If you work as a subcontractor in UK construction, one of the most common questions is: how much tax do I pay as a subcontractor? Closely followed by: do subcontractors pay 40% tax?
The short answer is usually no. Most subcontractors paid under the Construction Industry Scheme (CIS) have tax deducted at 20% from their labour. If you are not properly registered, the deduction is usually 30%. A 40% tax rate is not the standard CIS deduction.
That said, your final tax bill can be more or less than the amount deducted on site, depending on your total income, allowable expenses, and whether you are working as a sole trader or through a limited company.
In this guide, we will break down exactly how subcontractor tax works in practice, what the 20%, 30% and 40% figures really mean, and how to stay on top of deductions, invoices and records.
How subcontractor tax works under CIS
Most construction subcontractors in the UK are paid under the Construction Industry Scheme, better known as CIS. Under CIS, the contractor who pays you deducts tax from your payment and sends it to HMRC on your behalf.
This is not always your final tax bill. It is more like an advance payment towards your tax and National Insurance.
CIS usually applies to trades and site-based labour such as:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Bricklayers</li><li class="ml-4 list-disc list-inside">Groundworkers</li><li class="ml-4 list-disc list-inside">Carpenters</li><li class="ml-4 list-disc list-inside">Dryliners</li><li class="ml-4 list-disc list-inside">Electricians working as subcontractors</li><li class="ml-4 list-disc list-inside">Plasterers</li><li class="ml-4 list-disc list-inside">Roofers</li><li class="ml-4 list-disc list-inside">General labour-only subcontractors</li></ul>
If you are supplying labour on a housing site in Birmingham, fitting joists on a school extension in Leeds, or doing snagging works on a commercial fit-out in Manchester, CIS may apply to the payments you receive.
How much tax do subcontractors pay?
For most subcontractors, the deduction rate is one of the following:
20% tax deduction
This is the standard CIS deduction rate for subcontractors who are:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Registered with HMRC for CIS</li><li class="ml-4 list-disc list-inside">Verified by the contractor</li><li class="ml-4 list-disc list-inside">Paid for labour under the scheme</li></ul>
In practice, this means the contractor deducts 20% from the labour element of your invoice, not usually from materials.
30% tax deduction
If 30% is being deducted, it usually means:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">You have
not given the contractor your UTR, or</li><li class="ml-4 list-disc list-inside">HMRC could not match or verify your details</li></ul>
This higher rate is designed for subcontractors who are not correctly registered under CIS.
0% deduction
Some subcontractors qualify for gross payment status, which means they are paid without CIS deductions. This is not automatic and depends on meeting HMRC's criteria.
Do subcontractors pay 40% tax?
This is where many people get confused.
Subcontractors do not normally have 40% deducted under CIS. The standard CIS rates are 20% and 30%, with 0% for gross payment status.
However, some subcontractors may still pay tax at 40% overall if their total taxable income is high enough to fall into the higher-rate income tax band.
So the answer to do subcontractors pay 40% tax? is:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
Not as a standard CIS deduction</li><li class="ml-4 list-disc list-inside">
Possibly as part of their final self-assessment tax calculation, if earnings are high enough</li></ul>
For example, if a subcontractor in London earns well above the higher-rate threshold after allowable expenses are deducted, some of their profits could be taxed at 40% income tax. But that is different from saying “CIS takes 40% off your pay”. It does not.
What CIS tax is deducted from
A key point many subcontractors miss is that CIS tax is generally deducted from the labour portion of the invoice.
The contractor should not deduct CIS from:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Materials you have paid for</li><li class="ml-4 list-disc list-inside">VAT, if applicable</li><li class="ml-4 list-disc list-inside">Certain plant hire costs where no labour element is included</li></ul>
Example
A plastering subcontractor invoices:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Labour: £2,000</li><li class="ml-4 list-disc list-inside">Materials: £500</li><li class="ml-4 list-disc list-inside">Total before VAT: £2,500</li></ul>
If the subcontractor is registered under CIS at 20%, the deduction is usually:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">20% of £2,000 =
£400</li></ul>
The contractor pays:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">£2,500 minus £400 =
£2,100</li></ul>
That is why accurate invoices matter. If labour and materials are not clearly split, it can create confusion and cash flow problems.
Why your final tax bill may be different
The CIS deduction is only part of the story. At the end of the tax year, you still need to work out your actual tax position through self-assessment unless your accountant handles it for you.
