If you pay subcontractors under the Construction Industry Scheme, you have a job to do every single month, whether or not you paid anyone. You file a CIS monthly return (often called the CIS300), and you pay HMRC the deductions you took from your subcontractors.
Miss the filing date and the penalties start at £100 on day one. Get the deduction sums wrong and you either short-pay HMRC or over-deduct from the people you rely on to finish the job.
This guide walks you through the whole monthly cycle: what the CIS300 actually reports, how to work out the deduction on a subcontractor's invoice, the two key deadlines, and a fully worked example with the maths checked. It's written for contractors in construction and the trades who want to get this right without it eating their evenings.
What is the CIS monthly return (CIS300)?
The CIS300 is the return you send HMRC each month telling them which subcontractors you paid, how much you paid them, and how much tax you deducted under the Construction Industry Scheme (CIS).
CIS is HMRC's way of collecting tax from construction subcontractors at source. Instead of waiting for the subcontractor to settle up through Self Assessment, you, the contractor, hold back a slice of each payment and hand it to HMRC. That deduction counts as an advance payment towards the subcontractor's own Income Tax and National Insurance.
The return covers a "tax month", which runs from the 6th of one month to the 5th of the next. So your May return covers payments made from 6 May to 5 June.
Who has to file a CIS300?
You file a CIS300 if you're a CIS contractor, meaning you pay subcontractors for construction work. That includes:
- Construction businesses, builders and trades that subcontract work out.
- Property developers and "deemed contractors" whose business isn't construction but who spend heavily on it.
If you're purely a subcontractor and never pay other subcontractors, you don't file a CIS300. The contractor who pays you handles the return, and you see the deductions on your payment and deduction statement.
In practice the line we most often see blurred is the trade who is mainly a subcontractor but occasionally brings in a labourer or a mate to help on a job. The moment you pay another person for construction work, the contractor rules can apply to you. If you're unsure which side of the line you sit on, our construction accounting page sets out the obligations both ways.
What does the CIS300 report?
Each monthly return asks you to:
- List every subcontractor you paid in the tax month.
- State the total payment made to each one.
- State the cost of materials within that payment (you don't deduct on materials).
- State the CIS deduction you took.
- Declare that the people listed are subcontractors, not employees.
That last point matters. The return includes an employment status declaration, and getting it wrong (treating someone as a subcontractor when they should really be on the payroll) can carry a penalty of up to £3,000.
Do you still file if you paid no one?
Yes, unless you've told HMRC otherwise. If you made no payments to subcontractors in a tax month, you either file a nil return showing zero, or you tell HMRC the scheme is temporarily inactive so it stops expecting returns for up to six months. Do nothing and HMRC treats the return as missing, and the £100 late penalty lands.
How do you work out the CIS deduction?
There are three deduction rates, and which one applies depends on the subcontractor's CIS status when you verify them with HMRC:
| Subcontractor status | CIS deduction rate |
|---|---|
| Registered for CIS (verified) | 20% |
| Not registered / could not be verified | 30% |
| Gross payment status | 0% |
(Source: GOV.UK CIS contractor guidance, current 2025/26.)
You don't deduct on the whole invoice. You apply the rate only to the labour element. Before calculating, you strip out the parts that aren't subject to deduction:
- VAT charged on the invoice.
- The cost of materials the subcontractor paid for directly.
- Plant hire (equipment hired in for the job).
- Fuel used, except for travel.
- Consumable stores and prefabricated or manufactured materials.
Whatever is left, broadly the labour, is the figure you apply 20% or 30% to.
Why you must verify before you pay
You verify a subcontractor with HMRC before the first payment so you know which rate to use. Skip verification and you have to treat them as unverified, which means deducting at 30% rather than 20%. That hits the subcontractor's cash flow hard and is an easy, avoidable mistake.
Worked example: filing a CIS300 for one month
Illustrative example. Meridian Build Ltd is a contractor. In the tax month 6 May to 5 June it pays two subcontractors. These figures are illustrative and use the standard CIS deduction rates, which are unchanged across 2025/26 and 2026/27.
Subcontractor A — Tariq, a registered (verified) bricklayer. He invoices £4,000 for labour plus £1,000 for materials he bought himself, plus £1,000 VAT. Total invoice £6,000.
- Strip out VAT (£1,000) and materials (£1,000), leaving £4,000 of labour.
- Deduction at 20% of £4,000 = £800.
- Tariq is paid £6,000 minus £800 = £5,200.
Subcontractor B — Dan, a labourer who isn't registered for CIS. He invoices £1,500, all labour, no VAT, no materials.
- Nothing to strip out, so the full £1,500 is the labour figure.
- Deduction at 30% of £1,500 = £450.
- Dan is paid £1,500 minus £450 = £1,050.
What goes on the CIS300 and what Meridian pays HMRC:
| Subcontractor | Gross labour | Materials | Rate | CIS deduction |
|---|---|---|---|---|
| Tariq (verified) | £4,000 | £1,000 | 20% | £800 |
| Dan (unverified) | £1,500 | £0 | 30% | £450 |
| Total | £5,500 | £1,000 | £1,250 |
Meridian files the CIS300 showing these two subcontractors and total deductions of £1,250. It then pays that £1,250 over to HMRC. The maths checks out: £800 plus £450 is £1,250.
