CIS Registration in 2026: A Guide for Contractors and Subcontractors

The Construction Industry Scheme (CIS) decides how much tax a builder, roofer, electrician or labour agency has taken off each payment before the money reaches their bank. If you're a subcontractor, registering is the difference between losing 20% and 30% of your labour to deductions. If you're a contractor, it's a legal duty with monthly deadlines and real penalties. This guide covers both sides in 2026: who must register, how to do it, how deductions are worked out, gross payment status, and what changed on 6 April 2026.

Quick answer

CIS registration is free and done online with HMRC. Contractors must register (through the new employer process) before paying their first subcontractor. Subcontractors don't have to register, but if they don't, contractors deduct 30% from the labour part of every payment instead of 20%. Subcontractors who pass the business, turnover and compliance tests can apply for gross payment status and be paid in full.

• Deduction rates: 20% registered, 30% unregistered, 0% with gross payment status

• Deductions apply to labour only — not materials, VAT, plant hire or the CITB levy

• Contractors file a monthly return by the 19th of the month after the tax month and pay by the 22nd of the month (19th by post)

• From 6 April 2026, nil returns are required again unless you've told HMRC you won't pay any subcontractors

• From 6 April 2026, losing gross status for fraud means a 5 years wait before reapplying

What the Construction Industry Scheme is and who it covers

CIS is an HMRC scheme that makes contractors collect tax from the subcontractors they pay, in a similar way to PAYE for employees. The deduction isn't an extra tax. It's an advance payment towards the subcontractor's own Income Tax and National Insurance, or towards a limited company's PAYE and Corporation Tax position. The scheme exists because construction relies heavily on self-employed labour, and HMRC wants to collect tax as the money moves down the supply chain rather than chase it a year later.

The scheme covers most construction work on buildings and structures in the UK, including site preparation, alterations, repairs, decorating, demolition and installing heating, lighting, power, water and ventilation systems. It applies whether the contractor or subcontractor is UK-based or based abroad, as long as the work is done in the UK.

Some jobs sit outside CIS even on a building site. HMRC's list includes architecture and surveying, scaffolding hire without labour, carpet fitting, delivering materials, and work that isn't construction at all, such as running a site canteen. Work paid for by charities or trusts, and certain education work paid by school governing bodies, is also excluded. If you can't tell whether a job is covered, HMRC's CIS helpline will give you a view, and it's worth asking before you pay rather than after.

Contractors and deemed contractors

You are a mainstream contractor if your business pays subcontractors to do construction work — a builder hiring a bricklayer, a developer paying a groundworks firm, or a labour agency supplying operatives. You can be a sole trader, a partnership or a limited company.

You can also become a deemed contractor without doing any construction yourself. That happens when a business spends more than £3 million on construction in the 12 months after its first construction payment — a retailer fitting out new stores, for example, or a property investment company. Deemed contractors have a few extra exceptions, such as work on property they don't intend to sell or let, and contracts under £1,000 excluding materials.

A business can be a contractor and a subcontractor at the same time. A general builder who takes work from a developer and then pays a plasterer is both, and must register both ways.

Subcontractors

You're a subcontractor if you do construction work for a contractor. That includes sole traders, partnerships and limited companies, and it includes subcontractors who themselves pay other subcontractors. Private homeowners paying for work on their own home are not contractors, so a kitchen fitter paid directly by a householder has no CIS deduction to worry about on that job.

CIS deduction rates in 2026

There are three possible rates, and the contractor learns which one applies when it verifies you with HMRC:

The rate is applied only to the labour element of the invoice. Before working out the deduction, the contractor takes off VAT, materials the subcontractor bought for the job, consumable stores, fuel (other than for travelling), plant hire for the job, and the cost of manufacturing or prefabricating materials. The contractor is entitled to ask for receipts that show the subcontractor really paid for the materials. A subcontractor who inflates the materials figure to cut the deduction is creating a problem for both sides.

Worked example: one invoice, three outcomes

Dan is a self-employed plasterer. He invoices a building contractor £5,000 for a job: £4,000 of labour and £1,000 of plasterboard and bonding that he bought himself. He isn't VAT-registered.

• Registered for CIS: the deduction is 20% × £4,000 = £800. The contractor pays Dan £4,200 and gives him a statement showing the £800.
• Not registered: the deduction is 30% × £4,000 = £1,200. Dan receives £3,800 — £400 less cash this month than if he'd registered.
• Gross payment status: no deduction. Dan receives the full £5,000 and pays his tax through Self Assessment.

Across a year of similar jobs worth £48,000 of labour, the difference between the registered and unregistered rates is £4,800 of cash tied up with HMRC until after the tax year ends. That's why registering matters even though the deductions are credited back later.

