How is the CIS deduction calculated?

The CIS deduction is the deduction rate multiplied by the LABOUR portion of the invoice only. Materials, VAT and qualifying plant are excluded. For example, on £2,400 of labour at the 20% rate the deduction is £480 — even if the invoice also includes materials.

Is the CIS deduction taken off materials?

No. Materials are exempt from the CIS deduction, as are VAT and qualifying plant hire. The deduction only ever applies to the labour element of a subcontractor's invoice. The materials cost passes through to the subcontractor in full.

What are the 20%, 30% and 0% CIS rates?

20% is the standard rate for subcontractors who are registered for CIS and verified with HMRC. 30% is the higher rate for subcontractors who are not registered or cannot be verified. 0% applies to subcontractors HMRC has granted gross payment status — no deduction is made at all.

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Free CIS Deduction Calculator

Work out the CIS deduction on a subcontractor invoice in seconds. Enter labour and materials, pick the rate, and get the deduction, the net payment, and the figures for your CIS300 — calculated the way HMRC requires: on labour only.

THE RESULT

CIS deduction

£480.00

20% of labour

Net to pay subbie

£2,480.00

Gross less deduction

CIS deduction breakdown
LabourDeduction-eligible	£2,400.00
MaterialsEXEMPTExempt from deduction	£560.00
Gross totalLabour + materials + VAT	£2,960.00
Deduction rateOn labour only	20%
CIS deduction20% × labour	− £480.00
Net paymentWhat the subbie receives	£2,480.00

On your CIS300: report gross £2,960.00, materials £560.00, and a deduction of £480.00 for this subcontractor.Figures exclude VAT. Verify the subcontractor's status and rate with HMRC.

The automatic version

This is the manual version. Skip the typing.

CISflow reads the subcontractor invoice and gives you these exact figures automatically — labour/materials split, deduction rate, net pay — then drops a clean, HMRC-ready CIS bill straight into Xero. No retyping, every month.

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HOW IT WORKS

How CIS deductions work

Under the Construction Industry Scheme, a contractor deducts a percentage from a subcontractor's payment and pays it to HMRC as an advance on the subcontractor's tax. The deduction applies to the labour portion only — materials, VAT and qualifying plant or CIS-exempt costs are never deducted.

The rate depends on the subcontractor's status with HMRC: 20% if they are registered and verified, 30% if they are unverified or not registered, and 0% if HMRC has granted them gross payment status.

So on an invoice of £2,400 labour plus £560 materials at the 20% rate, the deduction is £480 (20% of labour), the subcontractor is paid £2,480, and £480 goes to HMRC and is reported on your monthly CIS300 return, due by the 19th.

This calculator is a guide for UK CIS deductions. Always verify a subcontractor's registration and rate with HMRC. CISflow is a tool, not an accountancy or tax service — you remain responsible for figures submitted to HMRC.

FAQ

CIS deduction questions

How is the CIS deduction calculated?: The CIS deduction is the deduction rate multiplied by the LABOUR portion of the invoice only. Materials, VAT and qualifying plant are excluded. For example, on £2,400 of labour at the 20% rate the deduction is £480 — even if the invoice also includes materials.
Is the CIS deduction taken off materials?: No. Materials are exempt from the CIS deduction, as are VAT and qualifying plant hire. The deduction only ever applies to the labour element of a subcontractor's invoice. The materials cost passes through to the subcontractor in full.
What are the 20%, 30% and 0% CIS rates?: 20% is the standard rate for subcontractors who are registered for CIS and verified with HMRC. 30% is the higher rate for subcontractors who are not registered or cannot be verified. 0% applies to subcontractors HMRC has granted gross payment status — no deduction is made at all.