CIS mortgages are normal residential mortgages, just assessed in a way that fits how you're actually paid. As a subcontractor in the construction industry, your contractor takes 20% off every payment for labour and sends it to HMRC before the money hits your bank account. A lender who understands that can work from your gross CIS pay, instead of waiting for a tax return that shows a much smaller profit.
I've been arranging mortgages for 15 years and CIS workers are some of my favourite people to help. Bricklayers, sparks, plumbers, groundworkers, roofers, plasterers, scaffolders. Steady earners who still get turned down by a high street bank, often because the person on the other end only knows how to read a PAYE payslip.
This page is part of our self employed mortgages guide. If you work through your own company, read our page on mortgages for limited company directors. If you trade without CIS deductions, the sole trader mortgages page explains how your accounts are read, and agency or day rate workers outside construction should look at contractor mortgages.
The short version: the right lender looks at what you earn before tax, not what is left after your accountant has done their job.
The Construction Industry Scheme, or CIS, is how HMRC collects tax from subcontractors as they go. Your contractor deducts money from every payment for labour and pays it straight to HM Revenue and Customs. It's an advance on your tax and National Insurance bill, and it gets squared up when you file your self assessment at the end of the tax year.
Deductions only come off the labour part of a bill. Materials you supply aren't taxed under CIS, and that matters later, because lenders treat materials very differently from your actual earnings.
To be paid gross, HMRC needs to see that you've paid your tax and National Insurance on time, that you run the business through a bank account, and that your construction turnover, ignoring VAT and materials, is at least £30,000 a year as a sole trader. Partnerships and companies have their own thresholds. It's great for cash flow, but it changes the paperwork a lender will ask for.
This is the bit that trips people up. There are two completely different ways a lender can look at a CIS worker, and they can give wildly different answers on the same person.
Some lenders treat you a bit like an employee. They add up the gross figure on your CIS payslips or monthly deduction statements, take an average and turn it into an annual income. Depending on the lender, that could be the last 3 months, 6 months or a full year.
To give you real examples, The Nottingham Building Society's intermediary guide says it averages 3 months of CIS income and annualises it over 46 weeks. NatWest's intermediary criteria say it uses the gross figure, less expenses, from the last 12 months of CIS statements. Either way you'll need bank statements that match, because the lender will check each net payment actually landed in your account.
Other lenders treat CIS workers like any other self employed person. They ask for your SA302 tax calculations and tax year overviews from HMRC, usually for one or two years, and lend on the net profit after expenses. Principality Building Society, for example, says CIS contractors are assessed on their latest accounts or SA302. If your accountant has claimed every expense going, which is their job, that figure can be a long way below your gross.
A few lenders will annualise a day rate or hourly rate instead. Earl Shilton Building Society publishes a CIS policy that works out gross income as a daily rate times 5 days times 46 weeks, as long as you've been in the industry for at least 12 months. That can suit someone on a fixed day rate who has only just started a new contract.
Lenders get twitchy about materials. If your statements include money for materials you've bought, most will strip it out, because it isn't income. Skipton's criteria, for instance, use a 12 month gross average minus materials. Your van, tools, fuel and phone are a different story. On the payslip route most lenders won't knock them off, and on the SA302 route they've already come out of your profit.
Here's a typical case with the numbers rounded. Dan is a self employed bricklayer working regular sites around Southampton. His CIS payslips average £4,300 a month gross for labour, which is £51,600 a year. Once his van, tools, fuel and phone are taken off, his accountant shows a net profit of £34,000 on his SA302.
Same man, same job, same bank account. The only thing that changed is which lender we sent the application to. Not all lenders will use the gross figure, and the ones that do still run a full affordability check on his outgoings, so 4.5 times isn't a promise. But you can see why choosing the right lender before you apply matters so much.
Tax rebates: plenty of CIS workers get money back from HMRC each year, because the 20% taken can be more than they owe once expenses are counted. Lenders won't add a rebate to your income, as it's your own tax coming back, but it can make a handy boost to your deposit.
This is an illustration only. Your figures, outgoings and credit history will change the answer.
Put in your average monthly gross CIS pay and the net profit from your last SA302 to see the gap between the two routes. It uses a simple income multiple, so treat it as a rough guide rather than a decision.
No two CIS workers have the same year. These are the questions that come up on almost every case, and how lenders tend to look at them.
Working for one main contractor all year looks nice and steady. Lots of short jobs for different firms is normal in the trade, but some lenders limit how many you can have had. Earl Shilton, for example, looks for no more than 3 in the previous 12 months. Others don't mind at all, as long as the money keeps coming in.
A week or two between jobs, or a quiet fortnight at Christmas, is expected. A three month gap needs explaining. If you had a slow spell, tell me up front and I'll look for a lender that averages over a longer period, so one bad month doesn't drag your figure down.
Many lenders want 12 months of CIS history, some accept 6 months, and a few will go lower if you've been in the same trade for several years. Time in construction counts in your favour even if your CIS registration is newer.
