Taxes for Construction Industry Workers in the UK
If you go to work in the construction industry in the UK, you should be aware of the Construction Industry Scheme (CIS), which was developed to minimize tax evasion within the construction industry.
The scheme applies to all contractors and subcontractors working in the mainstream construction industry in the UK. Contractors and subcontractors should register with the scheme before any construction starts.
The scheme applies to:
- Self employed
- Owner of limited company
- A partner or in a partnership or trust
You should register as a contractor if:
- You pay subcontractors for construction work
- Your business doesn’t do construction work but you spend an average of more than £1 million a year on construction in any 3-year period
The average CIS rebate is £1453
You should register as a subcontractor if:
- You do construction work for a contractor.
In general the scheme covers work such as:
• Groundwork-laying foundations and providing access works
• General building (building, brick laying, roofing)
• Alterations, repairs, and demolition
• Installation of heating systems, lighting, power, water, and ventilation
• Cleaning buildings after construction work
The average CIS rebate is £1453
How does it work?
Under the Construction Industry Scheme, a contractor must deduct 20% from your payments and submit it to HM Revenue and Customs (HMRC). These deductions will count towards your tax and National Insurance bill. If you don’t register for the scheme however, contractors must deduct 30% from your payments.
When registered your contractor should provide you with a CIS voucher or certificate confirming any deductions and submit CIS returns to HMRC at the end of each month.
No deductions are made on any payment if the subcontractor is eligible to receive gross payments.
Gross Payment status
You may qualify to receive gross payment status only if all 3 apply:
- Construction work is carried out in the UK and run largely though a UK bank account
- Annual turnover is £30,000 or more
- There are no outstanding tax returns or payments due
At the end of the financial year on April 5 and before the deadline of October, self-employed subcontractors need to submit a tax return. HMRC will calculate what tax or National Insurance is due and offset any CIS deductions.
The average CIS rebate is £1453
Expenses and deductions
As a CIS registered subcontractor, there are a number of expenses you can claim. The expenses must be for the sole purpose of business and not for personal use. So for example if your van’s mileage for work is 60% of the total mileage, you should only claim 60% of the total mileage.
Expenses you can claim include:
• Materials, tools and equipment and the cost of maintaining these
• Motor expenses/mileage allowance including tolls, parking, insurance, petrol, MOT, repairs, etc.
• Internet phone and stationary
• Protective clothing (boots, hard hat etc.)
• Administration expenses (book keeping)
• Home Office Expenses
• Accountancy fees
• Advertising
Remember the main rule is that any expenses must be ONLY connected to your business and not for personal use.
Note: Remember to keep any receipts for expenses!
IMPORTANT: You should retain any records of tax deductions to claim a refund of CIS tax payment
The average CIS rebate is £1453
Filing your tax return
If you’re a self-employed construction worker in the UK, you’ll need to file a self-employed tax return before the deadline in October. HMRC has tough fines and penalties within the CIS scheme so you need to make sure you retain all records and make tax returns and any payments required on time.
Taxback.com can help both PAYE and self-employed workers in the construction industry claim a tax rebate. In fact the average refunds we get for CIS workers is £1453!
Check if you are due a cis tax rebate now!
Some important things to note:
• You should retain all receipts and records of any expenses
• You should retain evidence of any CIS deductions
• You should file after the end of the tax year on April 5 and before the deadline in October, otherwise you may be subject to a late filing penalty
• You can use Taxback.com's tax rebate calculator to find out what you could be owed!
• Taxback.com can help you file your tax return on time and ensure you are fully compliant
Using Taxback.com
Taxback.com has been helping people file their tax returns and get tax rebates since 1996 and our ISO certified tax team are on hand to help you with any questions you have 24/7. If you apply with Taxback.com you'll also get access to online updates, live chat help and our highly specialised tax accountants.
It’s free to find out what you’re owed and if you’re not ready to apply that’s okay, you can simply find out using our online tax calculator or by emailing info@taxback.com. Our ISO certified tax team can also help you file your tax return and claim any expenses you're owed in a simple hassle-free process.
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