If you run a construction business and employ people or pay subcontractors, you have probably had a letter from the CITB asking you to register or file a Levy Return. The two questions that follow are always the same. Do I actually have to pay this, and if so, how much?
The CITB levy is a statutory training levy, not an HMRC tax, but it is mandatory for employers in scope and it is set in law. Many smaller firms pay nothing because of the small business exemption, yet still have to file a return every year.
This guide explains who is in scope, the rates that apply, the thresholds that let smaller firms off, and what happens if you ignore the paperwork. The figures here reflect the 2026 Levy Order.
It is written for builders, groundworkers, electrical and plumbing firms, and anyone running a construction establishment. If you want this handled for you alongside your CIS and accounts, that is what we do at Zmartly for construction businesses.
Do you have to pay the CITB levy?
If your business is engaged wholly or mainly in construction industry activities, you must register with the CITB and complete a Levy Return each year. Whether you then pay anything depends on the size of your wage bill. Smaller firms are exempt but must still file the return.
What is the CITB levy?
The CITB levy is a charge on construction employers that funds training and skills development across the industry. It is collected by the Construction Industry Training Board (CITB) under the Industrial Training Act 1982, and the exact rates and thresholds are set every few years by an Industrial Training Levy Order made by Parliament.
The current rates and exemptions come from the Industrial Training Levy (Construction Industry Training Board) Order. It gives effect to the CITB's levy proposals for the levy periods ending in 2026, 2027 and 2028, keeping the same headline rates that have applied since the 2022 Order.
Two things often surprise people. First, it is not an HMRC tax, so it does not work like PAYE or CIS. The liability sits with the construction establishment that is assessed; it is not something you deduct from a worker and pay over. Second, even firms that owe nothing have to engage with it, because the only way the CITB knows you are exempt is from the return you file.
Who has to register and pay?
The levy applies to employers engaged wholly or mainly in construction industry activities. In practice, if construction work takes up more than half of your workforce's time (counting both payroll staff and subcontractors), you are in scope and must register with the CITB.
For levy purposes, "employer" is read broadly. It covers limited companies, partnerships and sole traders, and the definition of who works for you includes people engaged under a contract for services, not just employees on the payroll. That is why your subcontractors feed into the calculation.
Registering is not the same as paying. Once registered, you complete an annual Levy Return so the CITB can assess you. Many smaller firms then fall under the exemption threshold and pay nothing, but the return still has to go in. Charities are exempt from the levy.
A common mix-up is between the CITB levy and the Construction Industry Scheme (CIS). They are separate regimes. CIS is HMRC's tax-deduction scheme for payments to subcontractors. The CITB levy is a training charge that happens to use your CIS figures as part of its calculation. You can be in both, and most construction firms are.
How much is the CITB levy?
The levy is worked out on two parts of your wage bill, at two different rates:
| Levy basis | Rate | What it applies to |
|---|---|---|
| PAYE | 0.35% | Total payments to employees through your payroll |
| Net CIS subcontractors | 1.25% | Payments to subcontractors you make CIS deductions from (net-paid) |
| Gross-paid CIS subcontractors | 0% | No levy is charged on subcontractors paid gross |
Source: CITB levy rates, reflecting the 2026 Levy Order. These rates have applied since the 2022 Order and are confirmed for the levy periods ending in 2026, 2027 and 2028.
The "Net CIS" figure is the key one for many firms. It captures subcontractors who are registered for CIS and have 20% deducted (net payment status). If a subcontractor is paid gross because they hold gross payment status, no levy is charged on those payments at all. Under CIS itself, the deduction is 20% for registered subcontractors, 30% for unregistered ones, and 0% for those with gross payment status, but only the net-paid (taxable) total drives the 1.25% levy charge.
So your gross levy before any exemption is simply: (total PAYE x 0.35%) plus (net-paid CIS total x 1.25%).
The small business exemption and reduction
Most small construction firms pay little or nothing, thanks to two reliefs based on your total wage bill (payroll plus Net CIS):
- Small Business Levy Exemption. If your total wage bill is under £150,000, you do not pay the levy at all. You still have to file the Levy Return so the CITB can confirm the exemption.
- Small Business Levy Reduction. If your total wage bill is between £150,000 and £499,999, you get a 50% reduction on your assessed levy.
These thresholds were raised under the 2026 Levy Order to bring more small firms into the exemption, so a business that paid a reduced levy in the previous year may now be fully exempt. The reduction percentage stays at 50%.
The thresholds are set in the Levy Order and can change when a new Order is made, so always work from the figures for the current levy period before you budget.