Plenty of people finish an apprenticeship on PAYE and then go self employed under CIS doing the same job. Because the work hasn't really changed, some lenders will look at your history as a whole rather than starting the clock again at zero.
Price work and bonuses make monthly figures jump about. That's fine, but it pushes us towards lenders who average over 6 or 12 months. If you're on a fixed day rate, the day rate method can work better for you.
Have a word with me before you switch. Changing structure part way through a year can reset the clock with some lenders, and you could end up with no usable income history for a while.
Getting the paperwork right first time saves weeks. For most CIS mortgage applications I'll ask for these documents:
Lenders read bank statements properly. Returned payments, an overdraft you live in every month, payday loans and regular gambling transactions all get noticed. None of that is an automatic no, but I'd much rather know about it before the underwriter does.
A missed phone bill from three years ago won't usually stop you. Recent defaults, CCJs or missed payments on credit commitments narrow the choice, and you may be looking at specialist lenders, a larger deposit or a higher rate. Check your credit file before we apply, our Check My File guide shows how, and our bad credit mortgage broker page explains how we deal with credit issues. Complex or adverse cases can carry a broker fee, and I'll always tell you before you commit to anything.
Most CIS workers can apply with a 5% or 10% deposit, though 5% narrows the choice. A larger deposit of 15% or more opens up more lenders and usually a lower interest rate, because the loan to value is lower. Being CIS doesn't automatically mean a worse mortgage rate. With a lender that understands CIS pay, you're offered the same products as an employed buyer with the same deposit and credit profile.
If this is your first home, our first time buyer mortgages guide covers deposits and costs, and the stamp duty calculator shows what you'd pay. Getting a mortgage in principle early tells you what a lender will actually consider before you start booking viewings.
If your fixed rate is ending, we'll compare a product transfer with your current lender against the rest of the market. Our remortgages page explains how it works. Moving to a new lender means your income gets checked again, so the same CIS rules apply.
Your home may be repossessed if you do not keep up repayments on your mortgage.
We're whole of market, so we aren't tied to any one bank. That matters more for CIS than almost any other type of case, because the gap between lenders is so big. We check your figures against each lender's criteria before anything goes near a credit check, and we send a short covering note with your application explaining exactly how you're paid.
We're fee free on over 90% of cases. Mortgages under £100,000 carry a £299 fee, and complex or adverse cases can carry a fee of up to £995, depending on the circumstances. You'll always know before you commit, and you can read what other clients say on our reviews page.
Source for CIS rates and gross payment status: HMRC guidance for CIS subcontractors.
The benefits of a CIS mortgage are pretty simple. Lenders who work from gross income can allow you to borrow more, you don't have to wait two years for accounts, and many subcontractors can apply with 3 or 6 months of payslips instead of a pile of tax returns. If you work for registered contractors who send proper monthly statements, the documents side is usually quick.
There are catches too, and I'd rather you heard them from me. Not every lender offers CIS mortgages on gross pay, so your choice of mortgage deal can be smaller than an employed buyer's. Some lenders cap the loan to value, Earl Shilton at 75% for example. A higher borrowing figure also means higher monthly payments, so we always check the mortgage is comfortable on your net income, not just the most a lender will offer. A patchy credit history or bad credit makes the catches bigger: fewer lenders, a larger deposit and usually a higher interest rate. And if your CIS payments dry up for a while, the mortgage payments don't.
If you're ready to apply for a CIS mortgage, or you just want to know where you stand, speak to us before you talk to a bank. Send over a few recent CIS payslips and we'll calculate what you could borrow on each route before anything touches your credit file. The next steps after that are an agreement in principle, a full mortgage application with the right lender and a valuation on the property. If you'd rather talk it through, call us on 03300 432 428.
Here's how we get you from the first phone call to picking up the keys. The lender and the valuation set the pace, but most of the waiting happens before the application, so the more we sort out up front, the smoother it goes.
Ring us or fill in the form. We'll ask how you're paid, how long you've been on CIS and what you're hoping to buy. There's no obligation.
CIS payslips, bank statements and SA302s if you have them. We go through everything before a lender sees it, so there are no surprises later.
We work out your figure on the payslip route and the SA302 route, then choose the lender that gives you the best result on your real numbers.
We get you an agreement in principle so you know your budget, and so estate agents take your offer seriously.
Once your offer on a property is accepted, we submit the full application with a note explaining your CIS income and deal with any underwriter questions.
After the valuation the lender issues your mortgage offer, and your solicitor takes it through to exchange and completion. We keep you updated the whole way.
Good to know:
Lender criteria change often. The lenders named on this page are examples taken from their published intermediary criteria, there to show how differently lenders treat CIS income. They are not a recommendation, and we always check the latest criteria for your case before we apply.
Tell us how you're paid and what you'd like to buy. We'll give you an honest answer on what you could borrow and which lenders make sense, and most of our advice is fee free.
