The Construction Industry Scheme (CIS) requires contractors to deduct tax from their subcontractors' payments, with these deductions contributing to the subcontractors' tax and National Insurance.

Spreading payments across the year helps to avoid a hefty bill at the end of the tax year. When you register for CIS, subcontractors benefit from a lower tax deduction rate, making the process easier to manage and ensuring compliance with HMRC.

Who needs to register for CIS?

Pay As You Earn (PAYE) is the system employers use to deduct tax and National Insurance directly from employees’ wages, while the Construction Industry Scheme is for self-employed construction workers. Under CIS, contractors deduct tax from payments to subcontractors, which then counts towards their tax and National Insurance.

If you're a self-employed construction worker, you’ll need to register for CIS. If you don’t, you could be taxed at a higher rate – 30% instead of the standard 20% – making it more difficult to manage your earnings. Registering ensures you pay the correct amount of tax.

How to register for CIS step-by-step

Here’s a quick guide to registering for CIS as a self-employed construction worker:

Step 1: Register for HMRC’s online services and enrol for self-employment

Step 2: You’ll receive your Government Gateway ID via email and your Unique Taxpayer Reference (UTR) number by post

Step 3: Head to the official HMRC website, log in using your Government Gateway ID, and select the option to register for CIS

Step 4: Choose your CIS payment status – either net pay (where tax is deducted) or gross pay (you handle the tax yourself)

What’s the difference between gross pay and net pay?

Net pay status

  • Taxes withheld: 20% of earnings are withheld and paid to HMRC by the contractor
  • Qualification: All construction workers qualify
  • Benefit: Lower tax withholding (20% instead of 30%)
  • Drawback: You may still overpay taxes but can claim a refund

Gross pay status

  • Taxes withheld: 0% – you handle taxes yourself via self-assessment
  • Qualification: Must meet criteria, including £30,000+ turnover, timely tax payments, and using a business bank account
  • Benefit: No immediate tax deductions, giving you full payment up front
  • Drawback: You’re responsible for managing your tax payments, which can be tricky if you don’t set aside enough

Common mistakes to avoid when registering for CIS

Here are a few common pitfalls to steer clear of during the CIS registration process:

Incorrect worker classification

It’s crucial to ensure that workers are accurately classified as contractors or subcontractors. Misclassification can lead to penalties and complications with tax obligations.

Incomplete information

Double-check that all required information is provided, including your UTR and National Insurance number. Missing details can delay your registration.

Failure to verify subcontractors

Contractors must legally verify their subcontractors through HMRC to ensure the correct tax deductions are made. Neglecting this step can result in errors and potential penalties.

What happens after registration?

Once you’ve registered for CIS, your responsibilities will vary depending on whether you’re a contractor or a subcontractor.

  • For contractors

    You’ll need to verify your subcontractors with HMRC to ensure the correct tax deduction rates are applied. Additionally, you must file monthly returns detailing payments made to subcontractors and the amounts deducted.

  • For subcontractors

    You’ll have tax deducted at the standard rate of 20% (or 30% if you’re not registered). If you qualify for gross payment status, no deductions will be made, and you’ll manage your tax payments at the end of the year instead.

Get your CIS process rolling

Navigating your CIS can seem daunting, but understanding the key steps makes it manageable. Whether you’re a contractor or subcontractor, being aware of your obligations helps you stay compliant.

Now is the perfect time to register for CIS. From groundworkers to builders, UK construction workers in CIS can claim tax rebates, averaging £2,262. We also handle CIS Self Assessment tax returns with no hidden charges or hourly rates. Let us simplify the process and maximise your rebates.