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CIS For Subcontractors
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If you work as a subcontractor in the construction industry, you should register with HMRC for the Construction Industry Scheme (CIS).
- You can register under your own name or a business name (‘trading name’)
- You can register for the CIS by contacting HMRC
- It is important to register as soon as possible to make sure you are deducted the correct amount of tax
- HMRC will let you know that you are registered and will post you a UTR number which is also know as a Unique Taxpayer Reference
When you are registered as a CIS subcontractor, your contractor will deduct 20% tax from certain payments made to you. The tax is paid directly to HMRC. This is called ‘payment under deduction’.
If you do not register as a CIS subcontractor, your contractor will deduct tax at 30% of all your payments. The tax deducted from payments you receive as a registered CIS subcontractor is then used to contribute to your annual tax and National Insurance payments.
In some cases a registered CIS subcontractor can ask that no deductions are made from payments received. This is called ‘receiving gross payments’.
This is usually only available to certain businesses, currently those with a turnover of over £30,000 per employee. Other rules also apply, these rules are called the ‘compliance test’.
If you receive gross payments instead of payments under deduction you will need to pay your tax and National Insurance in full at the end of each tax year.
As a CIS subcontractor you will have to pay Class 2 and Class 4 National Insurance where required.
- Class 2 National Insurance is currently payable at £2.65 per week. You may be exempt if your annual income is currently under £5595.
- Class 4 National Insurance contributions are payable currently at 9% of your taxable profits between £7,605 and £42,475. An additional 2% is charged on any profits over £42475.
- Class 4 National Insurance contributions are generally paid at the same time as any income tax. The amount of class 4 National Insurance Contributions due is worked out when completing your Self Assessment Tax Return.
- Class 2 National Insurance is usually paid by direct debit on a monthly basis.
A Self Assessment Tax Return must be completed for any tax year in which you have had self employment income.
When you have registered as a CIS subcontractor HMRC will request that you complete a Self Assessment Tax Return for each tax year in which you have had self employment income. A Self Assessment Tax Return will have to be completed regardless of how much CIS self employment income you have had in any one tax year.
How do I fill in a Self Assessment Tax Return?
You can complete your Self Assessment Tax Return either online or on a paper tax return. The filing deadline for submitting on line is the 31st January and the 31st October for a paper return.
What happens if my Self Assessment Tax Return is late?
If you do not submit your Self Assessment Tax Return on time you will be issued a penalty by HMRC. It is important to submit your Tax Return on time to avoid a late filing penalty from HMRC.
Many CIS Sub Contractors are entitled to a CIS tax refund at the end of each tax year. You can only receive a CIS tax refund after you have completed your Self Assessment Tax Return.
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