Working under CIS (Construction Industry Scheme) means that the Contractor you are working for deducts CIS tax from your wage each time you are paid; however, these deductions do not take your Tax Free Allowance into consideration.
Everybody in the UK gets a Tax-Free Allowance, for the tax year 2023-2024 it is £12,570. This means that you do not have to pay tax until you have income over £12,570.
But… by working under CIS you have been paying tax on this income and will continue to do so until you submit your Tax Return whereby you can reclaim any overpaid tax. This is to ensure you submit your Tax Return.
For example:
Example One - John Smith is a Labourer, he earned £10,000 in the tax year (6th April 2023 to 5th April 2024). 20% Income Tax was deducted under CIS and he was paid 80% into his bank. 20% - £2,000 was paid to HMRC but as his total income was less than £12,570 so he did not need to pay any tax.
John Smith used Tax2u Ltd to claim his tax rebate and received £2,000 into his bank. He provided all his supporting documents to Tax2u and he only paid £119+VAT for his tax return.
Example Two - Evan Jones (Carpenter) is paid £150 a day and he worked 150 days; his total income was £22,500 for the tax year 6th April 2023 to 5th April 2024. He had 20% Income Tax deducted from his wages, £4,500 and HMRC collected this money and allocated it to Evan’s tax account.
However, as Evan does not pay tax on the first £12,570 that he earned, only on anything above the £12,570. He was paid £10,000 above the Tax-Free Allowance. Evan also had business expenses this tax year of £3,000 (Mobile phone, travel, tools, PPE etc).
When Tax2u deducted Evan’s business expenses from his income of £22,500 it meant he only had an income of £19,500 and only needed to pay tax on £7,000 (£19,500 - £12,570).
His Tax Return looked like this (before National Insurance)
| Total Pay | £22,500 |
| Less business expenses | £3,000 |
| Total profit | £19,500 |
| Less tax free allowance - | £12,570 |
| Tax to be paid on | £7,000 |
| 20% of the above | £1,400 |
Even’s tax bill was £1,400 but had already paid £4,500. So, before NI was calculated Evan was due a tax rebate of £3,100.
Tax2u is a registered HMRC tax agent and we are here to help our clients maximise their tax rebate. We have helped thousands of clients reclaim their overpaid tax. Check out our thousands of 5* reviews on Trustpilot, Google and Facebook.
All we need is for you to upload your payslips and supporting documents onto our secure Online Dashboard. To get started click here to open your free Online Dashboard, start uploading your files and be allocated your dedicated Accountant.
The best bit is that we will draft your return for free to find out if you are due tax back or not.
Carmen
