Should a CIS subcontractor operate as a limited company?

A limited company can be more tax-efficient once net profits consistently exceed 35,000 to 40,000. CIS refunds offset corporation tax rather than income tax through a limited company.

What is the CIS deduction rate for 2025/26?

Registered CIS subcontractors have 20% deducted from labour payments. Unregistered subcontractors have 30% deducted. Subcontractors with gross payment status (annual turnover above £30,000 for sole traders or £100,000 for companies, and a clean compliance record) receive payments without any deduction.

Is CIS better than PAYE for a construction worker?

CIS subcontractors are self-employed, so they can claim allowable expenses (mileage, tools, PPE, insurance) that PAYE employees cannot. This usually generates a tax refund. PAYE employees have employment rights (holiday pay, sick pay, pension contributions) and pay less National Insurance. The right choice depends on income level, expense profile, and whether the working relationship genuinely qualifies as self-employed under HMRC's employment-status rules.

How much CIS refund will I get?

A typical CIS subcontractor earning £40,000 gross with £6,000 of allowable expenses would have paid £8,000 in CIS deductions (20%), but their actual tax + NIC liability would be approximately £5,400 — generating a refund of about £2,600. The exact figure depends on expenses, other income sources, and your personal allowance position.

Can a CIS contractor work through a limited company?

Yes. A limited company can register as a CIS subcontractor — deductions are taken from the company rather than the individual director. The company can apply for gross payment status if turnover exceeds £100,000. Operating through a limited company can offer tax efficiency above approximately £40,000 of profit, but adds compliance overhead. We model both routes for every CIS client.

CIS Contractor Accountant UK | MTD Ready

The scheme

What is the Construction Industry Scheme?

Direct answer

The Construction Industry Scheme (CIS) requires contractors to deduct tax at source from payments to subcontractors — 20% if you are registered, 30% if you are not. These deductions are advance payments of your income tax. If total deductions exceed your actual liability at year end, HMRC refunds the difference.

If you work in construction, demolition, repairs, decorating, civil engineering or property maintenance as a self-employed subcontractor, CIS almost certainly applies to you. The scheme covers most construction work in the UK, whether you work for a single main contractor or multiple clients.

AccTek specialises in accounting for CIS subcontractors. We ensure you are registered correctly, your deductions are verified, your expenses are fully claimed and your refund is maximised every year.

CIS deduction rates

Registration Status	Deduction Rate	Impact
Registered subcontractor	20%	Standard rate — deducted from labour element of payment
Unregistered subcontractor	30%	Higher rate — register immediately to reduce to 20%
Gross payment status	0%	No deductions — you keep 100% and pay through Self Assessment

If you are not yet registered for CIS, you are losing 10% of every payment unnecessarily. AccTek registers you within 48 hours.

Your money back

CIS tax refunds — most subcontractors are owed money

Quick comparison: Use the free CIS vs PAYE calculator to estimate how much more or less you would take home as a subcontractor compared to PAYE employment, based on your annual income and expenses.

CIS deductions are advance tax payments, not your final tax bill. After claiming allowable expenses, most subcontractors have paid more through CIS than they actually owe. The difference is your refund.

How AccTek maximises your CIS refund

Reconcile every CIS deduction statementWe verify each payment and deduction against HMRC records. Errors by contractors are common — wrong rates, missing payments and incorrect UTR references all reduce your recorded deductions and therefore your refund.

Claim every allowable expenseTools, PPE, van costs, mileage, phone, insurance, materials — every legitimate expense reduces your taxable profit and increases your refund. Most subcontractors we onboard have been missing £2,000–£5,000 in annual deductions.

Correct gross vs net treatmentCIS deductions apply to the labour element of your invoice, not materials. If materials are included in the deduction calculation, you are being over-deducted. AccTek ensures the split is correct.

File promptly for faster refundHMRC typically processes refunds within 6–12 weeks of your Self Assessment or MTD Final Declaration. AccTek files as early as possible to get your money back faster.

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What we do

CIS Accounting Services — What’s Included

📝 CIS Registration & Verification

CIS subcontractor registration
Unique Taxpayer Reference (UTR) setup
Gross payment status application
Monthly deduction statement verification
Contractor verification checks

💰 CIS Refund Claims

Annual CIS deduction reconciliation
Expense maximisation for higher refund
Gross vs net payment verification
HMRC refund submission
Refund tracking and chasing

📊 MTD & Self Assessment

MTD registration and Xero setup
Quarterly digital submissions
Final Declaration filing
Self Assessment preparation
Payments on account calculation

⚙️ Bookkeeping & Expenses

Monthly or quarterly bookkeeping via Xero
Automated bank feed reconciliation
Receipt capture via Dext
Mileage and vehicle expense tracking
Predictable fixed monthly pricing

Allowable expenses for CIS subcontractors

Every pound you claim reduces your taxable profit — and increases your CIS refund. Common construction industry expenses include:

Tools and equipment — hand tools, power tools, specialist equipment
Work clothing and PPE — safety boots, hard hats, hi-vis, gloves
Vehicle costs — van running costs or mileage at 45p/mile (first 10,000 miles), then 25p/mile
Fuel and parking — site-related travel costs
Materials purchased for jobs — if you supply your own materials
Phone and broadband — business proportion of personal phone
Public liability insurance
Professional indemnity insurance
Accountancy fees — including AccTek’s fee
Use of home as office — flat rate £6/week or proportional claim
Training and certification — CSCS card renewal, NVQs, site safety courses
Subsistence — food and drink on site (within HMRC scale rates)

Common mistake

Many CIS subcontractors only claim the obvious expenses — tools and van fuel. They miss PPE, phone costs, insurance, subsistence, CSCS renewals and home office allowance. AccTek captures every deduction you are entitled to.

