If you are a subcontractor working under the Construction Industry Scheme, CIS deductions are being taken from every payment you receive — but most people have no clear system for tracking what has been deducted or what they can claim back. This guide walks you through exactly what records to keep, what mistakes to avoid, and how to make sure you are not paying more tax than you owe.

Why CIS bookkeeping matters for subcontractors

The Construction Industry Scheme requires contractors to deduct tax at source from payments made to subcontractors — either at 20% if you are registered, or 30% if HMRC cannot verify your status. That money leaves your account before you ever see it. The only way to get it back, or to confirm the right amount was deducted, is to have clean, accurate records from day one.

CIS bookkeeping is not just about staying organised. It directly affects how much tax you owe at the end of the year and how much of a refund you can claim via your Self Assessment tax return. Subcontractors who do not track their CIS deductions properly often either overpay tax or miss deductions entirely — both of which cost real money.

Where most subcontractors go wrong with CIS bookkeeping

CIS deductions affect your cash flow every single month, yet a significant number of subcontractors do not track them in any structured way. The most common outcome is arriving at year-end with a shoebox of CIS statements, no record of business expenses, and no idea whether HMRC owes them money or they owe HMRC.

Not collecting CIS deduction statements

Every contractor who pays you under CIS must give you a deduction statement showing the gross payment, any materials costs, and the amount deducted. Many subcontractors never ask for these and have no record of what was taken. Without them, you cannot accurately complete your Self Assessment return or challenge an incorrect deduction.

Ignoring allowable expenses

Your taxable income under CIS is based on the labour portion of your payments, but your overall tax bill can be reduced significantly by claiming allowable expenses. Van costs, fuel, tools, workwear, and public liability insurance are all potentially deductible. A subcontractor with £50,000 in gross receipts and £12,000 in legitimate expenses has a very different tax bill from one who claims nothing.

What to do with your CIS bookkeeping, step by step

Good CIS bookkeeping does not require expensive software or a large amount of time each week. It requires a consistent habit and an understanding of what HMRC actually needs to see. Here is a straightforward process that works for most sole trader subcontractors.

1. Collect your CIS deduction statement from every contractor at the end of each month. The statement must show the gross amount invoiced, any materials deducted, and the tax withheld. File these either physically or digitally — you need to keep them for at least 3 years after the relevant tax year ends.
2. Record all business income and expenses as they happen, not at year-end. For each payment received, note the gross amount, the CIS deduction, and your net receipt. For expenses, keep receipts for anything you intend to claim — tools, fuel, van running costs, trade-specific PPE, and professional subscriptions are the most common categories for construction subcontractors.
3. At the end of the tax year, total up your CIS deductions across all contractors and compare this against your actual tax liability calculated through your Self Assessment return. If your deductions exceed your liability, HMRC will issue a refund. If you have underpaid — which can happen if you have income from other sources — you will owe the difference.

The process sounds straightforward in writing, and it genuinely can be, provided the records are kept throughout the year rather than reconstructed at the last minute. Where it tends to go wrong is when subcontractors go weeks without updating anything and then face a backlog of missing statements and unrecorded receipts.

Costs and what to expect

The real cost of CIS bookkeeping is not the accountant’s fee — it is the tax you overpay, or the penalty you receive, when it is not done correctly. An accountant who works regularly with CIS subcontractors will know what expenses are claimable in construction, how to reconcile deduction statements, and how to file your Self Assessment in a way that maximises any refund you are entitled to. At STZ Accounting, CIS bookkeeping is included as part of a fixed monthly package — the Sole Trader package starts from £150 per month plus VAT and covers bookkeeping, bank reconciliation, VAT returns where applicable, annual accounts, and your Self Assessment return. There are no hidden extras and no surprise bills.

How to get started with your CIS bookkeeping today

You do not need to wait until the end of the tax year to sort this out. If you have been operating under CIS for any length of time without a clear bookkeeping system, the most useful thing you can do right now is gather what you have and identify the gaps. From there, a short call with an accountant who works with CIS subcontractors regularly is all it takes to understand where you stand.

• Gather every CIS deduction statement you have received from contractors this tax year and check that each one shows the gross payment, materials deduction, and tax withheld. If any are missing, contact the relevant contractor and request a replacement.
• Book a free call with David at STZ Accounting to go over your current situation. You deal directly with David, there is no obligation, and you will leave the call knowing exactly what needs to be done and what it will cost.