CIS Tax Refunds: A Practical Guide for Subcontractors

CIS Tax Refunds for Subcontractors: What You Are Owed and How to Claim It

If you are a CIS subcontractor, there is a good chance HMRC is holding some of your money. Contractors take 20% off every labour payment you receive, and for most sole traders that is more tax than they actually owe once expenses and the personal allowance are counted.

This guide shows how the refund works, what you could get back with a worked example, why some refunds get held up, and the deadlines for claiming older years. If you would rather hand it over, our CIS accountants in Surrey and Hampshire handle refund claims for trades across Godalming, Guildford, Farnborough and Petersfield.

Why CIS subcontractors are usually owed a refund

The 20% deduction is a flat rate taken from your gross labour payments. It ignores three things that reduce your real tax bill:

• Your personal allowance. The first £12,570 of profit is tax-free, but deductions are taken from your first pound of income.
• Your business expenses. Tools, van costs, PPE and insurance reduce your taxable profit. The contractor has no idea what you spend.
• The real mix of tax you owe. Your profit is taxed at 20% basic rate plus 6% Class 4 National Insurance. After allowances, that usually works out lower than 20% of your gross pay.

CIS deductions are simply advance payments towards your Income Tax and National Insurance. Your Self Assessment return works out what you really owed, and HMRC repays the difference.

How much CIS refund could you get? A worked example

Here is the same subcontractor in the 2025-26 tax year, first with expenses claimed and then without.

The difference is £1,820. That is what £7,000 of unrecorded expenses would cost this subcontractor in a single year. Good records are worth real money.

Figures use 2025-26 rates for a sole trader with no other income. Your own refund depends on your figures.

Deadlines: how far back can you claim a CIS refund?

You can claim a refund for up to four years after the end of the tax year. Miss the cut-off and the money stays with HMRC for good.

If you worked under CIS in 2022-23 and never filed a return, that refund disappears after 5 April 2027. Late returns can still attract late filing penalties, so it is worth getting advice before sending one in.

How to claim a CIS tax refund as a sole trader

1. Register for Self Assessment if you have not already, so you have a Unique Taxpayer Reference (UTR).
2. Collect your payment and deduction statements. Every contractor must give you one each month they pay you. Ask for missing ones straight away.
3. Total your allowable expenses for the tax year, with receipts.
4. Complete your Self Assessment return. Enter your total pay before deductions as income and your total CIS deductions in the CIS box.
5. Submit online. You can file any time after 5 April. The earlier you file, the sooner you are repaid.

Our Self Assessment tax return service covers all of this, including chasing contractors for missing statements.

Expenses CIS subcontractors can claim

1. Tools and equipment

2. Van or vehicle costs, or mileage at 45p a mile for the first 10,000 business miles and 25p after

3. PPE and protective workwear (not everyday clothing)

4. Public liability and tool insurance

5. Materials you buy for jobs

6. Phone, stationery and a share of home office costs

7. Training and trade subscriptions

8. Accountancy fees

Travel from home to a temporary site usually counts. Travel to a site you attend long term may not, so check before claiming. Keeping receipts in one place through the year makes this easy, and our bookkeeping for tradespeople can take it off your hands.

Why you might owe tax instead of getting a refund

A refund is common but not guaranteed. You may owe money if:

• You were deducted at 30% because you were not registered. You will usually get more back, but it is worth registering to stop overpaying in future.
• Your profit is above £50,270. Profit above that line is taxed at 40%, so 20% deductions may not cover it.
• You have other income. Rent, a second job or savings interest all add tax that CIS deductions were never meant to cover.
• Payments on account apply. If you ended up owing more than £1,000 in a year, HMRC can ask for advance payments towards next year. Read how payments on account work before you budget for a refund.

Why HMRC delays some CIS refunds

Most refunds go through without trouble. When they stall, it is usually for one of these reasons:

• Your figures do not match the contractor’s. Every contractor files a monthly CIS return telling HMRC what they deducted from you. If your total differs, HMRC will usually check before paying.
• Missing statements. If a contractor never gave you a statement, or has stopped trading, HMRC may need other proof such as bank records and invoices.
• Wrong UTR or name. A contractor verifying you under the wrong details means your deductions do not link to your record.
• Busy periods. Returns filed in January wait in the biggest queue of the year. Filing in the autumn usually avoids it.

Check your statements against your bank payments before filing. Sorting a mismatch before HMRC spots it is far quicker than after.

CIS refund companies: what to check before you sign

Some firms take a large percentage of your refund as their fee. Before signing, check:

• The fee in pounds, not just the percentage, and whether VAT is added on top.
• Who receives the money. Since 15 March 2023, HMRC treats any assignment of an Income Tax repayment to a third party as void (GOV.UK policy paper). A firm can only be nominated to receive it, and you can cancel a nomination.
• Whether they file future years too. A one-off claim does not help with next year’s return or MTD.

A fixed-fee accountant often costs less than a percentage deal, and the fee is itself an allowable expense.

CIS refunds for limited companies

Limited companies do not claim through Self Assessment. Deductions taken from the company’s income are set against its own PAYE and National Insurance each month through payroll, reported on the Employer Payment Summary.

If deductions are left over at the end of the tax year, the company claims them back from HMRC using its online form. HMRC warns not to use the Corporation Tax return to offset CIS deductions, as that can lead to a penalty (GOV.UK). We handle this alongside limited company accounts.

Will Making Tax Digital change how CIS refunds work?

The refund itself works the same way, but the paperwork changes. Since April 2026, sole traders with qualifying income over £50,000 must keep digital records and send quarterly updates. For CIS workers, that threshold is measured on gross pay before deductions. The £30,000 threshold follows in April 2027.

Quarterly updates do not trigger refunds. Your refund still comes after the year-end, once your final return is submitted. Read our full guide to Making Tax Digital for CIS subcontractors, and see which MTD-compatible software suits the trades.

Get your CIS refund checked

JML Accountancy has helped Surrey and Hampshire businesses with their tax for over 25 years. We will check your statements, find the expenses you are entitled to and file your return, so the refund lands in your account, not a middleman’s.

Book a free CIS refund check or find out more about our CIS accountancy service.