If Dan were VAT-registered, the VAT domestic reverse charge would normally apply. Since 1 March 2021, when a VAT-registered subcontractor supplies CIS-reportable construction services to a VAT-registered contractor that isn't the end user, the contractor accounts for the VAT instead of paying it to the subcontractor. Dan's invoice would say the reverse charge applies and show the VAT rate, but he wouldn't add the 20% to the total. The CIS deduction would still be worked out on the £4,000 labour figure. Read our VAT registration guide if you're close to the £90,000 threshold.

How to register for CIS as a subcontractor

Subcontractor registration gives you net payment status — deductions at 20%. Online is the fastest route.

Register as a CIS subcontractor

1. 1

   Get your UTR

   Sole traders and partners need a Self Assessment Unique Taxpayer Reference; companies use their Corporation Tax UTR. If you're newly self-employed, you can register for Self Assessment and CIS at the same time.

   Find or get a UTR
2. 2

   Sign in with Government Gateway

   Use the Government Gateway user ID linked to your business tax account.

3. 3

   Give your business details

   Legal name, any trading name, UTR, VAT number if you have one, and the date you started trading. You may also be asked for your National Insurance number, company registration number or partners' details.

4. 4

   Register for net payment status

   Confirm the details and submit. You'll then give your name, UTR and National Insurance number (or company number) to each contractor so they can verify you.

   CIS subcontractor registration

Postal forms exist for sole traders, partnerships and companies if you can't use the online service. Subcontractors based abroad still register if they do construction work in the UK.

The most common cause of a 30% deduction for someone who is registered is a mismatch. The contractor's verification details must match exactly what you used to register: the same legal name, the same UTR, and a permanent National Insurance number (not a temporary "TN" number). If you trade as "Smith Plastering" but registered as "John Smith", tell contractors both names and the UTR so they verify you correctly. If a contractor has deducted at the wrong rate because of their own mistake, ask them to correct it on the next statement — HMRC expects the contractor to put it right.

Gross payment status: the three tests

Gross payment status (GPS) means contractors pay you in full, without any deduction. You then pay your tax and National Insurance at the normal time, which helps cash flow but needs discipline: the money that would have gone to HMRC each month is now yours to set aside. Applying for GPS also registers you for CIS if you aren't already.

You must pass three tests.

1. The business test. Your business does construction work, or supplies labour for it, in the UK, and it's run through a bank account.

2. The turnover test. HMRC looks at your construction turnover over the last 12 months, leaving out VAT and the cost of materials:

• Sole trader: at least £30,000.
• Partnership: £30,000 for each partner, or at least £100,000 for the whole partnership.
• Limited company: £30,000 for each director, or at least £100,000 for the whole company.
• Company controlled by five or fewer people: £30,000 for each of those controllers.

3. The compliance test. You must have filed returns and paid your tax and National Insurance on time in the past. Since 6 April 2024, VAT compliance is part of this test, both when you apply and at HMRC's regular reviews. HMRC's 2024 policy paper set out tolerances for minor slips: up to three VAT returns submitted up to 28 days late, late payments under £100, and up to three late payments of £100 or more that were no more than 14 days late. Beyond those, late VAT can cost you GPS.

HMRC reviews GPS holders regularly. If you fall foul of the compliance test, HMRC can withdraw the status and you go back to 20% deductions. Before applying, check your record in your business tax account: a single forgotten Self Assessment balance or late PAYE payment can sink an application.

The April 2026 CIS changes

Two sets of changes took effect on 6 April 2026. Many guides still haven't caught up with them.

Tougher fraud rules and gross payment status

Legislation announced at the Autumn Budget 2025 lets HMRC act straight away where a business makes or receives a payment that it knew or should have known was connected with the fraudulent evasion of tax. In those cases HMRC can:

• remove gross payment status immediately, rather than at the next scheduled review
• make the business liable for the tax lost to the fraud
• charge a penalty of up to 30% of the lost tax, which can be charged to the business and also to its directors and other connected people
• stop the business reapplying for gross payment status for 5 years — up from one year

HMRC's policy paper says the target is the minority of businesses that repeatedly deal with "missing" or defaulting traders. But the "should have known" test means a contractor can't simply say it didn't ask questions. Treat due diligence as part of CIS compliance: check that a new subcontractor has a real trading history, a business bank account in its own name, insurance, a VAT number that matches HMRC's records, and a sensible labour rate. Keep notes of the checks you made and why the supplier looked genuine. Be wary of labour supply chains with several layers of companies, especially if any of them changes name or director frequently.

Nil returns are back, and public bodies are out

The Income Tax (Construction Industry Scheme) (Amendment) Regulations 2026 made two administrative changes from the same date. First, a contractor that pays no subcontractors in a month must again file a nil return, unless it has told HMRC in advance that it won't be making any payments. Nil returns stopped being compulsory in 2015, but HMRC found the change led to penalties being issued in error, so it has brought them back. Second, payments to local authorities and certain public bodies acting as subcontractors are now outside CIS altogether, putting an old extra-statutory concession on a legal footing.

