CIS subcontractors do not get a traditional payslip. They get a payment and deduction statement instead. It comes from the contractor, not an employer. Even so, it gives you the figures you need for your self-assessment return. This guide explains each part.
What is a CIS payment and deduction statement?
A CIS payment and deduction statement is the document a CIS contractor must give every subcontractor each time they make a payment with a CIS deduction. It is a legal requirement under the Construction Industry Scheme. The contractor keeps a copy. You keep a copy.
It is not the same as an employed worker’s payslip. There is no employment relationship behind it. The contractor is confirming what you invoiced, what they deducted, and what they passed to HMRC.
If you are a GPS holder, or the deduction is nil, a statement is not always required for nil-deduction payments, but many contractors still issue one for their records.
What must the statement show?
The statement must include:
- The contractor’s name, address, and PAYE reference
- The subcontractor’s name and UTR
- The gross amount of the payment before deductions
- Any materials payment included in the gross amount
- The net amount, after materials are removed, on which the deduction was calculated
- The deduction rate applied and the deduction amount
- The net payment passed to the subcontractor
That last figure, the net payment, is what lands in your bank account. Everything above it shows how HMRC got its share.
Reading the statement line by line
Gross payment is the total of your invoice, labour and materials together. It is the agreed contract price for the work.
Materials deduction is the amount left out of the CIS calculation if your invoice includes materials costs. The contractor needs the invoice to show the split. If there are no materials, this line is zero.
Net amount subject to deduction is the gross payment minus materials. This is the figure the deduction rate is applied to.
Deduction rate is either 20% for registered subcontractors, 30% for unregistered subcontractors, or 0% for GPS. See CIS deduction rates for a full explanation of each rate.
Deduction amount is the pound figure taken off: deduction rate multiplied by the net amount. The contractor pays this to HMRC on your behalf.
Net payment to you is what you actually receive, after the deduction amount has been taken off.
Why does the materials deduction matter?
If you have real materials costs, make sure they are shown clearly on your invoice, separate from labour. If a contractor does not split the invoice correctly, CIS is deducted from the full amount, including materials. That means more is deducted than HMRC actually requires.
The contractor has little reason to fix that unless you catch it. From their side, the overcalculation is your problem. You can usually get it back at year end, but only if you have kept your receipts and invoice records.
Always raise invoices that separate labour from materials. Always check that the statement matches the materials figure on your invoice.
How do you use the statement in self-assessment?
Collect all your CIS payment and deduction statements for the tax year. Add up the deduction amounts across every statement. That total is your “CIS deductions suffered.” It goes on your self-assessment tax return and is credited against your income tax and Class 4 NIC bill.
If your deductions suffered are higher than your annual tax liability, HMRC refunds the difference. If the bill is higher, you pay the balance.
Keep the statements for at least six years. HMRC can ask about past returns, and you will need the original statements to back up the figures.
See CIS and self-assessment for how to enter CIS deductions in your return.
What if your statement has errors?
Check every statement before you file. Common mistakes include the wrong materials figure, the wrong deduction rate, or a UTR shown incorrectly. Contact the contractor right away if anything is wrong. They must issue a corrected statement.
A wrong deduction figure on the statement leads to a wrong figure in your self-assessment. HMRC cross-checks your figures against the monthly returns filed by the contractors who paid you. Any mismatch can trigger an HMRC query.
How is this different from an umbrella payslip?
An umbrella payslip is an employed worker’s pay document. It shows gross wage, employer NIC, employee NIC, income tax, pension contributions, and net pay, all as employment deductions. A CIS payment and deduction statement shows a self-employed payment with one CIS deduction. The structure, purpose, and tax treatment are completely different.
Working through an umbrella company means employment. CIS means self-employment. The documents reflect that difference.
Some construction workers find umbrella PAYE simpler: one employer, one PAYE payslip, no self-assessment. Compare both routes with the CIS payroll service.
