If you work in construction as a subcontractor, the chances are good that you've overpaid tax this year without even realising it. Under the Construction Industry Scheme (CIS), contractors deduct money from your pay before it reaches you and send it straight to HMRC. That's an advance payment towards your tax bill, and it's very often more than you actually owe.
The good news is you can get the difference back. The route you take depends on whether you're a sole trader or working through a limited company, and getting it right is the difference between a refund landing in weeks and one stuck in HMRC's checks for months.
This guide walks you through who's owed a refund, exactly how to claim it through each route, what you can reclaim, and how long it takes. There's an illustrative worked example with current 2025/26 figures so you can see the maths.
Why do CIS subcontractors end up owed a refund?
CIS deductions are taken at a flat rate from your labour. They take no account of your personal allowance, your business expenses, or your actual profit. They're a blunt instrument.
A registered subcontractor has 20% taken off their labour payments before they're paid. But your real tax bill is worked out on your profit after expenses, with your tax-free personal allowance applied first. For 2025/26 that allowance is £12,570 (gov.uk). So in a lot of cases the 20% already handed over is more than you owe.
That gap is your refund. The deductions count as advance payments towards your Income Tax and National Insurance, and when the tax year ends, you reconcile what was taken against what you actually owe.
In practice, the people most likely to be owed money are subcontractors with significant tool, travel, and material costs, anyone who started part way through the year, and those whose profits sit comfortably inside the basic-rate band.
How much is deducted under CIS?
The rate a contractor deducts depends on your CIS status. There are three.
| CIS status | Deduction from labour | When it applies |
|---|---|---|
| Registered (net payment) | 20% | You're registered as a subcontractor with HMRC |
| Not registered | 30% | You haven't registered for CIS |
| Gross payment status | 0% | You meet HMRC's turnover and compliance tests |
These rates come straight from HMRC (gov.uk). If you're on the 30% rate purely because you never registered, registering is the single quickest way to stop overpaying. You'll still reclaim any over-deduction at the year end, but a smaller deduction is kinder to your cash flow.
One important point: the deduction applies to your labour, not to the cost of materials you supply. Your contractor should strip out genuine materials, plant hire, and certain other costs before applying the rate, which keeps the deduction off money that was never your profit.
How does a sole trader claim a CIS tax refund?
If you're a sole trader or in a partnership, you reclaim through your Self Assessment tax return. There's no separate CIS refund form. The deductions you've suffered are reconciled against your final tax bill on the return.
Here are the steps.
- Keep every payment and deduction statement. Each month a contractor pays you, they must give you a statement showing what you were paid and how much CIS was deducted. These are your evidence.
- Record your full income. On your tax return you enter the full amount on your invoices as turnover, before any CIS was taken off (gov.uk).
- Claim your business expenses. Tools, protective clothing, mileage, public liability insurance, accountancy fees, and so on. These reduce your taxable profit.
- Enter the CIS deducted. There's a dedicated box on the self-employment pages for total CIS deductions taken during the year.
- Let HMRC do the reconciliation. HMRC works out your tax and National Insurance on your profit, then sets the CIS already paid against it. If the CIS exceeds what you owe, the difference is refunded (gov.uk).
You can file your return from 6 April after the tax year ends. The online filing and balancing payment deadline is 31 January following the tax year (gov.uk), but there's no need to wait. Filing early simply means an earlier refund.
If you need help getting the return right, our Self Assessment service is built for exactly this, and our self-employed tax calculator gives you a quick sense of the numbers before you file.
How does a limited company reclaim CIS deductions?
A limited company can't reclaim CIS through Self Assessment. The company is a separate legal person, so the deductions belong to the company, not to you personally. The mechanism is different and trips a lot of directors up.
The first port of call is your payroll. Each month you report CIS deductions suffered on your Employer Payment Summary (EPS), submitted through RTI. HMRC then takes those deductions off what the company owes in PAYE tax and National Insurance (gov.uk).
If your CIS deductions are bigger than your PAYE bill in a month, you carry the unused amount forward to the next month within the same tax year. If there's still a surplus once the tax year has ended, you can ask HMRC to repay it or set it against another liability.
To claim that year-end repayment, the company needs to have submitted all relevant PAYE, CIS, and Corporation Tax returns, and you apply online through your Government Gateway or by post (gov.uk). You can ask HMRC to:
- repay the money directly to the company's bank account, or
- set it against the company's Corporation Tax, PAYE, or other CIS liabilities.
One timing trap to avoid: don't submit the repayment claim too early. If you claim before your final EPS for the year has been processed (you have until 19 April after the tax year), HMRC's records may not yet show all your deductions, which delays the whole thing.
If your company is also a CIS contractor itself, our Corporation Tax service and tax advisory team can keep the payroll, the EPS, and the repayment claim joined up so nothing slips.
Illustrative example: a sole-trader bricklayer's refund
Illustrative example. Tom is a self-employed bricklayer, registered for CIS, working on net payment status throughout 2025/26. The figures below are illustrative and rounded for clarity.
Over the year, his invoiced labour comes to £42,000. His contractors deduct CIS at 20%, so £8,400 has already gone to HMRC. He also invoices £3,000 of materials, which sit outside the deduction. His allowable business expenses (tools, van running costs, insurance, accountancy) come to £9,000.
Here's how the maths works through, using 2025/26 rates.
| Step | Figure |
|---|---|
| Labour income | £42,000 |
| Plus materials income | £3,000 |
| Total turnover | £45,000 |
| Less business expenses | £9,000 |
| Taxable profit | £36,000 |
| Less Personal Allowance | £12,570 |
| Income taxed at basic rate (20%) | £23,430 |
His Income Tax is 20% of £23,430, which is £4,686. The basic rate is 20% and the personal allowance is £12,570 for 2025/26 (gov.uk).
