CIS Contractor Mortgage: How Gross Income Assessment Works for Construction Industry Scheme Workers

The Construction Industry Scheme covers hundreds of thousands of UK subcontractors working in building, civil engineering, roofing, electrical, plumbing, and related trades. CIS workers are technically self-employed — but their income is structured in a way that sits outside both standard employed and standard self-employed mortgage assessment.

Under CIS, contractors deduct 20% (or 30% for unregistered workers) from each payment to a subcontractor and pass it to HMRC as a tax advance. The subcontractor receives the net amount. This creates the central mortgage problem: what income figure should a lender use?

Most high street lenders either refuse CIS applicants outright or use the net figure — significantly understating actual earnings and producing mortgage offers well below what the applicant can genuinely afford. Specialist lenders with CIS-specific underwriting criteria assess on gross income, producing substantially better outcomes.

All figures in this guide are illustrative. Actual mortgage offers are subject to full assessment, status, and lender underwriting criteria. Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home.

Why High Street Banks Struggle with CIS Income

Most high street lenders operate with two standard self-employed assessment methods: SA302 tax calculations averaged over two or three years, or company accounts for limited company directors. CIS income does not slot cleanly into either framework.

A CIS subcontractor operating as a sole trader does file a self-assessment tax return — but the income on that return reflects net CIS receipts after deductions, materials costs, and allowable expenses. The resulting SA302 figure is often substantially lower than gross CIS earnings. When a lender applies a standard 4× to 4.5× income multiple to this figure, the resulting maximum loan is far below what the applicant's actual CIS earnings can support.

Some lenders compound the problem by incorrectly treating CIS workers as employed subcontractors and requesting payslips that simply don't exist. Others apply blanket declines because their systems flag CIS deductions as unusual employment income. The result is that a CIS plasterer earning £45,000 gross per year — a solid professional income — might be offered a mortgage based on £36,000 net, or declined entirely while a PAYE employee on the same gross income sails through.

CIS-specialist lenders have built assessment policies specifically for this income type. They request CIS payment statements (available through the HMRC online portal) rather than SA302s, use gross CIS income as the assessed figure, and understand that the 20% deduction is a tax advance rather than a permanent reduction in earnings capacity.

Gross vs Net CIS Income: Why the Difference Matters

This is the single most important question in CIS mortgage assessment. The gross/net distinction can make a difference of tens of thousands of pounds in maximum borrowing.

Under CIS, every payment to a registered subcontractor is reduced by 20% at source. This 20% is sent by the contractor to HMRC and offset against the subcontractor's year-end tax liability. If more has been deducted than owed, the subcontractor receives a refund. The deduction is a cashflow advance on tax — not a cost of doing business like employer NIC or an umbrella margin.

Specialist lenders who understand this assess on the gross figure. A CIS worker invoicing £40,000 per year should have their mortgage assessed on £40,000 — not the £32,000 they receive after the 20% deduction. The difference at 4.5× income multiple is £36,000 in additional borrowing capacity.

Material Cost Deductions: An Added Complication

A further complexity arises for CIS subcontractors who supply materials as part of their work. Under CIS, the deduction rate applies only to the labour element of a payment — contractors should not apply the CIS deduction to materials costs.

In practice, many CIS payment statements show a total gross payment that includes both labour and materials, with the 20% deduction applied only to the labour portion. This can make gross income harder to interpret: a CIS worker who invoices £50,000 per year — of which £15,000 is materials — has a genuine labour-only income of £35,000 gross.

Specialist CIS lenders will often assess on the full gross figure shown on the payment statements, which may include materials. Others assess on the labour-only gross. This distinction matters most for CIS workers in trades with high materials spend — electrical subcontractors supplying wire and fittings, plumbers supplying pipework, or roofers supplying materials and fixing. A broker who understands each lender's specific CIS underwriting approach can ensure the application goes to the lender whose methodology best suits your income pattern.

CIS Workers Do Not Need an SA302 for a Mortgage

This is one of the most important distinctions between CIS mortgage applications and standard self-employed applications. A sole trader operating outside CIS is assessed on SA302 tax calculations — the HMRC summary of self-assessment returns that shows net profit after expenses. These are typically required for two or three years.

CIS workers do file self-assessment tax returns, but their primary income evidence for mortgage purposes is their CIS payment statements — not the SA302. The payment statements show the contractor who paid them, the gross amount, the amount deducted, and the net payment received. They directly evidence CIS earnings in a way that SA302 figures do not.

Some lenders unfamiliar with CIS will incorrectly request SA302s. A specialist broker will position the application with a lender whose CIS underwriting criteria specifically request payment statements, avoiding the confusion and delays that arise when a CIS worker is incorrectly assessed as a standard sole trader.

This is also why CIS mortgage assessment differs from the guide to sole trader mortgages: different documentation, different income calculation, different lender pool.

Documentation Required for a CIS Mortgage

A well-organised CIS mortgage application can move quickly through underwriting. The core documentation set is straightforward once you know what is needed.

Minimum CIS Track Record: What Lenders Require

Most specialist CIS lenders require a minimum of 12 months of CIS trading history before they will accept a CIS mortgage application. This is the standard requirement and reflects the need to see a consistent, established pattern of CIS income rather than an isolated period of work.

The 12-month minimum means lenders typically want to see payment statements covering at least the preceding 12 months from the date of application. For most applicants, this will span parts of two tax years. Where income has varied across the period, lenders will either use a 12-month average or the most recent 12 months depending on their policy.

Some lenders will accept a shorter track record — as little as six months — where the applicant has a strong prior employment history in the construction sector. A CIS worker who was a directly employed construction tradesperson for five years before becoming a CIS subcontractor 8 months ago may find that their employment history bridges the gap. A specialist broker will know which lenders apply this flexibility.

New-to-CIS applicants — those who have just registered under the scheme or have only a few months of payment statements — will generally need to wait until the 12-month mark before approaching specialist lenders. In the interim, a broker can help plan the optimal timing, advise on keeping payment statement records organised, and flag any lenders who may be flexible at the 9 or 10-month point.

Case Study — CIS Plumber, Gross vs Net Assessment

This case study is an illustrative example only and does not represent a guaranteed outcome. All mortgages are subject to status, valuation, and lender underwriting criteria.

Related Guides

• → Sole trader mortgage guide — SA302-based self-employed income assessment
• → Contractor mortgage UK — day rate assessment for PSC and outside IR35 contractors
• → Our self-employed mortgage service — how we work with complex income applicants