The CIS guide for UK contractors, 2026 edition.
Everything a contractor needs to run CIS properly this year: who it covers, the rates, the monthly deadlines, the penalties and what changed in April 2026.
Under CIS, contractors verify subbies with HMRC, deduct 20%, 30% or 0% from the labour part of each payment, file a monthly return by the 19th and pay deductions by the 22nd. From 6 April 2026, nil returns are back, payments to local authorities and public bodies are outside CIS, and HMRC has tougher powers over gross payment status where there's fraud.
Who CIS applies to
- Mainstream contractors: construction businesses that pay subcontractors.
- Deemed contractors: businesses outside construction spending over £3 million on construction in 12 months.
- Subcontractors: anyone paid for construction work by a contractor.
CIS covers most construction work on buildings and structures, including site prep, alterations, repairs, decorating and demolition. Some work, like architecture, surveying and carpet fitting, is outside it.
Rates
| Status | Rate on labour |
|---|---|
| Registered and verified | 20% |
| Unregistered or can't be verified | 30% |
| Gross payment status | 0% |
What you deduct from
Deduct from labour only. Before working out the deduction, take out:
- VAT
- Materials the subcontractor paid for
- Consumables
- Fuel, except fuel for travel
- Plant hire
- Manufacturing or prefabrication of materials
| Example | Amount |
|---|---|
| Labour | £2,000 |
| Materials | £500 |
| Deduction at 20% | £400 |
| Net payment | £2,100 |
Monthly deadlines
| What | When |
|---|---|
| Tax month | 6th to the 5th of the next month |
| Monthly CIS return | By the 19th |
| Pay deductions to HMRC | By the 22nd (19th if paying by post) |
| Payment and deduction statements | Within 14 days of the end of the tax month |
Late return penalties
| How late | Penalty |
|---|---|
| 1 day | £100 |
| 2 months | £200 more |
| 6 months | £300 or 5% of the deductions, whichever is higher |
| 12 months | £300 or 5%, whichever is higher |
| Deliberate cases | Up to £3,000 or 100% of the deductions |
You may want to check the current figures on gov.uk, as HMRC can change them.
What changed on 6 April 2026
- Nil returns are back. You need to file one for any month with no payments, unless you've told HMRC in advance that you'll be inactive.
- Local authorities and public bodies. Payments to them are now outside CIS.
- Gross payment status and fraud. Where a business knew or should have known about fraud in its supply chain, HMRC can remove gross payment status straight away, block reapplying for up to 5 years and charge penalties of up to 30%.
These changes are from HMRC's April 2026 CIS updates. Check gov.uk for the detail that applies to you.
A simple monthly routine
- Verify any new subbies before you pay them.
- Work out CIS on labour for each payment.
- Issue payment and deduction statements.
- File the return by the 19th, including nil months.
- Pay HMRC by the 22nd.
- Reconcile it all in your books.
Petl Pay works out CIS on every payment, pays by bank after your approval and pushes every payment and deduction to Xero. You have the return filed with an accountant, or our accountant partner does it on the managed service.
Frequently asked
When is the CIS return due?
By the 19th of each month, for the tax month ending on the 5th.
Do I need to file a nil return?
From 6 April 2026, yes, unless you've told HMRC in advance that you'll be inactive.
What's the CIS rate in 2026?
20% for registered subcontractors, 30% for unregistered ones and 0% for those with gross payment status.
Is CIS deducted from materials?
No. Only from labour.
Run your Friday pay run without the spreadsheet.
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Petl Pay never holds your funds. Payments are carried out by licensed, regulated payment partners. Petl Pay calculates and tracks CIS deductions and doesn't file returns itself; have them filed with an accountant. Tax rules change, so check the latest guidance at gov.uk.