CIS Tax Refund Guide: How to Claim Back Overpaid Construction Industry Scheme Tax

If you work as a subcontractor in the UK construction industry, you have almost certainly had tax deducted from your pay under the Construction Industry Scheme (CIS). What you might not know is that most subcontractors are over-deducted — meaning HMRC is holding more of your money than you actually owe in tax.

This guide explains exactly how CIS works, how to check whether too much was deducted from your payments, and how to claim every penny back through your Self Assessment tax return. Whether you are a bricklayer, electrician, plumber, carpenter, or general labourer, if you work through CIS, this applies to you.

What Is the Construction Industry Scheme (CIS)?

The Construction Industry Scheme is a special tax framework that HMRC applies to the construction sector. It is designed to ensure that tax is collected from subcontractors at source, reducing the risk of non-payment — a particular concern in an industry where many workers move between contracts and may not file tax returns.

Under CIS, a contractor (the person or business hiring you) must deduct tax from the labour portion of your payments and send it directly to HMRC. The contractor keeps a record of every payment made, the amount deducted, and forwards the deductions to HMRC each month using the CIS300 return.

CIS Deduction Rates for 2026/27

The amount deducted from your pay depends on your verification status with HMRC:

You can check or update your CIS registration and deduction status through your HMRC online account.

How CIS Deductions Work in Practice

When your contractor pays you for a construction job, the calculation works like this:

1. Start with the total invoice amount — the full amount you charged for the work.
2. Separate materials from labour — CIS deductions apply only to the labour element. If you supplied materials worth £2,000 and charged £5,000 total, only the £3,000 labour portion is subject to CIS.
3. Apply the deduction rate — your contractor deducts 20% (or 30% if unverified) from the labour amount. In this example: 20% of £3,000 = £600.
4. The contractor pays you the net amount — you receive the labour value minus the deduction, plus the full materials cost. So £3,000 - £600 + £2,000 = £4,400.
5. The contractor sends the £600 to HMRC — via the CIS300 monthly return, along with a payment statement showing the deductions made on your behalf.

At the end of each tax year, your contractor provides you with a CIS payment and deduction statement (form CIS36) showing all payments received and total deductions made. You need this information to complete your Self Assessment tax return.

Why Most Subcontractors Are Over-Deducted

The CIS deduction rates are flat percentages applied to every payment, regardless of your actual tax situation. This creates a mismatch because:

• Your Personal Allowance — the first £12,570 of your annual income is tax-free. But CIS deductions are taken from every pound of labour income from pound one. If you earn £15,000 in a year, CIS deductions may take 20% of the full labour amount, even though your tax liability should only apply to the £2,430 above the personal allowance.
• Business expenses reduce your taxable profit — you can deduct legitimate business costs such as tools, protective clothing, travel between sites, vehicle costs, and accountancy fees before tax is calculated. CIS deductions are applied to gross payments without considering these expenses.
• Irregular work patterns — if you only worked part of the year, your total income across the year might be much lower than what the flat 20% or 30% rate assumes.

The result is that most subcontractors end up with a CIS tax refund when they file their Self Assessment. The question is not whether you are due a refund — it is whether you bother to claim it.

How to Check If You Are Due a CIS Refund

You can get a rough idea of whether you are over-deducted by comparing your total CIS deductions against your expected tax liability:

1. Add up your total CIS deductions from all your CIS36 statements.
2. Estimate your total taxable profit — your gross CIS labour payments plus any other income, minus allowable business expenses and the £1,000 trading allowance (if applicable).
3. Calculate your expected tax — for 2026/27, the personal allowance is £12,570. You pay 20% basic rate Income Tax on taxable income between £12,571 and £50,270, and 40% higher rate on income between £50,271 and £125,140. Class 4 NIC is 9% on profits between £12,570 and £50,270, and 2% above.
4. Compare — if your total CIS deductions exceed your estimated tax and NI bill, you are due a refund.

