-style deductions and shows your true position after offsetting overpaid CIS against your tax bill.

Open the sole trader calculator

Sources and references

CIS framework from gov.uk CIS overview. Deduction rates from gov.uk subcontractor rules. Gross Payment Status from CIS 340 guide. VAT domestic reverse charge from gov.uk reverse charge guidance.

UK Tax Drag is educational and not regulated financial, tax, legal or business advice - see the disclaimer for the full position. Always verify current rates and rules at the original government sources before acting.

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Construction Industry Scheme (CIS) - UK guide 2026/27