Construction Industry Scheme (CIS): What You Need to Know
HMRC UPDATE | OCTOBER 2026
Construction Industry Scheme (CIS): What You Need to Know
A practical guide for UK construction businesses covering tax deductions, HMRC updates and essential compliance deadlines.
The Construction Industry Scheme (CIS) sets out how contractors deduct tax from payments to subcontractors working in the UK construction industry.
Understanding the rules can help your business avoid penalties, manage cash flow and stay compliant with HMRC.
What Is CIS?
CIS applies to many construction activities, including building, alterations, repairs and demolition. Contractors generally deduct tax from subcontractor payments and pay those deductions to HMRC on the subcontractor’s behalf.
What Are the CIS Deduction Rates?
The deduction rate depends on the subcontractor’s status:
20%
Registered subcontractors
30%
Subcontractors who are not registered or cannot be verified as required
0%
Subcontractors approved for Gross Payment Status
Deductions are generally calculated after excluding VAT and qualifying material costs in accordance with HMRC rules. These deductions count towards the subcontractor’s tax liabilities; they are not necessarily the final tax bill.
Important HMRC Changes in 2026
1. Monthly CIS Returns
From 6 April 2026, contractors must submit a monthly CIS return when required, even if no subcontractors were paid, unless they have appropriately notified HMRC of a period of inactivity.
2. Exemption for Certain Public Bodies
HMRC introduced an exemption from CIS for payments to qualifying local authorities and public bodies from 6 April 2026. Businesses should check the official guidance to determine whether the exemption applies to their payments.
Key CIS Deadlines
Contractors should remember these monthly deadlines:
19th of each month
Deadline for submitting the monthly CIS return and generally paying HMRC by post.
22nd of each month
Deadline for paying HMRC electronically.
These deadlines relate to the preceding CIS tax month. Late returns can result in penalties.
What Should Your Business Do?
Contractors should take practical steps to help ensure that their CIS obligations are managed correctly.
- Verify subcontractors before making payments.
- Apply the correct deduction rates.
- Submit returns and make payments on time.
- Maintain accurate payment records.
- Keep subcontractor deduction statements and report CIS deductions through the appropriate tax process.
Eligible deductions may be credited against tax liabilities, and a repayment may be due depending on the circumstances.
The Key Takeaway
CIS compliance is essential for construction businesses. Reviewing your registration, deductions and monthly reporting arrangements can help prevent errors and unnecessary penalties.
ASESA Solutions Ltd recommends checking the latest HMRC guidance to ensure your business meets its CIS obligations.