How to Claim Your CIS Tax Refund

The only way to reclaim overpaid CIS deductions is to file a Self Assessment tax return. HMRC will not process a CIS refund automatically — you must submit your return, and the refund is calculated as part of the overall assessment.

Step 1: Register for Self Assessment

If you have not filed a Self Assessment return before, you need to register with HMRC. You can do this online via GOV.UK. You will need your National Insurance number and personal details. After registering, HMRC sends you a Unique Taxpayer Reference (UTR) and activates your online account.

Step 2: Gather Your Documents

Before completing your tax return, collect:

• CIS36 payment and deduction statements from every contractor you worked for during the tax year.
• Records of business expenses — receipts for tools, equipment, protective clothing, vehicle costs, travel, accommodation, accountancy, CIS training, insurances.
• Details of any other income — employment, rental income, dividends, savings interest.
• Your P60 or P45 if you also had employment income.
• Your UTR and National Insurance number.

Step 3: Complete Your Tax Return (SA100 + SA103S or SA103F)

The Self Assessment tax return for sole traders and subcontractors consists of the main SA100 form plus the self-employment pages (SA103S for short return or SA103F for full return). The CIS deductions are reported on the self-employment pages in the "Construction Industry Scheme deductions" box. Enter the total amount deducted across all your contracts.

HMRC's online system automatically compares your CIS deductions against your calculated tax liability. If the deductions exceed your bill, the difference is shown as a refund.

Step 4: Submit and Wait for Your Refund

After you submit your return, HMRC processes your refund. The refund is typically paid directly into your bank account within 4–6 weeks of submission. You can also choose to have the refund transferred to the next year's tax bill if you prefer not to receive it as cash. You can check the status of your refund through your HMRC online account.

Mid-Year CIS Refund Claims

If your circumstances change significantly during the tax year — for example, you stop working for an extended period, or your income drops sharply — you can apply for a mid-year refund without waiting for the annual Self Assessment deadline. This is done by:

• Completing form CIS46 (Application for repayment of CIS deductions) and sending it to HMRC.
• Contacting HMRC directly via phone or online to request an early repayment.
• HMRC will review your income and deductions position and, if appropriate, issue a repayment outside the normal Self Assessment cycle.

Note that mid-year claims require HMRC to process them manually, so they take longer than refunds issued through Self Assessment. Most subcontractors are better off waiting for the annual return unless there is a genuine hardship or a very large over-deduction.

Key Deadlines for CIS Refunds

You can file your return as early as 6 April following the end of the tax year. Filing early means you get your refund sooner. There is no penalty for filing early — only for filing late (after 31 January).

Common Pitfalls That Cost Subcontractors Money

Thousands of construction workers miss out on CIS refunds every year because of avoidable mistakes:

What If You Are Paid Through an Umbrella Company?

Many construction workers are paid through umbrella companies, especially when working through recruitment agencies. If you are an employee of an umbrella company, CIS does not apply to you in the same way — the umbrella company handles payroll and tax deductions through PAYE instead.

However, some umbrella companies operating in construction incorrectly apply CIS deductions when they should be using PAYE. If you are an umbrella employee and CIS deductions are being taken, you should raise this with your umbrella company because you may be due a refund of those deductions through your Self Assessment in the same way as a direct subcontractor. You can compare umbrella company take-home pay against direct CIS employment using our umbrella vs ltd calculator.

Getting Professional Help with Your CIS Refund

While it is perfectly possible to file your own Self Assessment return and claim your CIS refund, many subcontractors choose to use a specialist CIS accountant. A good CIS accountant will:

• Ensure every allowable expense is claimed, maximising your refund.
• Check that your CIS36 statements are accurate and that your contractor has not over-deducted.
• Complete and file your Self Assessment return on your behalf.
• Advise on whether you qualify for gross payment status (0% deduction rate).
• Handle any HMRC queries or compliance checks.

Our CIS tax return service is designed specifically for UK subcontractors. We offer a flat-fee CIS refund service that covers the preparation and filing of your Self Assessment return, with specialist knowledge of the construction sector.

Related Calculators and Guides

← Back to all blog articles