CIS Deduction Rates: 20% vs 30% Explained
The Two CIS Deduction Rates
Under CIS, there are three possible deduction rates: 0% (Gross Payment Status), 20% (standard registered rate), and 30% (unregistered or unmatched rate). Most subcontractors fall into either the 20% or 30% category, and the difference between them is significant.
The 20% Rate
The 20% rate applies to subcontractors who are registered with HMRC for CIS. When a contractor verifies you and HMRC confirms your registration, the contractor deducts 20% from the labour portion of your payment.
This is the standard rate and applies to the majority of active subcontractors in the UK construction industry. Registration is free, straightforward, and can be done online or by phone.
What 20% Looks Like in Practice
On a £4,000 labour invoice:
- CIS deduction: £800
- Payment received: £3,200
Over a year at £50,000 labour income:
- Total CIS deductions: £10,000
- Effective rate on total income (before expenses): 20%
The 30% Rate
The 30% rate applies in two situations:
- The subcontractor is not registered for CIS — they have never registered, or their registration has lapsed
- The subcontractor cannot be verified — the contractor attempted verification but HMRC returned an "unmatched" result
The 30% rate is effectively a penalty rate designed to encourage registration. It is significantly higher than most subcontractors' actual tax liability, particularly after expenses are deducted.
What 30% Looks Like in Practice
On a £4,000 labour invoice:
- CIS deduction: £1,200
- Payment received: £2,800
Over a year at £50,000 labour income:
- Total CIS deductions: £15,000
- That is £5,000 more than the 20% rate
While you can reclaim the excess through Self Assessment, that £5,000 is tied up with HMRC for months — money you could otherwise use for tools, materials, travel, or personal expenses.
Why You Might Be on 30%
Not Registered
The most common reason. If you have never registered for CIS with HMRC, you will be on the 30% rate by default. The fix is simple: register. You need your UTR, National Insurance number, and basic business details.
Details Do Not Match
When a contractor verifies you, they provide your name, UTR, and National Insurance number (or company registration number) to HMRC. If any of these do not match HMRC's records, the verification returns "unmatched" and the 30% rate applies.
Common causes:
- You gave the contractor a trading name instead of your legal name
- Your UTR is incorrect or belongs to a different entity
- Your National Insurance number has a typo
- You recently changed your name and have not updated HMRC
Registration Has Lapsed or Been Cancelled
If you were previously registered but your registration was cancelled (for example, because you stopped trading and HMRC closed your record), you may need to re-register.
How to Move from 30% to 20%
Step 1: Register for CIS
If you are not registered, contact HMRC:
- Online via the Government Gateway
- By phone on 0300 200 3210
You will need your UTR and National Insurance number. If you do not have a UTR, register for Self Assessment first — this can take up to 10 working days.
Step 2: Confirm Your Details
Ensure the details HMRC has on file match what your contractors are using to verify you. Check your legal name, UTR, and National Insurance number.
Step 3: Inform Your Contractors
Once registered, tell your contractors to re-verify you. They will receive a "net payment" (20%) result instead of "unmatched" (30%).
Step 4: Check Future Payments
After re-verification, all subsequent payments should be at 20%. Check your next CIS statement to confirm the correct rate is being applied.
Can You Backdate Registration?
No. CIS registration is not backdated. If you were on the 30% rate for previous payments, those deductions stand. You will reclaim any overpayment through Self Assessment, but you cannot change the historical deduction rate.
The Case for Gross Payment Status
If you want to eliminate deductions altogether, consider applying for Gross Payment Status (0%). You will need to meet turnover and compliance tests, but it provides the best cash flow position of any CIS rate.
How Accounted Helps
Accounted helps you monitor your CIS deduction rate and take action if you are overpaying:
- Deduction rate tracking — see at a glance which rate is being applied to your payments
- Refund calculation — know how much you are owed
- Registration guidance — Penny can explain the registration process if you need it
Check out our pricing page to get started.
Do not pay 30% when you should be paying 20% — or nothing at all. Sign up for Accounted and get your CIS deductions under control.
Tax & Compliance Specialists
Our tax specialists have decades of combined experience in UK sole trader and small business taxation, MTD compliance, and HMRC submissions. All content is reviewed against current HMRC guidance before publication and updated quarterly to reflect legislative changes.
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