How CIS has changed

1 March 2021

VAT domestic reverse charge starts for CIS-reportable construction services

6 April 2021

Deemed contractor test changes to £3 million spend in 12 months

6 April 2024

VAT compliance added to the gross payment status tests

6 April 2026

Immediate GPS removal for fraud, 30% penalty, 5-year reapplication bar

6 April 2026

Nil returns reinstated; public bodies taken out of CIS

What contractors must do every month

Contractors register through HMRC's new employer process, even if they don't employ anyone, and receive an employer PAYE reference and Accounts Office reference to use for CIS. You must do this before you take on your first subcontractor. Our employer registration guide walks through the form.

Before your first payment to any subcontractor, verify them with HMRC using the free CIS online service or commercial software. You need your own UTR, Accounts Office reference and employer reference, plus the subcontractor's details: UTR and National Insurance number for a sole trader, company name, UTR and company number for a company, or the nominated partner's details and partnership UTR for a partnership. HMRC tells you which rate to use. You don't need to verify again if the subcontractor has been on one of your CIS returns in the current or the last two tax years. If you verify more than 50 subcontractors, you'll need software.

The CIS calendar runs in tax months, from the 6th of one month to the 5th of the next.

One CIS tax month for a contractor

Step 1

Verify new subcontractors

Step 2

Pay invoices less the deduction

Step 3

Give payment and deduction statements

by the 19th

Step 4

File the monthly return

by the 19th

Step 5

Pay deductions to HMRC

by the 22nd (19th by post)

For the tax month 6 September to 5 October, for example, the statements and the return are due by 19 October and the payment by 22 October. The monthly return lists every subcontractor you paid, the gross amount, the cost of materials and the deduction. It also includes a declaration that none of them should really be an employee. Getting employment status wrong carries a penalty of up to £3,000, so check status properly for long-term, full-time workers who take orders like staff.

If you know you won't pay subcontractors for up to six months, ask HMRC to make your scheme inactive rather than filing nil returns every month. Keep your CIS records — gross payments, materials and deductions — for at least three years after the end of the tax year they relate to. Failing to produce them when HMRC asks can also cost up to £3,000.

CIS penalties for late returns

Late monthly returns attract automatic penalties, and they apply to each late return separately. A contractor who forgets for several months can quickly owe thousands, even if every deduction was paid on time.

CIS monthly return late filing penalties

How late	Penalty
1 day	£100
2 months	Another £200
6 months	Another £300 or 5% of the CIS deductions on the return, whichever is higher
12 months	Another £300 or 5% of the CIS deductions, whichever is higher
More than 12 months	An extra penalty of up to £3,000 or 100% of the deductions, whichever is higher

1 day

Penalty

£100

2 months

Penalty

Another £200

6 months

Penalty

Another £300 or 5% of the CIS deductions on the return, whichever is higher

12 months

Penalty

Another £300 or 5% of the CIS deductions, whichever is higher

More than 12 months

Penalty

An extra penalty of up to £3,000 or 100% of the deductions, whichever is higher

Late payment of deductions adds interest at Bank of England base rate plus 4%, and can add penalties too. If you have a reasonable excuse — a serious illness, or an HMRC system failure — you can appeal a penalty. Penalties issued only because no nil return was filed for a month with no payments are exactly what the 2026 regulations aim to stop. Telling HMRC in advance that you won't be making payments is still the cleanest fix.

How subcontractors get their deductions back

CIS deductions are credits, not lost money, but the way you claim them depends on your business structure.

Sole traders and partners record their total pay before deductions as income on their Self Assessment return and enter the total CIS deductions in the CIS box. HMRC calculates the tax and Class 4 National Insurance due on profits and subtracts the deductions. If the deductions are more than the bill, HMRC refunds the difference. If they're less, you pay the balance by 31 January. Keep every monthly payment and deduction statement — they're your evidence. If you stop trading part-way through a year, you can claim early using form CIS40 (sole traders) or CIS41 (partners).

Example: Dan earned £48,000 of labour income during the tax year, and contractors deducted £9,600. After expenses, his Income Tax and Class 4 National Insurance come to £6,500. HMRC refunds £3,100 once his return is processed. Filing early in the tax year, rather than in January, gets that money back months sooner. Our self-employed tax guide explains how the bill is worked out.

