Can CIS Subcontractors Claim Insurance as a Business Expense?
Yes. Insurance taken out wholly and exclusively for your trade is an allowable expense on your Self Assessment return, and because CIS tax was already taken from your labour at source, claiming it usually increases the refund you are owed.
The confusion is about where insurance goes. It is not a deduction your contractor takes off the invoice, which is why a lot of subbies never claim their tradesman insurance at all.
This guide follows the money from gross invoice through to refund, and shows exactly where the premium fits into that chain.
Keep every insurance invoice and receipt, because premiums paid wholly for your trade are an allowable expense on your Self Assessment return. Claiming the premium doesn’t change what your contractor deducts under CIS, but it does reduce your taxable profit and usually increases the refund you’re owed. Record it under the right expense category so HMRC can see it clearly.
Compare tradesman insurance quotes and keep the certificate for your tax return.
- Is insurance an allowable expense under cis?
- How are cis deductions worked out in the first place?
- Where does insurance sit between invoice and refund?
- Why do cis subcontractors usually end up owed money?
- Which policies can a subcontractor claim?
- How do you put it all on the tax return?
- Does gross payment status change any of this?
- What records does hmrc expect a subcontractor to keep?
- Frequently asked questions (FAQs)
Is insurance an allowable expense under cis?
Yes, on the same test as any other self-employed trade. The Construction Industry Scheme changes when your tax is collected, not what you are allowed to deduct.
The wholly and exclusively test still applies
HMRC allows any policy taken out wholly and exclusively for the business. The gov.uk self-employed expenses guidance names professional indemnity and gives public liability as its example of allowable business insurance.
Being paid under CIS makes no difference to that test. You are self-employed, and the premium reduces your taxable profit like fuel or materials do.
Why it never shows on a cis statement
Your contractor’s job under CIS is to strip out materials and a short list of other costs, then apply a percentage to what is left. Insurance is not on that list.
The premium is your overhead, not a cost of that specific job. It comes off later, on your own return, which is the step most subcontractors miss.
How are cis deductions worked out in the first place?
Contractors deduct 20% from registered subcontractors, 30% from unregistered ones and nothing at all where you hold gross payment status. Those rates have not moved since 6 April 2007.
The three deduction rates
The rate turns on whether HMRC can match you when the contractor verifies you, unless you hold gross payment status and nothing is deducted at all. Registering is free, and contractor duties under the scheme set out how that verification works.
| Your status | Deduction from labour | What it means in practice |
| Registered and matched | 20% | The standard position for most subcontractors |
| Unregistered or unmatched | 30% | An extra ten points held back until you register |
| Gross payment status | 0% | Paid in full, with all tax settled through your return |
Source: HMRC Construction Industry Scheme guidance. Rates unchanged since 6 April 2007.
What comes off the invoice before the rate applies
The deduction only ever touches labour. VAT, materials you paid for, consumable stores, fuel used for the work, plant hire and prefabricated materials all come out first.
That is why itemising an invoice matters. A carpenter who buries £900 of timber inside a single labour line has 20% deducted from the timber as well.
Where does insurance sit between invoice and refund?
Two stages later. Materials come off before the CIS rate is applied, then insurance and every other overhead come off your profit on the Self Assessment return.
The order things actually happen in
Keeping the two stages apart is the whole trick. One happens on the contractor’s desk, the other happens on yours in January.
| Stage | Who does it | What happens to your money |
| Gross invoice raised | You | Labour, materials and any plant hire itemised separately |
| Qualifying costs removed | The contractor | VAT, materials, consumables, fuel, plant hire and prefabricated materials come out |
| CIS rate applied | The contractor | 20%, 30% or 0% taken from the labour element only |
| Payment and statement issued | The contractor | You receive the net figure plus a statement of what was deducted |
| Business expenses claimed | You | Insurance, tools, mileage and other overheads reduce taxable profit |
| Position settled | HMRC | Tax already deducted is set against the bill, and the excess is repaid |
Why insurance belongs at the bottom of that chain
Your public liability premium covers every job you do in the year, not one contract. It cannot sensibly be netted off a single invoice, so it waits for the return.
The same applies to tool cover and the business share of your van insurance. All of it lands in the expenses figure rather than on any CIS statement.
Why do cis subcontractors usually end up owed money?
Because 20% is taken from your labour before a single expense has been counted. Tax is deducted against turnover while your bill is calculated on profit.
Tax on turnover, bill on profit
CIS deductions are payments on account of your income tax and Class 4 National Insurance. Nobody has yet allowed for your personal allowance, your tools, your mileage or your premiums.
That mismatch is why so many subbies get a repayment. A roofer with heavy tool costs and a year of 20% deductions often finds the balance falls their way.
What claiming everything does to the position
Every allowable expense you claim lowers taxable profit, which lowers the tax due, which raises the repayment against the tax already taken. Missing your insurance premium works the other way.
For most trades the premium is not trivial either. SimplyQuote’s cost guide puts typical annual tradesman spend at £200 to £1,200, and what drives that figure varies a lot by trade.
Which policies can a subcontractor claim?
The trade covers qualify in full. Personal policies do not, and anything with a private element has to be split before it goes anywhere near the return.
The covers that qualify in full
Anything bought because you trade is allowable. That is the whole test, applied policy by policy.
