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What is CIS tax?

tax2u Constructor

The Construction Industry Scheme (CIS) is a tax system that was brought in by HMRC to ensure that construction workers submit a tax return each year and pay tax on their income.

The Construction Industry Scheme puts the responsibility of tax collection onto the Contractor who pay their Subcontractors.

The percentage of tax deducted will depend on whether you have a Unique Tax Reference (UTR). If the contractor has your UTR then you will be taxed at 20% but without one, you will be taxed at 30%.

You can reclaim some or all of this tax at the end of the tax year. Find out more here

A Bit Of CIS History

CIS was brought into effect in 1972. Prior to this construction workers were receiving their Gross wage, meaning if they earnt £500 a week, they would receive the whole £500 (without any tax deduction). At the end of each tax year they would be required to submit a tax return to HMRC to confirm how much they had earned and calculate the tax that was due.

The major issue with this was that construction workers were notorious for not submitting a tax return, meaning HMRC could not collect their tax.

HMRC decided to “flip this on its head” – they changed the rules to make sure that the client or contractor paying the workers deducted CIS tax directly from their weekly or monthly pay.

Construction Industry Scheme (CIS) Today

Individuals working in the construction industry today are paid Net (that’s after tax deduction) so if they earn £500 a week, they would receive £400 (paid directly to them) and £100 (20%) tax will be deducted and sent on to HMRC.

The downside to this system is that these tax deductions don’t take into account the tax free allowance £12,570 (for tax year 2023-2024 ), of £12,570 (for tax year 2023-2024). This tax-free allowance is the amount of income you can be paid before you pay any tax on it. Follow the link to see more on tax thresholds

As a result, 96% of people who work in construction are due a tax rebate because when their tax return is calculated correctly, they can claim back the tax they paid on the first £12,570 of income. If you have had 20% tax deducted from your wage, then you have likely paid £2,514 in tax that you can now reclaim (20% of £12,570 = £2,514). This explanation is in its most simple form as there are other things to consider such as:

  • National insurance
  • Total income received
  • PAYEE income
  • Income received from other sources.

Everybody’s personal situation is different but the important point is that if you work in construction and you’ve had your tax deducted by a Contractor it’s more than likely that you are due a healthy tax return.

Tax2u Ltd specialises in reclaiming tax for its clients.

To start your tax return with us, please click here and join the thousands of happy clients that have claimed back their tax with us.

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CIS stands for Construction Industry Scheme, it’s a tax legislation put in place by HMRC to ensure all construction workers pay their tax. Read more

Some Your client or contractor has to deduct CIS tax from your pay each and every time they pay you. They then pay this tax deduction to HMRC who hold it on your account until your submit your tax return. Read more

Everyone in the UK gets a tax free allowance, this is the threshold before you have to pay any tax. However, as your client has already deducted your tax from earnings under the threshold you can claim it back. Read more

If you have earning over the minimum threshold (£12,570 for tax year 2023-24) then you can maximise your tax rebate by offsetting your income with business receipts. Read more

The main thing that you need is your CIS deduction certificates, payslips or your bank statements to prove income and tax deducted. Read more

You can claim back your CIS tax on the 6th April each year for the previous tax year. You then have until the 31st Jan (the tax return deadline) to submit your tax return. Read more

To claim back your tax you need to submit your self-assessment tax return. Read more

A CIS deduction certificate is the payslip that your client should give you each and every time you are paid. It will show the Gross, Nett and Tax deducted amounts that tax2u will need to reclaim your tax. Read more

It really couldn’t be simpler, log in or create your free account, upload your CIS deduction certificates / payslips and our accountants will do the rest. Read more