CIS Mortgages: Getting a Mortgage on Construction Industry Scheme Income

CIS workers — subcontractors operating under HMRC's Construction Industry Scheme — represent one of the most consistently mishandled income types in mortgage applications. Many get declined not because their income is insufficient, but because the lender assessed the wrong figure.

The gross vs net CIS income distinction is central to this. Get it right and a carpenter earning £55,000 gross might borrow £220,000+. Use the net figure that some lenders default to and the same person might be assessed on £38,000, limiting borrowing to £152,000. That is the same worker, same actual earnings, £68,000 difference in what they can be offered.

This guide explains what CIS is, how lenders treat it, and how to navigate the specialist market to get an accurate assessment.

What Is the Construction Industry Scheme?

The Construction Industry Scheme is an HMRC tax framework that governs how contractors pay subcontractors in the UK construction industry. It covers a wide range of trades: bricklayers, electricians, plumbers, carpenters, scaffolders, plasterers, groundworkers, roofers, and many others.

Under CIS, contractors are required to make deductions at source from payments to subcontractors:

• Standard rate: 20% deduction from labour element of each payment
• Higher rate: 30% deduction for subcontractors not registered with HMRC's CIS scheme
• Gross payment status: 0% deduction — available to subcontractors who meet HMRC's turnover and compliance thresholds

The deductions are not tax — they are advance payments toward the subcontractor's eventual tax liability, similar in concept to PAYE but with different mechanics. At the end of the tax year, the subcontractor files a Self Assessment return, and the deductions made under CIS offset the actual tax and National Insurance owed. Many subcontractors receive a refund; some owe additional tax.

This mechanism creates the income documentation challenge that causes problems with mortgage applications.

Gross vs Net CIS Income: The Critical Distinction

When a CIS subcontractor is paid, the payment looks like this:

• Gross payment: The full agreed amount for the work (labour + materials)
• Materials element: Deducted before the 20% withholding is applied (materials costs are not subject to CIS deduction)
• Labour element: Subject to 20% withholding tax deduction
• Net payment received: What the subcontractor actually receives in their bank account

A subcontractor earning £55,000 per year in gross CIS income might actually receive £38,000–£42,000 in their bank account after 20% deductions on the labour portion of their earnings.

For mortgage purposes, the question is: which figure should lenders use?

Lenders Who Use Net CIS Income

Some lenders — particularly standard high-street banks without specialist CIS criteria — look at bank statements and assess income based on what arrives in the account. On net payments, this produces a significant underestimate of actual earnings.

A subcontractor grossing £55,000 but receiving £38,000 net will be assessed on £38,000 if the lender uses bank statement income. At a 4.5× income multiple, this gives borrowing of approximately £171,000 — not the £247,500 that the gross income would support.

Lenders Who Use Gross CIS Income

A growing number of specialist and semi-specialist lenders have developed criteria that explicitly recognise gross CIS income. They assess affordability on the gross figure before CIS deductions, accepting that the deducted tax is returned (in whole or in part) through the annual Self Assessment process.

This approach produces significantly higher assessed income and, consequently, significantly higher maximum mortgage amounts for the same worker.

The difference between lenders on this single point can be £50,000–£100,000 in maximum loan amount for a mid-range CIS worker. It is not a marginal issue.

How SA302s Fit In

SA302 is the HMRC document showing your total taxable income for a given tax year, as submitted through Self Assessment. It is one of the primary income verification documents for self-employed mortgage applications, including CIS.

For CIS subcontractors, the SA302 shows total income from self-employment — this is the gross CIS income, not the net received amount. Where lenders accept gross CIS income, the SA302 is the document that supports the higher figure.

However, there is a common complication: expenses claimed on the Self Assessment return reduce the taxable profit shown on the SA302. A subcontractor who earned £55,000 gross CIS income but claimed £12,000 of legitimate business expenses may show only £43,000 on the SA302.

Most self-employed mortgage criteria use net profit as shown on SA302, not gross turnover. For CIS workers, this matters:

• Gross turnover: £55,000
• Business expenses claimed: £12,000
• Net profit on SA302: £43,000
• Amount used for mortgage assessment: Depends on lender — some use gross CIS income directly from CIS vouchers/statements, bypassing the SA302 net profit

Lenders with genuine CIS expertise understand this distinction. Many who claim to accept CIS income still apply standard self-employed criteria (net profit from SA302), which produces a lower figure than the gross CIS approach. The broker's job is to identify which lenders genuinely use gross CIS figures, not those who merely accept CIS as a category but assess it on net SA302 profit.

Documentation Required

The documentation requirements for a CIS mortgage application are more extensive than a standard employed application:

Core Documents

CIS monthly statements / CIS vouchers: HMRC provides CIS subcontractors with a monthly statement (CIS Monthly Returns) showing gross payments made by each contractor and the deductions taken. These are the primary evidence of gross CIS income. Collating 12–24 months of statements is the most important documentation task for a CIS borrower.

SA302 (Self Assessment Tax Calculation): Required for the last 1–3 tax years depending on lender. Confirms total self-employment income as filed with HMRC.

Tax Year Overview: Downloaded from the HMRC portal alongside SA302 — confirms the tax liability for each year and that returns are filed and up to date. Lenders check that outstanding tax liabilities are not a concern.

Bank statements: 3–6 months of business and personal bank statements showing income deposits matching CIS statements.

Proof of identity and address: Standard KYC requirements.

