Twenty percent on your labour income, every month, before expenses
That is the mechanism that produces most CIS refunds. For every labour payment your contractor makes, 20% is sent directly to HMRC before you see it. At the end of the tax year, HMRC works out what you actually owe: it starts with your gross CIS income, subtracts your allowable expenses to reach your taxable profit, then calculates income tax and Class 4 NIC on that profit, and applies your personal allowance. The CIS deductions already paid are then credited against that bill.
Because the 20% was applied to your gross labour receipts rather than to your profit after expenses and allowances, the deductions almost always exceed the actual tax and NIC due. The difference is your refund.
Understanding the size of your likely refund requires working through the arithmetic with your own figures. The two examples below show how the calculation operates in practice, using 2026/27 rates. All figures are verified against GOV.UK guidance as at 2026-06-12.
The four factors that determine your refund size
Before the worked examples, it is useful to understand which variables have the largest effect:
- Gross CIS income. The total your contractors paid you before any deduction, not the amount you received in your bank account. Higher gross income generally means more was deducted, but also more potential tax to pay, so the net direction depends on your other factors.
- Deduction rate. Whether you were on 20% (registered subcontractor) or 30% (unregistered). The 30% rate always over-deducts for virtually all income levels because the top income tax rate is 45% applied only to income above £125,140, not 30% on gross receipts. Even on the higher rate, expenses and the personal allowance typically bring the actual bill well below what was deducted.
- Allowable expenses. The more legitimate business expenses you can claim, the lower your taxable profit and the lower your actual tax and NIC bill, so the larger your refund. Common CIS subcontractor expenses include vehicle costs (at the HMRC approved mileage rate of 55p per mile for the first 10,000 business miles from 6 April 2026), tools and equipment, workwear and PPE, business phone costs, and accountancy fees.
- Other income. If you have other income in the same tax year (employment income from a second job, rental income, savings interest above your savings allowance), it affects your overall tax position and can reduce the refund or eliminate it if the combined income pushes you into a higher rate band.
Worked example 1: sole-trader plumber, £40,000 gross, 20% rate
James is a sole-trader plumber. In 2026/27 his gross CIS labour income is £40,000. He was registered throughout the year so the standard 20% rate applied. He drove 8,000 business miles in his van, bought £600 of tools during the year, spent £300 on workwear and PPE, and paid £800 in accountancy fees. He has no other income.
Step 1: Gross income and CIS deducted
| Item | Amount |
|---|---|
| Gross CIS labour income | £40,000 |
| CIS deducted at source (20% x £40,000) | £8,000 |
| Net received in bank during year | £32,000 |
Step 2: Allowable expenses
| Expense | Calculation | Amount |
|---|---|---|
| Van mileage (HMRC approved rate) | 8,000 miles x 55p | £4,400 |
| Tools and equipment | Actual cost | £600 |
| Workwear and PPE | Actual cost | £300 |
| Accountancy fees | Actual cost | £800 |
| Total allowable expenses | £6,100 |
Step 3: Taxable profit
| Item | Amount |
|---|---|
| Gross income | £40,000 |
| Less allowable expenses | (£6,100) |
| Net profit (taxable income) | £33,900 |
Step 4: Income tax calculation (2026/27)
| Band | Calculation | Tax |
|---|---|---|
| Personal allowance (£0 to £12,570) | £12,570 at 0% | £0 |
| Basic rate (£12,571 to £33,900) | £21,330 at 20% | £4,266 |
| Total income tax | £4,266 |
Step 5: Class 4 National Insurance (2026/27)
| Band | Calculation | NIC |
|---|---|---|
| Below lower profits limit (£0 to £12,570) | Nil | £0 |
| Main rate (£12,571 to £33,900) | £21,330 at 6% | £1,279.80 |
| Total Class 4 NIC | £1,280 |
Note: Class 2 NIC is £0 for 2026/27 for profits above the £7,105 small profits threshold (treated as paid, not collected separately).
Step 6: Total tax and NIC bill vs CIS deducted
| Item | Amount |
|---|---|
| Income tax | £4,266 |
| Class 4 NIC | £1,280 |
| Total tax and NIC liability | £5,546 |
| CIS deducted during the year | £8,000 |
| Refund due (overpayment) | £2,454 |
James's refund is approximately £2,454. He paid £8,000 in CIS deductions during the year but his actual combined income tax and NIC bill came to £5,546, leaving an overpayment of £2,454 that HMRC will return. This is within the typical £2,000 to £3,000 market range. If James had claimed more mileage (say 12,000 miles) or had larger tool costs, the refund would be higher.
Worked example 2: unregistered groundworker, £30,000 gross, 30% rate, with large materials exclusion
Ahmed is a groundworker who was not registered for CIS at the start of the year. He registered after three months, but one contractor continued using the 30% rate for the full year by mistake (and a second correctly switched to 20% after his registration came through). He also excludes significant materials costs from his invoices, but his contractors applied CIS deductions to the full invoice amount, not just the labour element, on several occasions.
For this example, to isolate the 30% rate effect cleanly, we will treat his full gross labour income of £30,000 as having been deducted at 30%, with allowable expenses of £5,000 and no other income.