Your final bill depends on:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Total income for the year</li><li class="ml-4 list-disc list-inside">Business expenses</li><li class="ml-4 list-disc list-inside">Mileage and travel where allowable</li><li class="ml-4 list-disc list-inside">Tools and equipment</li><li class="ml-4 list-disc list-inside">Insurance</li><li class="ml-4 list-disc list-inside">Training and certifications</li><li class="ml-4 list-disc list-inside">Use of home for admin</li><li class="ml-4 list-disc list-inside">Pension contributions</li><li class="ml-4 list-disc list-inside">Any other taxable income</li></ul>
If too much CIS has been deducted, you may be due a tax refund.
This is common in construction. A subcontractor working across several sites may have 20% deducted all year, but after expenses for fuel, tools, PPE, software, phones and other overheads, their actual tax liability could be lower.
Common site example: labour-only groundworker
Take a labour-only groundworker working on drainage packages across multiple residential sites.
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Monthly labour invoices: £4,000</li><li class="ml-4 list-disc list-inside">CIS deduction at 20%: £800</li><li class="ml-4 list-disc list-inside">Materials recharged separately: not deducted</li></ul>
Over a year, significant costs might include:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Diesel and travel</li><li class="ml-4 list-disc list-inside">Small tools</li><li class="ml-4 list-disc list-inside">PPE</li><li class="ml-4 list-disc list-inside">Public liability insurance</li><li class="ml-4 list-disc list-inside">Accountant fees</li><li class="ml-4 list-disc list-inside">Mobile phone and admin costs</li></ul>
Once those expenses are claimed, the final taxable profit may be lower than expected, and the subcontractor may receive a rebate.
What happens if 30% is being deducted?
If you are seeing 30% deductions, sort it out quickly. On a busy site job, that extra 10% can make a serious dent in your cash flow.
Usually, the fix is straightforward:
<ol class="my-4 space-y-2"><li class="ml-4 list-decimal list-inside">Make sure you are registered for CIS with HMRC</li><li class="ml-4 list-decimal list-inside">Provide the contractor with your correct
UTR</li><li class="ml-4 list-decimal list-inside">Check your name and business details match HMRC's records</li><li class="ml-4 list-decimal list-inside">Ask the contractor to verify you again</li></ol>
If you are moving between contractors frequently, this is especially important. One mismatch in your details can cause unnecessary deductions across several payment cycles.
How to keep track of subcontractor tax properly
Construction businesses often struggle with paperwork because site admin gets pushed aside while the actual job takes priority. But if you do not stay on top of invoices, deductions and payment statements, it becomes much harder to understand what tax you really owe.
This is where having a proper digital system helps.
With SiteSamurai, construction teams can keep site records, job information, and supporting documentation organised in one place. While your accountant will still handle tax returns or year-end advice, SiteSamurai helps subcontractors and contractors stay on top of the day-to-day admin that supports accurate payment records.
For example, if you are working across three live projects and invoicing weekly, it helps to have:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Clear records of labour and materials</li><li class="ml-4 list-disc list-inside">Job-specific notes and documentation</li><li class="ml-4 list-disc list-inside">Digital evidence for work completed</li><li class="ml-4 list-disc list-inside">Organised site paperwork that supports invoicing queries</li></ul>
On real projects, that can be the difference between getting paid quickly and chasing missing paperwork at month end.
Practical tips for subcontractors
If you want to avoid overpaying tax or running into CIS issues, focus on the basics:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
Register for CIS before starting work</li><li class="ml-4 list-disc list-inside">
Give every contractor your UTR</li><li class="ml-4 list-disc list-inside">
Check your payment and deduction statements</li><li class="ml-4 list-disc list-inside">
Separate labour and materials on invoices</li><li class="ml-4 list-disc list-inside">
Keep records of expenses throughout the year</li><li class="ml-4 list-disc list-inside">
Use digital tools like SiteSamurai to keep project admin tidy</li><li class="ml-4 list-disc list-inside">
Speak to an accountant if your income is increasing and you may enter the 40% tax band</li></ul>
Final answer: how much tax do I pay as a subcontractor?
In most cases, a UK construction subcontractor will have:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
20% deducted if registered under CIS</li><li class="ml-4 list-disc list-inside">
30% deducted if not properly registered or verified</li><li class="ml-4 list-disc list-inside">
0% deducted if approved for gross payment status</li></ul>
So, do subcontractors pay 40% tax?
Not as a normal CIS deduction. But if your profits are high enough, part of your income could be taxed at the 40% higher rate when your yearly self-assessment is calculated.
The key is understanding the difference between CIS deductions on your payments and your actual tax liability at year end.
If you want fewer admin headaches on site, better records, and clearer backup for invoices and payment queries, digital tools like SiteSamurai can help keep everything organised while you focus on the work.