- Public liability, which most contractors require before you set foot on site
- Employers’ liability, from the day you take on anyone yourself
- Tools and equipment cover for the kit you cannot work without
- Professional indemnity where you design, specify or advise
- Contract works cover on jobs you are responsible for until handover
The personal policies that do not
Your own life assurance and your own health or medical cover are non-trade purposes under HMRC’s manuals. Home contents insurance is personal too, even where tools sit in the garage.
Income protection premiums are not deductible for a sole trader. The compensation for that is that any benefit the policy pays out reaches you tax free.
Splitting a van used privately too
Only the business proportion of a vehicle premium is allowable. Work it out from business mileage against total mileage and keep the log, particularly if you are a builder using the same van at weekends.
Insurance Premium Tax is charged at 12% and sits inside the premium you paid. There is no reclaim for it, so simply deduct the full amount on the schedule.
How do you put it all on the tax return?
Declare your gross income and the CIS deductions already taken, then claim your expenses against it. HMRC sets those deductions against the tax and Class 4 National Insurance you owe.
Most subcontractors end up with a refund. If the deductions do not cover the bill, there is a balance left to pay.
Reporting the deductions already taken
Your Self Assessment return has a box for CIS deductions taken by contractors. Fill it from your monthly statements rather than from memory.
Income goes in gross, before the deduction. Putting the net figure in and claiming the deduction as well is the classic way to end up with an enquiry.
Where the insurance figure goes
Insurance sits inside your total business expenses. You do not itemise each policy on the form, though your own schedule should list them.
If you pay monthly, add the twelve payments into one annual figure. Anyone still deciding what to buy should start with whether public liability is needed at all.
| Cost | Comes off the contractor’s CIS calculation? | Claimed on your own return? |
| Materials you paid for | Yes, removed before the rate applies | No, already excluded from the deduction |
| Plant hire for the job | Yes, removed before the rate applies | No, already excluded |
| Fuel used carrying out the work | Yes, removed before the rate applies | No, already excluded |
| Public liability premium | No | Yes, inside total business expenses |
| Tool cover premium | No | Yes, inside total business expenses |
| Business share of van insurance | No | Yes, apportioned by business mileage |
| Your own life or health cover | No | No, a non-trade purpose |
Does gross payment status change any of this?
It changes the cash flow, not the deduction. With gross status the contractor takes nothing, so you settle the whole bill yourself rather than chasing a refund.
What gross status actually changes
You get paid in full and put money aside for the tax bill instead of waiting for HMRC to return it. For a scaffolder with a heavy wage bill, that difference in working capital is worth having.
The trade-off is discipline. Nothing is being held back on your behalf, so a bad January is entirely your problem.
What stays exactly the same
Your expenses claim is unaffected. Insurance is deductible whether you are paid gross, at 20% or at 30%, and what public liability insurance actually covers does not change with your payment status either.
Contract requirements do not change either. Main contractors and local authorities commonly specify £5 million of public liability before they will take you on, whatever your CIS position.
What records does hmrc expect a subcontractor to keep?
Keep everything supporting the return for five years after the 31 January submission deadline for that tax year. That covers your CIS statements as well as your expense evidence.
The five-year rule
The period runs from the filing deadline, not from the date on the invoice. A return due on 31 January 2027 needs its paperwork held until 31 January 2032.
Digital copies are acceptable as long as they are legible and complete. Scans, PDFs and portal downloads all count.
Your monthly cis statements
Every contractor must give you a statement showing the gross payment, the materials deducted and the tax withheld. Chase any that go missing, because the scheme rules make that statement your evidence of tax already paid.
File them monthly rather than reconstructing the year in January. A bricklayer working across several contractors can easily be juggling five sets of statements.
What to keep for the insurance claim itself
Four items answer almost any question HMRC could ask about a premium you deducted. Keep them together, one folder per tax year.
- The policy schedule showing cover type, period and premium paid
- Proof of payment from a bank statement or direct debit confirmation
- Renewal notices confirming the cost and the dates covered
- A mileage log where you have apportioned a vehicle premium
Add your certificates of employers’ liability to the same folder if you employ anyone, because contractors ask for those on site as well as HMRC asking for the premium.
Frequently Asked Questions (FAQs)
Yes. CIS deductions are payments on account of your tax bill, and your expenses are claimed separately on your Self Assessment return.
Twenty per cent for registered subcontractors, 30% for unregistered ones and nothing where you hold gross payment status. The rates have been unchanged since 6 April 2007.
No, only from labour. VAT, materials, consumable stores, fuel used for the work, plant hire and prefabricated materials come out before the rate is applied.
No. Insurance is not one of the costs stripped out before the CIS rate is applied, so it is claimed later as an expense on your return.
Yes. Gross payment status changes when your tax is collected, not which expenses you are entitled to deduct from your profit.
Because tax was taken from your labour before any of your costs were counted. Claiming every allowable expense increases the amount repaid.
No. Premiums are not allowable for a sole trader, and in exchange any benefit the policy pays is received tax free.
Only if the van is never used privately. Otherwise apportion the premium by business mileage and keep a log supporting the percentage you claimed.
You do not send anything in with the return, but keep the schedule and proof of payment for five years after the 31 January deadline in case HMRC asks.
No. Combine your business insurance into the total expenses figure and keep the detailed breakdown in your own records.
Almost always. It is not a legal requirement for tradesmen, but main contractors, local authorities and housing providers make it a condition of getting on site.