Step 1: Gross income and CIS deducted
| Item | Amount |
|---|---|
| Gross CIS labour income | £30,000 |
| CIS deducted at source (30% x £30,000) | £9,000 |
| Net received in bank during year | £21,000 |
Step 2: Allowable expenses
| Expense | Amount |
|---|---|
| Van mileage (6,000 miles x 55p) | £3,300 |
| Tools, boots, PPE, workwear | £1,000 |
| Phone and accountancy | £700 |
| Total allowable expenses | £5,000 |
Step 3: Taxable profit
| Item | Amount |
|---|---|
| Gross income | £30,000 |
| Less allowable expenses | (£5,000) |
| Taxable profit | £25,000 |
Step 4: Income tax (2026/27)
| Band | Calculation | Tax |
|---|---|---|
| Personal allowance (£0 to £12,570) | £12,570 at 0% | £0 |
| Basic rate (£12,571 to £25,000) | £12,430 at 20% | £2,486 |
| Total income tax | £2,486 |
Step 5: Class 4 NIC (2026/27)
| Band | Calculation | NIC |
|---|---|---|
| Below lower profits limit (£0 to £12,570) | Nil | £0 |
| Main rate (£12,571 to £25,000) | £12,430 at 6% | £745.80 |
| Total Class 4 NIC | £746 |
Step 6: Total bill vs CIS deducted
| Item | Amount |
|---|---|
| Income tax | £2,486 |
| Class 4 NIC | £746 |
| Total tax and NIC liability | £3,232 |
| CIS deducted during the year | £9,000 |
| Refund due (overpayment) | £5,768 |
Ahmed's refund is approximately £5,768. The 30% rate creates a much larger over-deduction than the 20% rate. His actual combined tax and NIC bill is £3,232 on a taxable profit of £25,000, but £9,000 was deducted from him during the year. The gap is £5,768.
This illustrates two important points. First, the 30% unregistered rate is always an over-deduction for virtually all income levels commonly seen in CIS. Second, if Ahmed's contractors also incorrectly applied CIS to his materials (not shown here for simplicity), the deductions suffered would be even higher and the refund even larger, because his Self Assessment return is based on his actual labour income and actual expenses, not on what the contractor chose to deduct.
What drives the spread: why individual refunds vary so much
The market average figure of £2,000 to £3,000 per year (reported by industry sources including Dearne Accountancy and RIFT Refunds and used here as an illustrative benchmark, not a guarantee) covers an enormous range of individual outcomes. The worked examples above show why:
- A subcontractor on £20,000 gross with modest expenses and the 20% rate might get back £500 to £800.
- A subcontractor on £45,000 gross with significant mileage, tool costs, and a proportion of the year at the 30% rate might get back £5,000 or more.
- A subcontractor with other income (a second job, for example) might see no refund at all if the combined income pushes the actual tax bill above the CIS deductions.
The only way to know your own refund figure with any precision is to go through the full Self Assessment calculation with your actual numbers. The CIS refund estimator calculator at our CIS refund estimator tool gives you a working figure quickly. For back years, you can also use our CIS back years calculator to estimate the cumulative position across up to four prior tax years.
Claiming for back years
If you have not filed Self Assessment for previous years, or filed but missed expenses or incorrectly reported the CIS figures, you can still claim for the last four tax years. In 2026/27 the open years are 2022/23, 2023/24, 2024/25, and 2025/26. Each year needs a separate return and the CIS deduction statements from each contractor who paid you in that year.
The cumulative position across four years can be substantial. A subcontractor with a £2,500 average annual refund over four unclaimed years has £10,000 waiting to be recovered. Claims more than four years old are out of time and HMRC will not process them.
For the full process on back-year claims, see our guide to CIS back years refund claims.
Limited company subcontractors: a different mechanism
The sole trader route described above involves waiting until after the end of the tax year to file Self Assessment and receive the refund. A limited company subcontractor has a faster option.
A company that suffers CIS deductions can offset them in real time each month against its PAYE and employer NIC liability using the Employer Payment Summary. In a month where the company has £2,000 of PAYE due but has suffered £1,500 of CIS deductions, it pays HMRC only £500 and records the offset on the EPS. If the CIS deductions exceed the PAYE liability in a given month, HMRC reduces the payment to nil and the excess carries forward or can be claimed as a direct repayment.
The EPS mechanism means the company does not wait up to 18 months for its money. The trade-off is that the company must run a payroll and the EPS submission must be timely and accurate. For a full walkthrough of the EPS process and company-specific rules, see our guide to CIS and Self Assessment and our guide to how to claim your CIS tax refund.
Allowable expenses: the biggest lever most subcontractors underuse
The two worked examples above both include vehicle mileage, tools, workwear, and accountancy fees. These are the most common allowable expenses for CIS subcontractors. But many subcontractors claim less than they are entitled to, particularly on mileage.
From 6 April 2026, the HMRC approved mileage rate for cars and vans is 55p per mile for the first 10,000 business miles (up from 45p). A subcontractor driving 12,000 business miles in 2026/27 can claim:
- First 10,000 miles: 10,000 x 55p = £5,500
- Next 2,000 miles: 2,000 x 25p = £500
- Total mileage deduction: £6,000
At the 20% income tax rate, that £6,000 deduction saves £1,200 in tax. At Class 4 NIC of 6%, it saves a further £360. The total tax saving from the mileage claim alone is £1,560. A subcontractor without a mileage log who does not claim this is leaving £1,560 on the table.
For a full breakdown of what is and is not claimable, see our guide to allowable expenses for CIS subcontractors.
The market average figure: use it as a benchmark, not a promise
The £2,000 to £3,000 average figure is drawn from industry sources and used in this guide as an illustrative benchmark only. It is a marketing-sourced average across a very wide range of individual circumstances. It is not a guarantee, a promise, or an estimate for any individual. Your actual refund depends entirely on your own income, deduction rate, expenses, and other income in the tax year. The worked examples above show that the range of individual outcomes runs from near-zero to well over £5,000 in a single year.
If you want an estimate specific to your situation, the CIS refund estimator asks for your key inputs and produces a working figure in a few minutes.