CIS deductions run at 20% on your labour income during the year. But your real tax bill is usually lower than the total deductions once personal allowance, business expenses, and quieter periods are taken into account. The result is a refund. Here is how to claim it.
Why do CIS subcontractors overpay tax?
The 20% CIS deduction rate is taken from every payment. It does not adjust for your personal allowance, allowable expenses, gaps in work, or lower earning periods. Your real tax liability is worked out once, at year end, through self-assessment. The difference between what was deducted and what you owe is the refund.
A basic rate taxpayer with a personal allowance of £12,570 and £40,000 in net earnings owes income tax on £27,430. At 20%, that comes to £5,486. But if 20% CIS was deducted all year on £40,000 of labour income, total deductions were £8,000. The overpayment is £2,514.
Add business expenses such as tools, travel, protective gear, and materials, and the taxable profit drops further. The refund grows.
Most CIS subcontractors who work through the year and claim real expenses get a meaningful refund. The exact amount depends on earnings, expenses, and personal tax position.
How does self-assessment generate a CIS refund?
You file your self-assessment return after 5 April each year. The return calculates your final income tax and NIC liability based on net profit, which is income minus expenses. CIS deductions you suffered are entered separately and credited against that liability. If deductions are higher than the liability, HMRC issues a refund.
The process:
- Add up all CIS payment and deduction statements for the tax year, using the deduction amounts shown.
- Log in to your Government Gateway account and file your self-assessment return.
- Enter gross income from construction work, claim allowable expenses, and enter the total CIS deductions suffered.
- The system calculates your net liability. If deductions are higher, the refund amount shows on the return.
- Provide your bank account details for the refund payment.
See CIS and self-assessment for the full filing process.
How long does a CIS refund take?
For online self-assessment returns, HMRC usually processes refunds within two to four weeks. Online returns filed early in the filing window, May to October, are often faster. Returns filed close to the 31 January deadline may take longer.
HMRC has to receive and process the return before it can issue a refund. Once processed, the refund goes straight to the bank account you provided. There is no separate application. The return itself triggers the calculation.
HMRC may offset the refund against any outstanding tax debts before paying the balance. Check your Government Gateway account for any liabilities first.
Can you claim a refund for previous years?
Yes. You can file late returns and claim refunds for up to four tax years. For example, in 2026-27, you can claim back to 2022-23. After four years, the right to claim a refund expires.
Filing a late return can also mean late filing penalties, which start at £100 for returns that are up to three months late and rise after that. If the refund is larger than the penalty, it is still worth filing.
Always file. Even if you think you owe nothing, filing stops penalties from building up.
How do limited companies claim CIS refunds?
Limited companies reclaim CIS differently from sole traders. A limited company does not file self-assessment. It files a Corporation Tax return (CT600). CIS deductions suffered are offset against the corporation tax liability on the CT600.
If CIS deductions are higher than the corporation tax bill, the company can either:
- Offset the excess against PAYE and NIC owed as an employer, if the company employs staff
- Apply to HMRC for a direct cash refund
The cash refund route needs a formal repayment claim with the CT600. HMRC processes these repayments, although limited company CIS refunds can take longer than sole trader refunds.
Limited companies should keep full records of CIS deductions suffered, meaning the payment and deduction statements from contractors, and make sure they are entered correctly on the CT600.
Can a tax agent claim on your behalf?
Yes. You can authorise a tax agent, such as an accountant, to file your self-assessment and claim refunds for you. HMRC pays the refund to your bank account, not to the agent’s, unless you have signed a specific assignment of refund agreement.
Be careful with unsolicited “CIS refund” services that contact workers directly and charge high percentage fees. You can file self-assessment yourself for free through HMRC’s Government Gateway. Agents are legitimate if you need help, but the service is optional.
What about working through umbrella instead?
Under a PAYE umbrella company, there is no self-assessment and no CIS refund claim. Tax is worked out correctly each pay period. If you are on the right tax code, you will not overpay much during the year, and you will not need to wait months for a refund.
That is a real benefit of umbrella PAYE for workers who find self-assessment stressful or who want tax handled automatically during the year rather than in one lump at year end.
The Construction Industry Scheme and DASA’s CIS payroll service are available if you work under CIS. DASA can also help if you want to switch to umbrella PAYE.
Contact the CIS payroll service for help with CIS deduction records and refund calculations.
Frequently Asked Questions
Why do CIS subcontractors get a tax refund?
CIS deductions are taken at a flat 20% rate during the year. At year end, self-assessment calculates your real tax liability after personal allowance and expenses. Because CIS deductions do not account for those factors, they usually exceed the final bill, which creates a refund.
How do I claim a CIS tax refund?
File your self-assessment return after 5 April. Enter gross income, allowable expenses, and total CIS deductions suffered. The return calculates your liability and the refund automatically. HMRC pays it to your bank account.
How long does a CIS refund take from HMRC?
Online self-assessment refunds usually take two to four weeks. Early returns, from May to October, are usually faster. HMRC may offset refunds against outstanding debts before payment.
Can I claim CIS refunds for previous tax years?
Yes, for up to four tax years back. In 2026-27, you can claim back to 2022-23. Late filing penalties apply for years filed after 31 January, but refunds usually outweigh penalties for regular CIS workers.
How do limited companies claim CIS refunds?
Limited companies offset CIS deductions against corporation tax on the CT600. If deductions are higher than the corporation tax bill, the excess can be offset against PAYE obligations or reclaimed as a cash refund through a formal repayment claim.
