CIS Deductions: How to Claim Back What You're Owed

Understanding CIS Deductions

Every time a contractor pays a subcontractor under the Construction Industry Scheme, they must deduct either 20% or 30% from the labour portion of the payment and send it to HMRC. These deductions are not a final tax — they are advance payments towards your income tax and National Insurance contributions.

This distinction is crucial. Many subcontractors assume the money deducted is simply lost. In reality, those deductions sit with HMRC as credits against your tax bill. If the total deductions exceed what you actually owe in tax, you get the difference back as a refund.

For the 2025/26 tax year, income tax rates for sole traders are:

• 0% on the first £12,570 (Personal Allowance)
• 20% on income between £12,571 and £50,270
• 40% on income between £50,271 and £125,140
• 45% on income above £125,140

If your taxable profit after expenses falls within the lower bands, the 20% CIS deductions taken from your gross payments may well exceed your actual tax liability — meaning you are due a refund.

Why Many Subcontractors Overpay

Several factors contribute to CIS subcontractors overpaying tax:

1. Deductions Are on Gross Labour, Not Profit

CIS deductions are calculated on your gross labour income before any business expenses are deducted. But your actual tax is calculated on your profit — income minus allowable expenses. If you have significant expenses (tools, travel, vehicle costs, materials you have personally funded, insurance, phone bills), your taxable profit will be lower than your gross income, and your CIS deductions will likely exceed your tax.

2. The 30% Rate for Unregistered Subcontractors

If you were not registered for CIS — or if your contractor could not verify you and applied the 30% rate — you have almost certainly overpaid. The 30% rate is higher than most subcontractors' effective tax rate, especially after expenses.

3. The Personal Allowance

Everyone in the UK has a £12,570 Personal Allowance (2025/26). CIS deductions do not take this into account — they are applied from the first pound. If your total income is below or near the Personal Allowance threshold, you will be owed a refund of most or all of the deductions.

4. Multiple Income Sources

If construction is not your only income source, the interaction between CIS deductions and other income can create complex situations where deductions exceed what is owed.

How to Claim Back CIS Deductions

Step 1: Gather Your CIS Statements

Every time a contractor makes a CIS deduction, they must provide you with a written statement showing:

• The contractor's name and details
• The gross amount of the payment
• The cost of materials (if applicable)
• The amount of the deduction
• The payment date

These statements are your evidence. Without them, claiming back deductions becomes much more difficult. If you have lost statements, you can ask the contractor for copies, or HMRC can sometimes confirm deductions made on your behalf.

Step 2: File Your Self Assessment Tax Return

The primary route to reclaiming CIS deductions is through your Self Assessment tax return. On the self-employment pages, you will need to enter:

• Your total income from construction work
• The total CIS deductions suffered during the tax year

HMRC will then calculate your actual tax liability, offset the CIS deductions, and either reduce your tax bill or issue a refund if you have overpaid.

Step 3: Claim Allowable Expenses

To maximise your refund, make sure you claim all allowable business expenses. Common expenses for construction subcontractors include:

• Tools and equipment — drills, saws, hand tools, PPE
• Vehicle costs — fuel, insurance, MOT, repairs (or mileage at 45p per mile for the first 10,000 miles)
• Travel — public transport to sites, parking, accommodation if working away from home
• Clothing — protective clothing and safety equipment (not ordinary clothing)
• Insurance — public liability, professional indemnity, tool insurance
• Phone and internet — the business proportion
• Training — courses related to your trade
• Accountancy fees — the cost of preparing your tax return

Every pound of legitimate expenses you claim reduces your taxable profit, which in turn increases the gap between your CIS deductions and your actual tax — meaning a larger refund.

Step 4: Submit on Time

The Self Assessment deadline for the 2025/26 tax year is 31 January 2027 for online returns. Filing early does not mean paying early — but it does mean you get your refund sooner. HMRC typically processes refunds within 4 to 12 weeks of receiving your return.

Can You Claim Mid-Year?

Sole traders generally cannot claim CIS refunds during the tax year — you must wait until you file your Self Assessment. However, limited companies can offset CIS deductions against their monthly PAYE and National Insurance payments to HMRC. If the CIS deductions exceed the PAYE and NI due, the company can claim the excess back.

Common Mistakes When Claiming CIS Refunds

Not Registering for CIS

If you have been suffering 30% deductions because you were not registered, register immediately. You cannot backdate registration, but going forward you will only have 20% deducted (or 0% with Gross Payment Status).

Missing Statements

Without CIS statements, HMRC may not accept your claimed deductions. Keep every statement, or use software like Accounted that stores them digitally.

Not Claiming All Expenses

Many subcontractors miss legitimate expenses, especially mileage, tools, and phone costs. Review your bank statements carefully and ensure you are claiming everything you are entitled to.

Filing Late

Late filing means late refunds. It also means penalties — £100 immediately, rising over time. There is no benefit to delaying.

Not Checking HMRC's Records

Sometimes contractors fail to submit CIS returns correctly, meaning HMRC's records of your deductions do not match your statements. If there is a discrepancy, contact HMRC early to resolve it.

How Much Could You Be Owed?

Let us look at a worked example for the 2025/26 tax year:

Sarah, a self-employed plasterer:

• Gross income from construction: £40,000
• Materials purchased: £3,000
• CIS deductions suffered (20% on £37,000 labour): £7,400
• Allowable business expenses: £8,000
• Taxable profit: £40,000 - £3,000 - £8,000 = £29,000

Tax calculation:

• Personal Allowance: £12,570
• Taxable income: £29,000 - £12,570 = £16,430
• Income tax at 20%: £3,286
• Class 4 NI (9% on £12,570–£50,270): £1,478.70
• Class 2 NI: £179.40

Total tax and NI: £4,944.10

CIS deductions paid: £7,400

Refund due: £2,455.90

That is over £2,400 back in Sarah's pocket — money she is legally entitled to but would never receive if she did not file her Self Assessment.

How Accounted Makes CIS Refunds Easier

Accounted is built for UK sole traders, including construction subcontractors. Here is how it helps:

• Automatic CIS tracking — Penny, your AI bookkeeper, identifies CIS payments in your bank transactions and records the deductions
• Materials separation — when you log a CIS payment, Penny asks about materials to ensure deductions are correctly calculated
• Expense capture — snap receipts via WhatsApp and Penny categorises them automatically
• Tax estimate — see your estimated refund in real time as the year progresses
• Self Assessment preparation — all your CIS data is ready when it is time to file

Check out our pricing plans to find the right option for your business.

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Stop leaving money with HMRC. Sign up for Accounted and start tracking your CIS deductions properly — your refund is waiting.