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Construction Industry Scheme (CIS) 2026/27: Rates & Rules
Business Tax · 2026/27

Construction
Industry Scheme.

Under CIS, contractors deduct tax from payments to subcontractors and pass it to HMRC. Here are the 2026/27 deduction rates, how gross payment status works, the duties on each side, monthly returns, and the stricter anti-fraud rules that took effect in April 2026.

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✓ Verified 2026/27✓ HMRC sources✓ Free calculators

CIS Deductions

👷 2026/27
Registered20%
Unregistered30%
Gross status0%
GPS turnover test£30,000
Labour element onlyUpdated May 2026
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Key 2026/27 figures

The numbers that matter.

20%
Registered subcontractor rate
30%
Unregistered rate
0%
Gross payment status rate
£30,000
GPS turnover test
Complete guide

The Construction Industry Scheme for 2026/27

Who is in scope, the deduction rates, gross payment status, the duties on contractors and subcontractors, returns and the 2026 anti-fraud changes.

Who CIS applies to

CIS is a set of special tax rules for the construction industry. Contractors deduct money from payments to subcontractors and pass it to HMRC as advance payments towards the subcontractor's Income Tax and National Insurance. A business can be both at once. "Deemed contractors" — non-construction businesses spending heavily on construction — can also be caught.

The deduction rates

Subcontractor statusDeduction
Registered for CIS20%
Not registered / not verified30%
Gross payment status0% (paid in full)

Deductions apply to the labour element only — genuine materials and VAT are excluded. Registering as a subcontractor reduces your deduction from 30% to 20%, which is a real cash-flow gain.

Worked example

Registered subcontractor invoice

Labour£4,000
Materials£600
CIS deduction (20% × £4,000 labour)− £800
Subcontractor receives (plus any VAT)£3,800

The contractor pays the £800 to HMRC. The subcontractor sets it against their final tax bill — through Self Assessment, or from 2026/27 their end-of-year return under Making Tax Digital — and may get a refund if too much was deducted. Estimate it with our CIS calculator.

Gross payment status (GPS)

Subcontractors with a clean compliance record can apply for gross payment status, so contractors pay them in full with no deduction. To qualify you must pass three tests:

  • Turnover test — at least £30,000 net construction turnover (for an individual) in the last 12 months.
  • Compliance test — tax returns and payments up to date.
  • Business test — run through a UK bank account.

Contractor duties

  • Register as a contractor before paying your first subcontractor.
  • Verify each subcontractor with HMRC to get the correct deduction rate.
  • Deduct and pay over the CIS amounts each month.
  • File a monthly CIS return by the 19th of each month and give subcontractors deduction statements.

⚠️ April 2026 anti-fraud changes

From 6 April 2026, where HMRC can show a business knew, or should have known, a payment was connected to fraud, it can cancel gross payment status immediately, assess the tax lost and charge a penalty of up to 30%. The bar on reapplying for GPS rose from one year to five years. Public bodies acting as subcontractors now fall outside CIS.

💡 VAT reverse charge

Most construction services between VAT-registered businesses use the domestic reverse charge — the customer accounts for the VAT rather than the supplier. CIS deductions are still worked out on the net (ex-VAT) labour figure. See our VAT guide.

🔗 Official sources

gov.uk what is the CIS · duties as a contractor · duties as a subcontractor · gross payment status.

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Common questions

CIS FAQs

Deduction rates, gross payment status, returns and the 2026 rules — answered.

What are the CIS deduction rates?
20% for registered subcontractors, 30% for unregistered or unverified subcontractors, and 0% for those with gross payment status.
Is CIS deducted on materials?
No. Deductions apply to the labour element only — genuine materials costs and VAT are excluded.
Should I register as a CIS subcontractor?
Usually yes. Registering cuts your deduction from 30% to 20%, improving cash flow, even though your final tax is the same.
What is gross payment status?
Approval to be paid in full with no CIS deduction. You apply to HMRC and must pass turnover, compliance and business tests.
What is the turnover test for gross payment status?
An individual must have at least £30,000 of net construction turnover in the previous 12 months (higher multiples apply for partnerships and companies).
Who is a contractor under CIS?
A business that pays subcontractors for construction work, plus 'deemed contractors' such as large non-construction businesses spending heavily on construction.
Do I have to verify subcontractors?
Yes. Contractors must verify each new subcontractor with HMRC to get the correct deduction rate before the first payment.
When is the CIS return due?
Monthly, by the 19th of each month. Contractors must also give subcontractors a deduction statement.
What changed for CIS in April 2026?
Stronger anti-fraud powers: HMRC can immediately cancel gross payment status where fraud is involved, assess the lost tax, charge up to a 30% penalty, and bar reapplication for five years.
How do subcontractors get their deductions back?
The deductions count as advance tax. You reconcile them through Self Assessment or, from 2026/27, your end-of-year return under Making Tax Digital, and may receive a refund.
Does CIS apply to employees?
No. Employees are taxed through PAYE. CIS applies to self-employed subcontractors. Misclassifying employees as subcontractors carries risk.
What work is covered by CIS?
Most construction operations on buildings and structures — site preparation, alterations, repairs, decorating and demolition. Some work, such as professional design, is excluded.
How does the VAT reverse charge interact with CIS?
For many construction services between VAT-registered businesses the customer accounts for the VAT. CIS is still calculated on the net labour figure.
Can a limited company be a CIS subcontractor?
Yes. A company offsets CIS deductions against its PAYE liabilities through the payroll, or reclaims any excess from HMRC after the tax year.
What if I do not register as a contractor?
Operating CIS is mandatory if you pay subcontractors for construction. Failing to register and file returns leads to penalties.
Do public bodies fall under CIS?
From April 2026, local authorities and certain public bodies acting as subcontractors are outside CIS, so deductions are not made from payments to them.
Are there penalties for late CIS returns?
Yes. Late monthly returns attract escalating fixed penalties, starting at £100 and rising the longer they are outstanding.
Can I lose gross payment status?
Yes. HMRC reviews compliance regularly and can withdraw GPS for late returns or payments, or immediately where fraud is involved.
Does CIS replace my tax return?
No. CIS deductions are payments on account. You still file a tax return to work out your final liability and any refund.
Where can I find official CIS guidance?
See gov.uk what is the Construction Industry Scheme and the contractor and subcontractor pages, linked in the guide above.
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UK Tax Hero provides general tax guidance and a free expert-matching service for the 2026/27 tax year. It is not personal tax, legal or financial advice. Figures are based on published HMRC rates and may change. Always confirm details on GOV.UK or with a qualified professional before acting.