Supporting Documents

Contracts or letters of engagement: Some lenders want evidence of current contractor relationships — a letter from the main contractor confirming the working arrangement, or copies of active sub-contracts.

HMRC CIS registration confirmation: Evidence that the subcontractor is registered with HMRC's CIS scheme (registered subcontractors pay 20% rather than the 30% unregistered rate — registration itself is evidence of legitimacy).

Accountant's reference: For self-employed applicants generally, an accountant's reference letter confirming trading status, income history, and that accounts are up to date is valued by many lenders.

Which Lenders Accept CIS Income

The lender panel for CIS-aware mortgages is predominantly specialist and semi-specialist:

Specialist lenders with explicit CIS criteria — including lenders like Kensington Mortgages, Aldermore, Halifax (with conditions), and various building societies — have underwriting frameworks that distinguish CIS income from standard self-employment. Some use gross CIS income from statements directly.

Building societies — many smaller building societies take a manual underwriting approach to non-standard income, which can work well for CIS. The underwriter reviews the case individually rather than applying a rigid algorithmic assessment.

High-street banks — most major banks do not have specialist CIS criteria. They typically apply standard self-employed criteria using SA302 net profit, which frequently underestimates CIS earnings. Going direct to a high-street bank as a CIS worker without broker guidance is the most common route to an unnecessary decline.

Lender criteria change regularly and the specific lenders with the most CIS-friendly criteria vary over time. A specialist broker with current knowledge of the market is the most efficient way to identify the right panel for your circumstances.

Common Problems with CIS Mortgage Applications

Gaps in Work

Construction work is project-based. Gaps between contracts — weeks or months with no CIS income — are common and normal in the industry. Lenders interpreting CIS statements alongside bank statements will see these gaps.

The impact depends on how the lender assesses income:

• Averaged over 12 months: A three-month gap reduces the annual average, even if the weeks worked were well-paid
• Trend-based assessment: Some lenders look at whether income is stable or growing, rather than penalising gaps
• Current contract requirement: Some lenders require evidence of a current active contract or placement — a gap immediately before application is therefore more problematic than a historical one

Building a continuous period of consistent work before applying — ideally 12–24 months without significant gaps — improves the application considerably.

Multiple Contractors

Some CIS subcontractors work for multiple contractors simultaneously or sequentially. While this is common in the industry, it adds complexity to documentation: CIS statements from multiple contractors, potentially multiple SA302 income sources, and bank statements showing irregular payment timing from different sources.

The income is real, but presenting it clearly requires organised documentation. An accountant who understands CIS can significantly help here.

High Expenses Claims

Some CIS workers claim significant business expenses — tools, vehicle costs, fuel, insurance, training — which reduce taxable profit on the SA302. Lenders who use SA302 net profit will assess a lower income as a result.

This creates a tension between tax efficiency (claim all legitimate expenses) and mortgage affordability (higher SA302 profit = higher assessed income). There is no single right answer; the calculation depends on the tax saving from the expense claim versus the reduction in mortgage capacity. An accountant can model this.

CIS vs PAYE Assessment

Some CIS workers also hold PAYE employment alongside their CIS subcontracting — for example, working through an agency on a PAYE basis while also doing direct CIS subcontracting. Combining these income sources requires care:

• The PAYE income is straightforward to evidence with payslips
• The CIS income requires the full self-employed documentation package
• The combined assessment must be consistent across both sources

Not all lenders will combine PAYE and self-employed CIS income — some will only assess one income type. Finding a lender who accepts both requires specialist knowledge of current criteria.

The Case for a Specialist Broker

The CIS mortgage market is genuinely specialist. The reasons a broker adds material value here:

1. Gross vs net: Knowing which lenders use gross CIS income (vs SA302 net profit) is not publicly documented. A broker with regular CIS clients knows this from practice.

2. Current lender appetite: Which lenders actively want CIS applications right now, vs. which accept them in theory but apply restrictive criteria in practice — this changes and a broker tracking it provides current intelligence.

3. Documentation presentation: How CIS statements and SA302 figures are presented to underwriters affects decisions. An experienced CIS broker knows what narrative to build around the numbers.

4. Hard search protection: Going direct to lenders without knowing their CIS appetite risks declined applications that leave hard credit footprints. A broker can make soft enquiries first.

Practical Steps for a CIS Mortgage Application

1. Compile 24 months of CIS monthly statements — download from your HMRC online account or contact contractors for copies if you do not have them
2. Obtain SA302 and Tax Year Overviews for the last 2–3 tax years from HMRC online
3. Ensure your Self Assessment returns are up to date and any tax owed is paid — outstanding tax liability is a significant concern for lenders
4. Collect 3–6 months of bank statements showing CIS deposits alongside the statements
5. Get an accountant's reference letter if you do not already have one — it provides a third-party confirmation of your trading history
6. Find a specialist CIS broker — ask specifically whether they have placed CIS subcontractors recently and which lenders they use for gross CIS income assessment

The Bottom Line

CIS mortgage applications fail not because the borrower lacks sufficient income, but because the income is assessed incorrectly. High-street lenders using net CIS payments or SA302 net profit frequently produce material underestimates of a CIS worker's true earnings.

The specialist lender market has responded to this with genuine CIS criteria that assess gross income from CIS statements. With the right documentation and the right broker, a CIS subcontractor with two years of consistent earnings should find the mortgage market significantly more accessible than a standard self-employed assessment would suggest.

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This is educational content, not financial advice. Your situation is unique — speak to a qualified mortgage broker before making any decisions.