30 June 2026 · Tax & Finance

What is CIS and How Does it Affect Your Invoices as a UK Contractor?

CIS is one of those things every UK contractor has heard of but half don't fully understand. Your mate mentions it on site, your accountant mentions it once a year, and you're left wondering whether it affects the invoice you're about to send on Friday afternoon. Here's what it actually means for your day-to-day invoicing — in plain English, no jargon.

What is the Construction Industry Scheme?

The Construction Industry Scheme (CIS) is an HMRC scheme that applies specifically to the construction industry. Its main purpose is to tackle tax evasion in construction by making sure tax gets collected at source — meaning the person paying for the work deducts tax before they pay you, rather than leaving it all for you to sort out at the end of the year.

Here's how it works in practice. If you're a subcontractor working for a CIS-registered contractor, they deduct tax from your payments before sending you the money. If you're registered with HMRC under CIS, the deduction is 20%. If you're not registered, it jumps to 30%. That deducted tax isn't gone forever — it's credited against your annual tax bill when you do your Self Assessment. But it does mean the amount hitting your bank account is less than the invoice total.

CIS only applies to labour costs, not materials. That's an important distinction we'll come back to, because it affects how you structure your invoices.

Who Does CIS Apply To?

CIS involves two roles. A contractor is a business that pays subcontractors to do construction work — think a main builder hiring a plumber, or a property developer bringing in an electrician. A subcontractor is the self-employed person or company doing the actual work.

Many tradespeople are both. You might subcontract to a main contractor on one job, and hire a labourer or specialist on another. If your business spends over £3 million a year on construction, you must register as a contractor with HMRC. As a subcontractor, you should register with CIS to get the lower 20% deduction rate instead of 30%.

CIS covers most construction work — building, alterations, repairs, demolition, and site preparation. It doesn't cover things like architecture, surveying, or carpet fitting, but if you're a builder, plumber, electrician, plasterer, or roofer, it almost certainly applies to you.

What Goes on Your Invoice Under CIS?

This is the practical bit — what you actually need on your invoice when CIS is involved:

• Your UTR number — your 10-digit Unique Taxpayer Reference from HMRC
• Your full name or business name — as registered with HMRC
• Your business address — legally required on all UK invoices
• Description of work done — clear and specific
• Labour costs separated from materials — CIS deductions only apply to labour, so these must be shown separately
• The CIS deduction amount shown separately — so both you and the contractor can see exactly what was deducted
• What the client actually pays after deduction — the net amount due

Getting this wrong causes payment delays. Contractors won't pay an invoice that doesn't split labour and materials correctly, or that's missing your UTR. Make sure every invoice is clear before you send it.

What is a UTR Number?

Your UTR (Unique Taxpayer Reference) is a 10-digit number issued by HMRC when you register for Self Assessment. Every self-employed person in the UK needs one, whether or not CIS applies to your work. It must appear on all your invoices — it's how HMRC links your invoices to your tax records.

If you don't have a UTR yet, you need to register for Self Assessment at gov.uk. HMRC will send your UTR by post, usually within a few weeks. Keep it somewhere safe — you'll need it for every invoice, your tax return, and registering for CIS.

Don't confuse your UTR with your National Insurance number. They're different. Your UTR is specifically for tax and appears on invoices and correspondence with HMRC.

Does BuilderPay Handle CIS?

BuilderPay includes the essentials UK contractors need on every invoice. Your UTR number and business address are saved in your profile and appear automatically on every PDF you generate. Bank details, VAT settings, job addresses, and work dates are all built in.

Labour and materials split for CIS invoices is coming soon — we're building it because we know how important it is for subcontractors working with main contractors. In the meantime, you can add line items manually to separate labour from materials on your invoices.

At the end of each month, you can export a clean summary of all your jobs and invoices for your accountant. That saves a lot of back-and-forth when CIS deductions need reconciling against your Self Assessment.

The Bottom Line

CIS isn't as scary as it sounds once you know the basics. Register as a subcontractor to get the 20% rate. Put your UTR on every invoice. Separate labour from materials. Show the deduction clearly. Keep records, and let your accountant handle the annual reconciliation.

BuilderPay takes care of the invoice side so you can focus on the work. Start your free 14-day trial and send your first compliant invoice in minutes — no credit card required.