Illustrative example: working out a levy bill
Illustrative example. Imagine a groundworks limited company with a 2026 Levy Return showing:
- PAYE payroll for the year: £200,000
- Net-paid CIS subcontractors: £120,000
- Gross-paid CIS subcontractors: £40,000
First, check the total wage bill that decides exemption. That is payroll plus Net CIS, so £200,000 + £120,000 = £320,000. That sits in the £150,000 to £499,999 band, so the 50% Small Business Levy Reduction applies. Gross-paid subcontractors do not count towards the wage bill for this test or the charge.
Now the gross levy:
| Element | Calculation | Amount |
|---|---|---|
| PAYE levy | £200,000 x 0.35% | £700 |
| Net CIS levy | £120,000 x 1.25% | £1,500 |
| Gross-paid CIS levy | £40,000 x 0% | £0 |
| Gross levy | £700 + £1,500 | £2,200 |
| Less 50% Small Business Reduction | £2,200 x 50% | -£1,100 |
| Levy payable | £1,100 |
So this firm pays £1,100 for the year. Had its total wage bill been under £150,000, it would have paid nothing. These figures are illustrative; your own assessment depends on your actual payroll, your net-paid CIS total and the thresholds for the levy period.
How do you file the Levy Return and pay?
Every registered construction employer must complete an annual Levy Return, even if no levy is due. The return reports your PAYE total and your CIS payments for the relevant period so the CITB can assess you.
The Levy Return should be returned by 30 June. Filing on time also protects your access to CITB grants and funding, which is where many firms get their training spend back. Once the CITB has assessed you, it sends a Levy Assessment Notice setting out what you owe.
Payment is due within one month of receiving your Assessment Notice. You can pay in full or set up a Direct Debit to spread the cost over interest-free monthly instalments. If you think you should be exempt, the return is still what triggers that exemption, so do not skip it on the assumption that you owe nothing.
Getting the PAYE and CIS figures right matters here, because they have to reconcile with what you report to HMRC. If your bookkeeping and CIS records are tidy and reconciled through the year, the Levy Return is a short job rather than a scramble.
Is the CITB levy tax-deductible?
For most construction businesses, yes. The levy is a cost you incur because you trade in construction, so it is normally an allowable revenue expense against your trading profits under the long-standing "wholly and exclusively" test that governs business deductions.
That means the levy reduces your taxable profit for Corporation Tax (if you trade through a company) or Income Tax (if you are a sole trader or partnership), in the same way as other running costs of the trade. It is not a tax you can deduct from a worker and pass on; the liability is the establishment's, and so is the deduction.
Keep the Assessment Notice and your payment records with your year-end paperwork so the deduction is properly supported. If you are unsure how the levy interacts with your wider tax position, our tax advisory team can confirm the treatment for your structure.
Want your CITB levy, CIS and accounts joined up so nothing slips? Book a free call with a Zmartly accountant and we will review where you stand.
Frequently asked questions
Who has to pay the CITB levy?
Employers engaged wholly or mainly in construction industry activities must register with the CITB and file a Levy Return. Whether you pay depends on your total wage bill. Firms with a wage bill under £150,000 are exempt but still have to file the return.
How much is the CITB levy in 2026?
The levy is charged at 0.35% on your PAYE payroll and 1.25% on net-paid CIS subcontractors, with nothing charged on gross-paid subcontractors. These rates apply under the 2026 Levy Order and have been in place since the 2022 Order.
What is the CITB small business exemption?
If your total wage bill (payroll plus Net CIS) is under £150,000 you pay no levy. If it is between £150,000 and £499,999 you get a 50% reduction on your assessed levy. Both reliefs come from the 2026 Levy Order, and you still need to file a Levy Return to claim them.
Do I still have to file a Levy Return if I owe nothing?
Yes. Every registered construction employer must complete an annual Levy Return, even when no levy is due. It is how the CITB confirms your exemption, and filing by 30 June also protects your access to CITB grants and funding.
Is the CITB levy the same as CIS?
No. CIS is HMRC's tax-deduction scheme for payments to subcontractors, while the CITB levy is a training charge set under the Industrial Training Act 1982. They are separate regimes, but the levy uses your CIS figures (the net-paid subcontractor total) as part of its calculation.
Is the CITB levy tax-deductible?
For most construction businesses, yes. It is a cost incurred for the purposes of your trade, so it is normally an allowable revenue expense against your trading profits for Corporation Tax or Income Tax. Keep your Assessment Notice and payment records to support the deduction.