Gross payment status — keep 100% of your pay

With gross payment status, the contractor pays you without deducting CIS tax. You keep 100% of the invoice amount and pay your tax through Self Assessment or MTD at year end. This dramatically improves cash flow.

HMRC requirements for gross payment status

Turnover test — net construction turnover of £30,000 or more over the previous 12 months (excluding materials and VAT)
Compliance test — all tax returns filed on time and all tax paid up to date
Business test — you operate through a UK bank account and the business is run largely in the UK

AccTek manages the application process, ensures your compliance record is clean and monitors your gross payment status annually to prevent HMRC revoking it.

Should CIS subcontractors set up a limited company?

Most CIS subcontractors start as sole traders. As profits grow, a limited company can reduce your overall tax — but the calculation is different from other industries because of how CIS deductions interact with Corporation Tax.

Key considerations

Tax efficiency — once net profits consistently exceed £35,000–£40,000, a limited company with salary plus dividends typically costs less in total tax
CIS deductions — as a limited company, CIS deductions offset your Corporation Tax bill (not income tax). The refund mechanism changes
Pension contributions — employer pension contributions through a limited company are the most tax-efficient extraction method available
Administrative overhead — a limited company has more filing requirements (annual accounts, Corporation Tax return, confirmation statement)

AccTek models both structures with your actual numbers. See our full guide: Sole Trader vs Limited Company 2026/27.

Explore further

CIS contractor guides & resources

Contractor Accountant HubFull guide to contractor accounting in the UK IT Contractor AccountantOur specialist contractor pillar hub Contractor Expenses GuideEvery deduction you are entitled to Sole Trader vs Limited Company2026/27 tax comparison with worked examples MTD 2026 GuideQuarterly reporting requirements explained First Year Contractor ChecklistMonth-by-month tax checklist Xero Cloud AccountingThe platform that powers your MTD compliance

Frequently asked questions

What is CIS and how does it work?

The Construction Industry Scheme requires contractors to deduct tax at source from payments to subcontractors — 20% for registered subcontractors, 30% for unregistered. These deductions are advance payments of your tax liability. If total deductions exceed your actual tax at year end, HMRC refunds the difference.

Can I claim a CIS tax refund?

Yes. If your CIS deductions exceed your actual income tax and National Insurance liability after expenses, HMRC refunds the difference. Most CIS subcontractors are owed a refund. AccTek calculates and claims your full refund as part of your annual service.

What expenses can CIS subcontractors claim?

Tools, equipment, PPE, work clothing, vehicle costs (45p/mile), materials, phone, public liability insurance, accountancy fees, training, CSCS card renewals, subsistence and use of home as office. AccTek captures every allowable deduction.

Do CIS contractors need to register for MTD?

Yes, if gross self-employment income exceeds £50,000 per year from April 2026, or £30,000 from April 2027. MTD requires quarterly digital submissions to HMRC via compatible software. AccTek handles registration, Xero setup and all submissions.

Should a CIS subcontractor set up a limited company?

A limited company can be more tax-efficient once net profits consistently exceed £35,000–£40,000. CIS deductions offset Corporation Tax rather than income tax, and you benefit from the salary plus dividends extraction model. AccTek models both options with your actual numbers.

What is gross payment status and how do I get it?

Gross payment status means no CIS deductions — you keep 100% of your pay and settle tax through Self Assessment. HMRC requires £30,000+ net construction turnover, all tax returns filed on time and all tax paid up to date. AccTek manages the application.

What happens if my CIS deductions are wrong?

Incorrect deductions (30% instead of 20%, deductions on materials, missing payments) reduce your cash flow and complicate your refund. AccTek verifies every deduction statement against HMRC records monthly and challenges errors immediately.

How much does a CIS accountant cost?

AccTek plans for CIS subcontractors start from £19.99 per month fixed. This includes Self Assessment or MTD submissions, CIS refund claims, Xero bookkeeping, expense tracking and a dedicated accountant who understands construction industry taxation.

CIS Accounting — From £19.99/month

CIS refunds • MTD compliance • Expense maximisation • Fixed fees

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Godwin Pinto

Founder at AccTek Ltd | Web | + posts

Godwin Pinto ACA is a chartered accountant and founder of AccTek with 20+ years of experience accounting and tax for contractors, startup and SME .

Accountant for CIS Contractors
Maximise Your Refund. Stay MTD Compliant.