CIS Tax Deduction Calculator
Work out the CIS deduction and net payment for any subcontractor invoice. Enter the invoice total (excluding VAT), split out materials, pick the verification rate — the calculator does the rest.
Payment details
Result
- Gross payment (ex VAT)
- £2,400.00
- Less materials
- − £600.00
- Amount liable to deduction (labour)
- £1,800.00
- CIS deduction (20%)
- £360.00
- Net payment to subcontractor
- £2,040.00
The deduction of £360.00 is paid to HMRC with your monthly CIS/PAYE bill and reported on your CIS300 return. Give the subcontractor a payment and deduction statement showing these figures.
How the calculation works
Under the Construction Industry Scheme, contractors deduct money from payments to subcontractors and pass it to HMRC as an advance payment towards the subcontractor’s tax and National Insurance. The deduction only applies to the labour element of the payment: start with the amount charged excluding VAT, take off the direct cost of materials, then apply the rate HMRC confirmed when you verified the subcontractor — 20% for registered subcontractors, 30% where verification fails or the subcontractor is not registered, and 0% for subcontractors with gross payment status. Read our full guides to CIS deduction rates and the CIS300 monthly return for the reporting side.
Worked example
| Line | Amount |
|---|---|
| Invoice total (ex VAT) | £2,400.00 |
| Materials | £600.00 |
| Labour (liable to deduction) | £1,800.00 |
| CIS deduction at 20% | £360.00 |
| Net payment to subcontractor | £2,040.00 |
Frequently asked questions
How is a CIS deduction calculated?expand_more
Start with the gross amount charged for the work, excluding VAT. Subtract the cost of materials the subcontractor actually paid for. Apply the deduction rate HMRC gave you at verification (20%, 30% or 0%) to the remaining labour amount. The result is the CIS deduction to withhold and pay to HMRC.
Why are materials excluded from the CIS deduction?expand_more
CIS deductions are advance payments towards the subcontractor’s tax on their income. Money that simply reimburses materials they bought is not income from labour, so it is excluded before the rate is applied. Only the direct cost of materials genuinely incurred for that contract can be excluded.
Is VAT included in the CIS calculation?expand_more
No. The deduction is calculated on amounts excluding VAT. Note that most supplies between VAT-registered CIS businesses fall under the domestic reverse charge, so in many cases the subcontractor does not charge VAT on the invoice at all.
Which CIS deduction rate should I use?expand_more
Use the rate HMRC gives you when you verify the subcontractor: 20% for subcontractors registered for CIS, 30% where HMRC cannot match the subcontractor or they are not registered, and 0% where the subcontractor holds gross payment status.
This calculator is general guidance, not tax advice. Always apply the rate HMRC confirms at verification and check current rules on GOV.UK.
Stop calculating deductions by hand
Taxriva verifies subcontractors, applies the right rate automatically, generates payment and deduction statements, and files your CIS300 — from the same product that runs your payroll.
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