CIS · Free tool · 6 min read

CIS deduction calculator

Enter the labour and materials split, pick the rate, and get the deduction and net payment. Underneath: the three mistakes that produce wrong deductions every month.

By Connor McKay, founder of Trade PA · 11 August 2026

The rules behind the numbers

CIS deductions come off the labour element only, at the rate that matches the subcontractor's verified status with HMRC: 20% for registered subcontractors, 30% where the subbie is unregistered or you have not verified them, and 0% where HMRC has granted gross payment status (full guide coming soon on this blog). Materials the subcontractor genuinely paid for are excluded from the deduction, as are VAT and certain other direct costs. You pay the deduction to HMRC, report it on your monthly CIS return by the 19th, and give the subbie a deduction statement so they can offset it against their own tax.

The three mistakes that produce wrong deductions

1. Deducting from the whole invoice

The most common one by a mile. A £1,500 invoice with £300 of materials means the deduction applies to £1,200, not £1,500. Over-deducting does not make you safe; it means the subbie is out of pocket, the paperwork is wrong, and you may owe a correction. The materials figure must be real, though: HMRC expects it to reflect the direct cost actually incurred, not a friendly guess to shrink the deduction. Keep the receipts story straight.

2. Guessing the rate instead of verifying

The 20% rate belongs to subcontractors you have verified with HMRC. Pay a new subbie at 20% because "he said he's registered" and HMRC later says otherwise, and the shortfall between 20% and 30% is your problem. Verify before the first payment, every time.

3. Treating gross status as permanent

Gross payment status gets reviewed and can be withdrawn. If a subbie loses it and you keep paying gross, you are the one who failed to deduct. Re-check status for anyone you have not paid in a while.

Where the real cost hides

Individually these are small sums. The damage compounds through the year: wrong deductions mean wrong monthly returns, wrong statements, a reconciliation nightmare at year end, and penalty exposure if HMRC decides the errors look careless rather than innocent. The fix is boring and effective: record the labour and materials split at the moment of payment, use the verified rate, and generate the statement from the same record. For the fuller picture of how tracking failures escalate into four-figure bills, our pillar guide walks through the real cases: CIS for subbies in 2026.

In Trade PA this whole chain is one motion: you set each subcontractor's verified status once, tell Eve "log Ryan's payment, £1,200 labour, £300 materials", and the deduction, the monthly figures and the statement all follow from that record. Eve applies the rate you have set; she never guesses a status for you.