CIS deductions are taken at 20% from your labour income throughout the year. But that is rarely the full amount you should end up paying once your personal allowance, business expenses, and quieter periods are taken into account. If too much has been deducted, you can claim it back. Here’s how it works.
Why do CIS subcontractors overpay tax?
The 20% CIS deduction rate is applied to every payment. It does not adjust for your personal allowance, allowable expenses, gaps in work, or lower-earning periods. Your actual 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 is £5,486. But if 20% CIS was deducted throughout the year on £40,000 of labour income, total deductions would be £8,000. The overpayment is £2,514.
Add business expenses — tools, travel, protective gear, materials — and the taxable profit drops further. The refund gets bigger.
Most CIS subcontractors who work steadily through the year and claim legitimate expenses get a meaningful refund. The exact amount depends on your 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 (income minus expenses). CIS deductions you suffered are entered separately and credited against the liability. If the deductions are more than the liability, HMRC issues a refund.
The process:
- Add up all CIS payment and deduction statements for the tax year — the deduction amounts shown.
- Log in to your Government Gateway account. 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 exceed it, the refund amount shows on the return.
- Provide 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–October) are often quicker. Returns submitted close to the 31 January deadline may take longer.
HMRC has to receive and process the return before it can issue a refund. Once it has been processed, the money goes straight to the bank account you provided. There is no separate application — the return itself triggers the refund calculation.
HMRC may offset the refund against any outstanding tax debts before paying the balance. Check your Government Gateway account for any outstanding liabilities.
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 also means paying late filing penalties (£100 for up to three months late, increasing after that) — but 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 exceed the corporation tax bill, the company can either:
– Offset the excess against PAYE and NIC owed as an employer (if the company employs staff), or
– Apply to HMRC for a direct cash refund
The cash refund route requires submitting 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 — the payment and deduction statements from contractors — and make sure these are entered correctly on the CT600.
Can a tax agent claim on your behalf?
Yes. You can authorise a tax agent (accountant) to file your self-assessment and claim refunds on your behalf. 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 not required.
What about working through umbrella instead?
Under a PAYE umbrella company, there is no self-assessment and no CIS refund claim. Tax is calculated through PAYE each pay period. If you are on the right tax code, you should not significantly overpay during the year — and you will not need to wait months to get a refund.
That is a real benefit of umbrella PAYE for workers who find self-assessment stressful or who want tax handled automatically throughout the year instead of in one lump at year end.
Read CIS rules for subcontractors if you are working under CIS. DASA can also advise on switching to umbrella PAYE.
