How does CIS work for self-employed individuals?
Answered 17 March 2026
How CIS Works for Self-Employed Individuals
What the law says
The Construction Industry Scheme (CIS) is established under Finance Act 2004, Chapter 3. The scheme provides for certain payments under construction contracts to be made under deduction of sums on account of tax. A "construction contract" must not be a contract of employment — it is only contracts where the worker is self-employed that fall within CIS.
Under FA 2004 s.63, HMRC must register an individual subcontractor either:
- For gross payment (no deduction), if the requirements of s.64 are met; or
- For payment under deduction (standard rate), in any other case.
HMRC Guidance / Practice
1. Scope and Employment Status
CIS is "solely concerned with how payments to subcontractors for construction work must be handled by contractors." Only persons engaged under contracts which do not amount to contracts of employment fall within CIS. Critically, being registered as a CIS subcontractor is not proof of self-employed status — employment status must be determined separately under general law. It is the contractor's responsibility to establish whether the person is employed or self-employed for each particular job or contract.
2. Registration
Individuals can register for CIS by:
- Accessing the HMRC website
- Telephoning the helpline for the Newly Self Employed or the CIS Contact Centre
- Completing a paper form CIS301, CIS302, or CIS304
All CIS forms require a valid National Insurance Number (NINO) or UTR, and the NINO must be verified as part of the authentication process.
3. Verification and Deduction Rates
Before making a first payment, the contractor must contact HMRC to verify the subcontractor's tax status. There are three possible outcomes:
- Gross payment — no deduction is made
- Net of standard rate deduction — a standard rate deduction is made
- Higher rate deduction — applied where the subcontractor cannot be verified or is not registered
Once registered, HMRC issues a confirmation letter (CIS313) notifying the subcontractor of their payment status.
4. Tax Treatment and Self Assessment
CIS deductions made from a self-employed subcontractor's payments are treated as Income Tax paid in respect of relevant profits. Where amounts deducted exceed the Income Tax liability in a Self Assessment return, the excess is first used to discharge Class 4 National Insurance contributions due, and any remaining excess is repayable.
When a subcontractor claims credit for CIS deductions on their Self Assessment return, an automated comparison is made between the deductions shown on the return and the payments recorded by contractors on their monthly CIS returns.
5. Administration
For individuals and partners, CIS matters are centralised at CIS Personal Tax (PT) Operations in Newcastle. If a taxpayer commences self-employment in the construction industry, responsibility for CIS matters lies with that office regardless of whether construction is the main or subsidiary source of income.
In summary: A self-employed individual working in construction must register with HMRC under CIS. Contractors will then deduct tax at either the standard or higher rate from payments (unless the subcontractor qualifies for gross payment status). Those deductions are credited against the subcontractor's Income Tax and Class 4 NIC liability when they file their Self Assessment return, with any excess being repaid.
Citation sources
record and by confirming their current payment status. Subcontractor not registered for CIS Where the subcontractor has not registered for CIS it will be necessary for them to do so. After the subcontractor has undergone an identity check, completed the appropriate application form and registered for CIS, their record will be updated to show a revised payment status of either ‘Gross’ (No deductions) or ‘Net of Deduction’. As part of the registration process HMRC will issue a confirmation letter
Part 3 Income tax, corporation tax and capital gains tax Chapter 3 Construction industry scheme Introduction Introduction 57 1 This Chapter provides for certain payments (see section 60) under construction contracts to be made under deduction of sums on account of tax (see sections 61 and 62). 2 In this Chapter “ construction contract ” means a contract relating to construction operations (see section 74) which is not a contract of employment but where— a one party to the contract is a sub-contr
The operation and existence of the Construction Industry Scheme (CIS) affects the computation of income chargeable to tax on subcontractors. It is a scheme solely concerned with how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses. Only persons engaged under contracts which do not amount to contracts of employment fall within the CIS. Being registered as a CIS subcontractor is not proof of self-employed stat
Following the introduction of SA, responsibility for construction industry matters passed to the office dealing with the main source, even though this may be PAYE. However, the work for individuals and partners has now been centralised at the CIS Personal Tax (PT) Operations in Newcastle. It follows that if a taxpayer commences self employment within the construction industry, regardless of whether this is the main or a subsidiary source of income, responsibility for construction industry matter
Before making a first payment to a subcontractor, the contractor must contact HMRC to confirm that the subcontractor has registered and to obtain details of their tax payment status. This process is known as verification. See CISR51010 for further guidance. Where HMRC are unable to verify the subcontractor from the details supplied, the contractor will be instructed to make a deduction at the higher rate from all payments to the subcontractor. Assuming that this subcontractor is unknown to HMRC,
When a subcontractor claims credit for CIS deductions on their self-assessment return, as part of the capture process of that return an automated comparison is made between the deductions shown on the self-assessment return, and the payments made to the subcontractor by all of their contractors during the year as shown by CIS. The results of this comparison will show in the ‘Payment details’ window in the CIS function ‘View Customer’ (See CISR90210). A detailed explanation of the way this compar
Subcontractors are those businesses that carry out building work, known as 'construction operations' for contractors within the United Kingdom. You should refer to CISR13000 onwards for more details of subcontractors and their role in the Scheme. Just because someone is registered on CIS, it does not follow that they are always self-employed. It is the contractor's responsibility to establish whether, in relation to a particular job or contract, the person is employed or self-employed. If they a
Individuals can register for CIS by Accessing HMRC website Telephoning the helpline for the Newly Self Employed Telephoning CIS Contact Centre Completing a paper version of CIS301, CIS302 or CIS304 and forwarding to CAAT. These forms may be accompanied by CWF1 The CIS Team within the CAAT CWF1 Team receive CIS applications in a number of ways. They can be On their own Attached to a CWF1 Received from the Contact Centre CAAT CWF1 CIS team will only deal with sole trader cases from the Contact Cen