Your First Payslip: CIS Deductions and Tax Explained

‍‌​‌​‌‌‌‌​​​‌‌​‌‌‌​​‌‌​​‍# S11. Understanding your first payslip - CIS deductions explained

Your first CIS payslip can look like someone's nicked half your money for fun. They haven't. But you do need to know what every line means so you're not being short‑changed.

1. THE SHORT VERSION

Under CIS, your contractor takes 20% or 30% off your labour and sends it to HMRC as advance tax.

Only your labour should be hit - not materials you've paid for yourself, not VAT.

Your CIS statement is your payslip: it must show gross pay, materials, CIS deducted and net pay. Keep every one.

2. WHAT CIS IS DOING TO YOUR MONEY

HMRC tells your contractor which rate to use:

• 20% if you're registered as a CIS subcontractor.
• 30% if you're not registered.
• 0% if you have gross payment status.

They start with your invoice, strip out certain costs, and take the percentage only off the remaining labour figure.

That CIS deduction is not an extra tax. It's money on account with HMRC that you square up on your tax return later.

3. WHAT A CIS STATEMENT / PAYSLIP MUST SHOW

A CIS statement is basically a subcontractor's payslip. It should include at least:

• Contractor's name, address and tax reference.
• Your name and UTR (and NI or company number).
• The tax month/period it covers.
• Gross amount (before CIS) – usually your labour + any materials (excluding VAT).
• Qualifying materials/costs you supplied (materials, certain plant hire, fuel for plant, consumables).
• The CIS deduction rate (20%, 30%, or 0% gross).
• The amount of CIS tax deducted.
• The net payment actually paid to you.

If anything major is missing, you don't really have a proper CIS statement.

4. HOW THE CIS DEDUCTION IS ACTUALLY CALCULATED

The logic is the same everywhere. HMRC sets it out like this:

1. Start with the gross amount (excluding VAT).
2. Take off qualifying materials and certain costs you paid for:
   • Materials you bought yourself for this job.
   • Some plant hire, fuel for plant, consumable stores, manufacturing prefabricated items.
3. The figure left is the CIS base.
4. Apply the CIS rate (20% or 30%) to that base.

Example (20% registered subcontractor):

• You invoice £700 total, no VAT.
• £200 of that was materials you paid for.
• CIS base = £700 − £200 = £500.
• CIS at 20% = £100.
• Net to you = £600.

If they've taken 20% off the full £700, they've over‑deducted. That's the kind of thing you need to spot.

5. READING YOUR FIRST PAYSLIP LINE BY LINE

On a typical CIS payslip/statement you'll see:

• Gross pay – what you earned before CIS (check if this includes materials).
• Materials / business costs – what they say you supplied and they've taken off before CIS.
• CIS deduction – the tax withheld under CIS (20% or 30% of the CIS base).
• Other deductions – umbrellas/agency may show admin fees, insurance, etc. (these are not CIS; they're just them taking their cut).
• Net pay – what hits your bank after all deductions.

Always check:

• Does the rate match what you were told (20 or 30)?
• Are materials correctly taken off before CIS?
• Do the numbers add up? (Gross − materials = CIS base → base × rate = CIS deduction → gross − CIS = approximate net before other fees.)

6. WHAT'S NORMAL VS WHAT'S DODGY ON THAT FIRST PAYSLIP

Normal:

• 20% CIS because you're registered.
• CIS only on labour, not on clearly listed materials you actually paid for.
• Small admin or umbrella fees if you knowingly signed up with an umbrella or agency that charges them (they should have told you).

Dodgy signs:

• 30% CIS even though you registered weeks ago (contractor hasn't verified you properly).
• CIS taken on the whole invoice including materials you bought.
• Big "management" or "admin" deductions you didn't agree to, stripping your net way down.

Always ask for a clear breakdown if something doesn't make sense.

7. WHY CIS FEELS LIKE YOU'RE GETTING ROBBED (AND WHAT ACTUALLY HAPPENS)

CIS pushes tax upfront – your day‑to‑day take‑home is lower than a PAYE worker at the same gross rate.

But every CIS deduction is logged against your name with HMRC. At tax‑return time:

• If you've overpaid, you get a refund.
• If you've underpaid, you owe the balance.

If you're seeing big CIS deductions and low expenses, it's common to be due money back once you do your Self Assessment.

8. QUICK "SANITY CHECK" ON YOUR FIRST PAYSLIP

When that first statement lands, do this:

1. Check the rate – 20% if registered, 30% if not, 0% if gross.
2. Find the materials line – make sure materials you paid for are taken off before CIS.
3. Rebuild the CIS base – gross (no VAT) minus materials and qualifying costs.
4. Multiply by the rate – see if the CIS deduction matches.
5. Look at any "extra" deductions – admin, insurance, etc. Decide if you agreed to them.

If the numbers don't line up, ask your contractor/payroll in writing to explain the calculation.

9. WHAT TO KEEP AND WHY IT MATTERS

Every CIS statement is evidence that tax has already been taken from you.

You need to:

• Keep every statement – digital photos or scans are fine.
• Match them to your bank payments so you can prove what you were paid and what was deducted.
• Use them when you or your accountant do your Self Assessment to claim credit for CIS tax already paid.

Lose the statements and you make it harder to claim back over‑deducted tax.

10. IF YOUR DEDUCTIONS LOOK WRONG

• Start simple: "Can you send me the CIS calculation for this payment, showing gross, materials, CIS base and rate?"
• If they've applied CIS to materials or used 30% in error, ask them to correct it on the next statement or explain why they can't.
• For ongoing issues, get an accountant or advice service to look at a few payslips – they can often spot patterns quickly.

WHAT TO DO NEXT

• Check your first CIS statement against the calculation in this guide - does the maths add up?
• Make sure materials you paid for are listed separately and not included in the CIS base.
• Photograph or scan every CIS statement and save them somewhere safe.
• File your Self Assessment tax return on time so you can claim back any over-deducted tax.
• If the numbers look wrong, ask your contractor for a written breakdown before the next payment.

SOURCES

• Finance Act 2004 - Construction Industry Scheme provisions. https://www.legislation.gov.uk/ukpga/2004/12
• Income Tax (Earnings and Pensions) Act 2003. https://www.legislation.gov.uk/ukpga/2003/1
• GOV.UK - CIS deductions. https://www.gov.uk/what-is-the-construction-industry-scheme

Common questions

How do I check my CIS deductions?

Check the monthly CIS payment statement your contractor must give you, and cross-check it against your invoices. It shows gross pay, materials, and the 20% or 30% deduction. You can also see deductions in your HMRC personal tax account. Without statements, you can't reclaim the tax in your Self Assessment.

CIS Refund Estimator.

What rate should CIS deductions be?

20% if you're registered with HMRC, 30% if you're not, and 0% if you have Gross Payment Status. The contractor verifies your status with HMRC before paying you. If they're deducting 30%, register for CIS today. It's free and the rate drops at the next pay run.

CIS Rates reference card.

How this site is funded →

Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.

In crisis? Samaritans 116 123 · Mental health support

How this site is funded →