Dan's year-end CIS position (illustration)

£48,000

Labour income for the year

£9,600

CIS deducted by contractors

20% of labour

£6,500

Income Tax and Class 4 NI due

Illustrative figure

£3,100

Refund from HMRC

Limited companies don't claim through the Corporation Tax return. Instead, the company runs a PAYE scheme, sends its usual Full Payment Submissions, and reports the year-to-date CIS deductions suffered on an Employer Payment Summary each month. HMRC sets the deductions against what the company owes in PAYE, National Insurance and its own CIS deductions, and the company pays the balance. Deductions left over at the end of the tax year can be reclaimed from HMRC. Claiming through the CT600 instead is a common and costly mistake — HMRC won't offset them there.

Common CIS mistakes and how to fix them

• Deducting from the whole invoice. CIS applies to labour only. If you've deducted from materials or VAT, correct it on the next payment and statement.
• Paying before verifying. Verify first, or you have no basis for the rate you used. An unmatched result means 30% until the subcontractor fixes their registration.
• Forgetting a nil return. From April 2026, a month with no payments still needs a return unless HMRC knows in advance.
• Treating a worker as self-employed when they're really an employee. If someone works only for you, on your hours, with your tools, under your supervision, they may be an employee — and the CIS return declaration makes you answerable for that.
• Losing statements. Subcontractors who can't show their deductions may struggle to get credit. Ask for missing statements straight away and keep copies.
• Ignoring VAT in the GPS test. Late VAT returns or payments now count against gross payment status.

Official HMRC links for CIS

• What you must do as a CIS subcontractorRegistration, rates and gross payment status
• Gross payment status testsBusiness, turnover and compliance tests
• What you must do as a CIS contractorRegistration, verification, deductions and returns
• Register as an employerHow contractors register for CIS
• CIS monthly returns and penaltiesDeadlines, nil returns and penalties
• Tackling CIS fraud (policy paper)April 2026 GPS and penalty changes
• VAT domestic reverse charge for constructionWhen the contractor accounts for VAT

What to do next

If you're a subcontractor, register online today so contractors deduct 20% rather than 30%, and diarise your Self Assessment so you claim the deductions back promptly. Once your turnover and tax record are solid, apply for gross payment status. If you're a contractor, register through the employer route, set up a monthly routine for verification, statements, returns and payments, and record your due diligence on every new subcontractor. Use our free invoice generator to show labour and materials separately on every CIS invoice, and our hourly rate calculator to price jobs with the deduction in mind. Don't have a UTR yet? Start with our UTR number guide.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

Do I have to register for CIS as a subcontractor?

No, registration is not compulsory for subcontractors, but if you aren't registered, contractors must deduct 30% from the labour part of every payment instead of 20%. Registering is free and quick online once you have a UTR and a Government Gateway login. Contractors, by contrast, must register before they pay their first subcontractor.

How long does CIS registration take?

Online registration for net payment status is usually immediate once HMRC can match your UTR and Government Gateway details. If you are a new sole trader, you can register for Self Assessment and CIS together, but you'll wait for your UTR to arrive by post first. Gross payment status applications take longer because HMRC checks your turnover and your tax compliance history.

What is the CIS turnover test for gross payment status?

Over the last 12 months, net of VAT and materials, a sole trader needs at least £30,000 of construction turnover. Partnerships need £30,000 per partner or £100,000 in total. Companies need £30,000 per director or £100,000 in total. Close companies controlled by five or fewer people need £30,000 for each controller.

What changed in CIS in April 2026?

From 6 April 2026, HMRC can immediately remove gross payment status from a business that knew or should have known a payment was connected to fraud. It can also charge the lost tax plus a penalty of up to 30%, and the business must wait 5 years before reapplying. Separate regulations reinstated nil returns and took payments to local authorities and certain public bodies out of CIS.

Can a limited company claim back CIS deductions?

Yes, but not through the Corporation Tax return. A company reports the CIS deductions suffered on its Employer Payment Summary each month, and HMRC sets them against the PAYE, National Insurance and CIS the company owes. If deductions are left over at the end of the tax year, the company claims a repayment from HMRC.

Do I need to register for CIS if I'm doing work for a homeowner?

No. CIS covers payments from contractors, not private householders paying for work on their own home. A homeowner doesn't deduct tax, so you're paid in full and declare the income on your tax return. If you also work for builders or developers, you'll still want to register so those contractors deduct 20% rather than 30%.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 7 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

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2. 2.What you must do as a CIS subcontractor — gross payment status — GOV.UK (HMRC) · accessed 7 October 2026
3. 3.What you must do as a CIS subcontractor — pay tax and claim back deductions — GOV.UK (HMRC) · accessed 7 October 2026
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12. 12.Construction Industry Scheme: proposed simplification and administrative amendments — HM Revenue & Customs · accessed 7 October 2026
13. 13.Strengthening the tests for gross payment status (policy paper) — HM Revenue & Customs · accessed 7 October 2026
14. 14.VAT domestic reverse charge for building and construction services — HM Revenue & Customs · accessed 7 October 2026
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