What do the deductions on my CIS statement mean?
A Construction Industry Scheme deduction is money taken from a qualifying construction payment and sent to HMRC towards your tax and National Insurance. It is a payment on account, rather than a calculation of your final tax bill. [1]
Your payment and deduction statement helps you see what was paid and what was withheld. If you are looking at one for the first time, start with the rate used and the amount it was applied to.
This guide focuses on self-employed individuals. Limited companies have a different process for reporting and recovering CIS deductions.
Why the deduction rate can be different
The payer verifies your details with HMRC to establish how to treat your payments. The usual outcomes are: [2]
| HMRC verification outcome | CIS treatment |
| Registered for CIS and successfully verified | 20% deduction |
| Not registered or unable to be verified | 30% deduction |
| Confirmed gross payment status | No CIS deduction |
If 30% has been used unexpectedly, ask the payer to check the registration and verification details. Make sure the name and Unique Taxpayer Reference you supplied match HMRC’s records. Do not assume that simply having a UTR means your CIS registration is complete.
Gross payment status means you receive payments without CIS deductions. It does not make the income tax-free. [2]
A simple example
Suppose £1,000 is subject to a 20% CIS deduction. The deduction is £200, leaving £800 from that amount.
At 30%, the deduction on the same £1,000 would be £300. This example isolates the CIS calculation: it excludes VAT, materials and any separately agreed service margin. It is not a personalised NWM payment illustration.
The useful question is: ‘What amount was the percentage applied to?’ That helps you check the calculation even when an invoice contains several different items.
Materials can change the amount being assessed
The amount subject to CIS can differ from the invoice total. VAT and certain qualifying costs, including materials you paid for directly, can be excluded from the deduction calculation. Keep receipts and ask the payer how those items have been treated. [2]
Avoid assuming that every business expense reduces the CIS deduction at payment time. The calculation made by the payer and the expenses you claim when working out taxable profit serve different purposes.
Check the statement against your own records
A CIS payment and deduction statement records the payments covered, relevant materials amounts and CIS tax deducted. A tax month runs from the 6th of one month to the 5th of the next. Where deductions are made, the statement is due within 14 days of the tax month ending. [3]
To check it, put your invoice or agreed work record, payment statement and bank entry side by side. Work through these questions:
- Does it cover the work and payment period you expected?
- Does the amount before deductions agree with the payment records?
- Is the CIS rate correct, and can you follow the calculation?
- Are any other agreed costs explained separately?
- Can you reconcile the resulting payment to your bank account?
A provider’s margin is a separate service cost, not a CIS tax deduction. If NWM’s margin applies to your arrangement, ask us to explain where it appears and how it affects your payment. Each line should have a clear purpose.
What happens at the end of the tax year
As a sole trader, you report income before CIS deductions and the deductions already taken on your Self Assessment tax return. HMRC takes those deductions into account when working out the balance due.
You may have more to pay, or you may be due a refund. A refund is not automatic just because CIS has been deducted. Keep your statements so you can support the figures you report. [4]
Saving them as you go makes the year-end job easier. If you use an accountant, ask what other records they need so you can keep everything together.
If something is missing or does not look right
Ask the payer for an explanation or a replacement statement. Give the payment date and the specific figure you are querying. If you are paid through NWM, contact us so we can help you understand your records.
CIS registration does not, by itself, establish that someone is self-employed. The working arrangement needs to be appropriate for CIS; an employee should not be paid under the scheme simply because they have registered. [1]
Know how your CIS payment will work
Considering NWM for CIS? Ask for an illustration based on your circumstances, with the deduction and NWM’s margin clearly explained. You should know what to expect before your first payment arrives.
Request your CIS payment illustration
This guide explains the general position. Your tax calculation depends on your circumstances and business structure.
Sources and further reading
1. HMRC — CIS subcontractor overview
2. HMRC — Getting paid under CIS