The short answer
If a contractor took CIS tax from your pay, record each deduction so HMRC counts it as tax you have already paid. In SimpleTaxFlow, open CIS deductions in Tax, choose Add CIS deduction, enter the figures from your CIS statement and choose Create CIS deduction. Contractors usually deduct 20%, or 30% if you are not registered for CIS.
Part of Add employment, savings and dividends to your MTD tax return.
Is this the right guide?
Use this guide if you are a self-employed subcontractor in construction, you are in Making Tax Digital for Income Tax, and a contractor took Construction Industry Scheme (CIS) deductions from your pay.
It is not for contractors who pay subcontractors. It also does not cover your other income. For a job, savings or dividends, use the guide to adding employment, savings and dividends.
How CIS deductions work
Under CIS, a contractor deducts tax from your payments and passes it to HMRC. GOV.UK says the rate is 20% if you are registered for CIS and the contractor can verify you, and 30% if not. With gross payment status, the contractor takes no deductions and you pay your own tax.
Contractors do not take deductions from the parts of your invoice for VAT, or for materials you paid for directly, among other items. Each month your contractor must give you a payment and deduction statement showing what they paid you and what they deducted.
The deductions count as advance payments towards your tax and National Insurance. HMRC takes them off what you owe for the year.
CIS under Making Tax Digital
GOV.UK tells subcontractors to record their total pay before deductions as income, and the deductions separately as CIS deductions. Under Making Tax Digital, your full pay goes in the turnover in your quarterly updates. The deductions are not an expense.
HMRC adds CIS deductions that contractors have reported to it, and they appear in SimpleTaxFlow. You check them and add any that are missing before you submit your tax return.
You cannot claim a tax refund in your tax return using Making Tax Digital. If your deductions are more than you owe, ask for the refund through your HMRC online account.
What you need
- Every monthly payment and deduction statement for the tax year.
- Each contractor’s name and employer reference, which is on the statement.
- Your CIS status: registered, not registered or gross payment status.
1. Gather your CIS statements
Each contractor should give you a statement for every tax month they deducted CIS. It shows the gross payment, the cost of materials and the deduction. Use these figures.
Read HMRC’s CIS rules2. Open CIS deductions
Open Tax and choose More. Under Your tax tools, choose CIS deductions. You can also choose Open year-end steps, then Review other income, then CIS deductions. The Contractor list shows deductions already held by HMRC, grouped by employer reference.
Open Tax3. Add a deduction
Only add statements that are not already in the Contractor list. Choose Add CIS deduction. Enter Contractor name, Employer ref, Period from (06th) and Period to (05th). Then enter Gross amount paid and Cost of materials.
Open CIS deductions4. Choose the CIS rate and save
In CIS rate, choose the standard 20% rate, the higher 30% rate or gross payment status. Deduction amount fills in for you as the rate times gross pay less materials. You can type your own figure instead. Your contractor’s statement is the figure that counts. Choose Create CIS deduction.
Open CIS deductions5. Check the year-to-date totals
Per-contractor summary shows gross pay, materials and deductions for the tax year. Compare them with your statements. Rows your contractor sent to HMRC cannot be changed here. Rows you added can be edited and saved with Save changes.
Open CIS deductions6. Check HMRC’s calculation
Before you submit your tax return, open HMRC’s calculation and check your CIS deductions are included.
Submit your tax returnA worked example
Alex (fictional) is a self-employed plasterer registered for CIS. A contractor pays Alex £2,000 for a month of work, and £500 of that was for materials.
The contractor deducts 20% of £1,500, which is £300. Alex records a gross amount paid of £2,000, cost of materials of £500 and a deduction of £300.
Alex’s quarterly updates include the full £2,000 in turnover. The £300 is tax already paid, so it goes in CIS deductions, not in expenses.
- Gross amount paid
- £2,000
- Cost of materials
- £500
- Amount the 20% applies to
- £1,500
- Deduction amount
- £300
- Paid to Alex
- £1,700
If every month looked like this, Alex would have £24,000 gross pay and £3,600 of deductions for the year.
Common mistakes
- Recording only the amount paid into your bank as income, instead of the full pay before deductions.
- Entering CIS deductions as a business expense in Bookkeeping.
- Adding a statement HMRC already holds, so the deduction is counted twice.
- Choosing the wrong rate, so the calculated deduction does not match your statement.
How to check it worked
Add up the deductions on your statements for the tax year. The Per-contractor summary should show the same total for each contractor. Then open HMRC’s calculation and check your CIS deductions are included before you submit your tax return.
Before you move on
- Every contractor statement with a deduction is recorded
- The rate matches your CIS status
- Figures match the contractor’s CIS statement
- The year-to-date totals match your statements
- £30.00 + VAT a year or £3.50 + VAT a month. Bookkeeping is free. Pay when you send to HMRC.
Frequently asked questions
Do CIS deductions reduce my tax bill?
CIS deductions are tax you have already paid. HMRC takes them off the tax you owe for the year. If they are more than you owe, you may get a refund.
Do I still send quarterly updates if I am a CIS subcontractor?
Yes, if you are in Making Tax Digital. Your quarterly updates show your business income and expenses. Your CIS deductions are recorded separately.
How much CIS will my contractor deduct?
GOV.UK says contractors deduct 20% if you are registered for CIS and they can verify you, and 30% if not. If you have gross payment status, they take no deductions.
Can I claim a CIS refund in my MTD tax return?
No. You cannot claim a tax refund in your tax return using Making Tax Digital. Record your deductions, submit your tax return, then ask for any refund through your HMRC online account.
Check the official rules
Tax rules can change and individual circumstances matter. Use HMRC’s current guidance to confirm the treatment that applies to you.
Put the guide into practice.
Open the relevant workspace and complete the next step with this guide available in another tab.
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