He also pays Class 4 National Insurance. For 2025/26 this is 6% on profit between the Lower Profits Limit of £12,570 and the Upper Profits Limit of £50,270 (gov.uk). His profit of £36,000 sits inside that band, so Class 4 is 6% of (£36,000 minus £12,570), which is 6% of £23,430, or £1,405.80.
| Tom's bill | Figure |
|---|---|
| Income Tax | £4,686.00 |
| Class 4 National Insurance | £1,405.80 |
| Total due | £6,091.80 |
| Less CIS already deducted | £8,400.00 |
| Refund due to Tom | £2,308.20 |
Tom's CIS deductions of £8,400 are well over his actual £6,091.80 liability, so HMRC refunds him £2,308.20 once his return is processed. This is the everyday reality for a lot of subcontractors: the flat 20% takes no account of expenses or the personal allowance, so a refund is the norm rather than the exception.
What can you reclaim, and what cuts your refund?
Your refund is simply the gap between the CIS deducted and your real liability. Two things widen that gap in your favour, and a couple narrow it.
What helps your refund:
- Claiming all your allowable expenses. Every legitimate cost you leave off the return inflates your taxable profit and shrinks your refund. Tools, materials, mileage, protective gear, insurance, phone, and professional fees all count.
- Your personal allowance. The first £12,570 of profit is tax-free for 2025/26 (gov.uk), yet CIS was deducted as if it wasn't.
What reduces or complicates it:
- Other untaxed income. If you've other income that hasn't had tax taken off, it eats into the refund.
- Payments on account. Once your Self Assessment bill is large enough, HMRC may ask for payments on account, due 31 January and 31 July (gov.uk). These can offset against a refund position.
- Incomplete records. Missing payment and deduction statements are the most common reason a claim stalls.
If you're VAT-registered, remember CIS and VAT are separate. The domestic reverse charge for construction may apply to your invoices, but it doesn't change how your CIS refund is calculated.
How long does a CIS refund take?
It depends on your route and how clean your records are.
For sole traders, the refund follows your Self Assessment return. File online with complete figures and HMRC typically repays within a few weeks. Paper returns and cases that trigger extra checks take longer.
For limited companies, year-end EPS-based repayments are usually processed within around 28 days of a clean claim, though first-time claims often take longer because HMRC verifies your identity and registration.
A few things keep your refund fast:
- File after your records for the year are complete, not before.
- Make sure your name, Unique Taxpayer Reference, and (for companies) PAYE reference all match HMRC's records exactly.
- Keep your payment and deduction statements to hand in case HMRC asks.
If you're new to CIS, expect a little extra patience on the first claim. After that, they tend to run smoothly.
Should you apply for gross payment status instead?
If you keep getting big refunds, gross payment status is worth a look. With gross status, contractors pay you in full with no CIS deducted, and you settle your whole tax bill through Self Assessment or Corporation Tax instead. No more waiting for money back.
To qualify, HMRC applies a business test, a turnover test, and a compliance test, so you need a clean record of filing and paying on time (gov.uk). It's a strong option for established subcontractors with healthy turnover, but it does mean you're responsible for the full tax bill at the year end rather than having it drip-fed to HMRC. Cash-flow discipline matters.
For trades and construction businesses weighing this up, our pages for CIS contractors, the wider construction sector, and tradesmen set out how we help with the whole picture.
Stop leaving your refund with HMRC. Most subcontractors we work with are owed money back, but only if the return claims every expense and the CIS is reconciled properly. Book a free 20-minute call with a Zmartly accountant and we'll handle your CIS refund from start to finish. Get in touch with Zmartly.
Frequently asked questions
How do I claim a CIS tax refund as a sole trader?
You claim through your Self Assessment tax return. Record your full income before deductions, claim your allowable business expenses, and enter the total CIS deducted in the dedicated box. HMRC works out your real tax and National Insurance, sets the CIS already paid against it, and refunds any excess. You can file from 6 April after the tax year ends.
Can a limited company claim a CIS refund through Self Assessment?
No. A limited company offsets CIS deductions against its monthly PAYE and National Insurance bill using the Employer Payment Summary. If there's still a surplus after the tax year, the company asks HMRC to repay it or set it against Corporation Tax or other liabilities. You must have filed all relevant PAYE, CIS, and Corporation Tax returns first.
How much CIS is deducted from subcontractors?
Registered subcontractors have 20% deducted from their labour. Unregistered subcontractors have 30% deducted. Subcontractors with gross payment status have nothing deducted and pay their tax in full at the year end. Deductions apply to labour, not to genuine materials you supply.
Why am I owed a CIS refund?
CIS is deducted at a flat 20% (or 30%) with no allowance for your tax-free personal allowance or your business expenses. Your actual tax is worked out on your profit after expenses, with the £12,570 personal allowance for 2025/26 applied first. The flat deduction is usually more than you owe, and the difference is your refund.
How long does a CIS refund take to come through?
For sole traders, the refund follows your Self Assessment return and is usually paid within a few weeks of an online filing with complete records. For limited companies, year-end repayments are typically processed within about 28 days, though first claims take longer while HMRC runs verification checks.
Do CIS deductions come off my materials too?
No. CIS is deducted from your labour only. Your contractor should remove the cost of genuine materials, plant hire, and certain other items before applying the rate, so the deduction stays off money that was never your profit.