Note how much Dan loses by not being registered. Had he been verified at 20%, his deduction would have been £300, not £450, leaving him £150 better off that month. Encouraging your subcontractors to register is good for everyone.
When is the CIS return due and when do you pay HMRC?
There are two separate dates each month, and people often confuse them.
| Action | Deadline |
|---|---|
| File the CIS300 monthly return | By the 19th of the month following the tax month |
| Pay deductions to HMRC (post) | By the 19th |
| Pay deductions to HMRC (electronic) | By the 22nd |
So for the 6 May to 5 June tax month, the return is due by 19 June, and payment by 22 June if you pay electronically (or the 19th if you pay by post, which almost nobody does now).
CIS deductions are paid to HMRC together with your PAYE and National Insurance under the same monthly process and the same accounts office reference. If your average monthly liability for PAYE, NIC and CIS is under £1,500, you may be able to arrange to pay HMRC quarterly instead of monthly, though you still file the CIS300 every month. The quarterly payment date follows the same pattern: the 22nd after the quarter ends if you pay electronically.
If the 22nd falls on a weekend or bank holiday, make sure HMRC has cleared funds by the last working day before it. Faster Payments usually clear same day, so that's the safe route for a deadline-day payment.
How do you actually file the CIS300?
You have two routes:
- HMRC's free CIS online service. Log in with your Government Gateway details, select the tax month, add each subcontractor, enter the payment and deduction figures, and submit. Suitable if you pay a handful of subcontractors.
- Commercial CIS or payroll software. This files the return for you and is the better fit once you have several subcontractors, since it stores verifications and reuses subcontractor details month to month. One quirk to know: a CIS return must not include any negative values, so corrections to a previous month are handled differently rather than by entering a minus figure.
Whichever route you use, keep your payment and deduction records and give each subcontractor a payment and deduction statement so they can claim the tax you've withheld. Clean monthly records are what make this painless, which is exactly the kind of routine our bookkeeping services are built to handle for busy construction firms.
What happens if you file late?
The CIS300 has fixed, escalating penalties, and they stack up fast because they apply per return, every month:
| How late the return is | Penalty |
|---|---|
| 1 day late | £100 |
| 2 months late | £200 |
| 6 months late | £300 or 5% of the CIS deductions, whichever is higher |
| 12 months late | A further £300 or 5%, and in serious cases up to £3,000 or 100% of the deductions |
(Source: GOV.UK CIS late filing penalties.)
Late payment of the deductions themselves attracts interest and can attract further penalties on top. You can appeal a penalty within 30 days if you have a reasonable excuse, but the cleaner answer is simply to file and pay on time every month.
A common trap: a contractor who has a quiet month and pays nobody assumes there's nothing to do, then gets a £100 penalty for a missing nil return. If you're not paying subcontractors, file the nil return or set the scheme to inactive. Don't go silent.
If the monthly CIS cycle is getting away from you, or you're not confident your status declarations and deduction rates are right, this is exactly where a specialist pays for itself. Our team works with builders and trades day in, day out through our construction accounting service.
Frequently asked questions
When is the CIS monthly return due?
You must file the CIS300 by the 19th of the month following the tax month it covers. A tax month runs from the 6th to the 5th, so the return for 6 May to 5 June is due by 19 June.
What is the difference between the filing date and the payment date?
The CIS300 return is due by the 19th. Paying the deductions to HMRC is due by the 22nd if you pay electronically, or the 19th if you pay by post. They are two separate deadlines in the same month.
Do I have to file a CIS return if I didn't pay any subcontractors?
Yes, unless you have told HMRC the scheme is inactive. If you made no payments, file a nil return showing zero. Doing nothing means HMRC treats the return as late and charges a £100 penalty.
What CIS deduction rate do I use?
Deduct 20% from a subcontractor who is registered and verified for CIS, 30% if they are not registered or you could not verify them, and 0% if they hold gross payment status. You apply the rate to the labour element only, after stripping out VAT, materials, plant hire and fuel.
What is the penalty for filing the CIS300 late?
It starts at £100 for being one day late, rises to £200 at two months, and reaches £300 (or 5% of the deductions, whichever is higher) at six months. At twelve months a further penalty applies, up to £3,000 or 100% of the deductions in the most serious cases.
Can I pay CIS to HMRC quarterly instead of monthly?
If your average monthly PAYE, NIC and CIS liability is under £1,500 you can arrange with HMRC to pay quarterly. You still have to file the CIS300 every single month regardless.
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The bottom line
The CIS monthly cycle is simple once it's a routine: verify your subcontractors, deduct at the right rate on the labour only, file the CIS300 by the 19th, and pay HMRC by the 22nd. The penalties for slipping are fixed and unforgiving, so the goal is a clean, on-time return every month, including nil returns.
Want the CIS300 off your plate? Book a free call with a Zmartly accountant and we'll handle your monthly returns, deductions and HMRC payments through our tax advisory service, so you can get back on the tools.
