Self-Employed Builder Tax Guide UK 2025/26

Whether you're a general builder, carpenter, bricklayer, or roofer — running your own construction business means dealing with CIS deductions, complex expense claims, and HMRC scrutiny that other trades don't face. This guide covers everything self-employed builders need to know about tax in 2025/26.

Construction Industry Scheme (CIS)

As a builder, CIS will dominate your tax life. Every payment you receive from a contractor has tax deducted at source — 20% if you're registered, 30% if you're not.

How CIS affects your income

Say you invoice a contractor £2,000 for a week's work:

Critical point: CIS deductions are NOT extra tax. They're advance payments towards your annual tax bill. Most builders actually overpay through CIS and get a refund when they file their Self Assessment. Don't leave that money sitting with HMRC — file your return on time.

Getting gross payment status

If your annual turnover exceeds £30,000 (net of materials), you can apply for gross payment status. This means contractors pay you in full with no deductions. You'll need:

• A good tax compliance record (returns filed on time, tax paid on time)
• Turnover of at least £30,000 per year
• To pass HMRC's compliance test

Gross payment status transforms your cash flow. Instead of waiting for a tax refund, you keep the full amount and pay tax once a year. Apply via your Government Gateway account.

Registering with HMRC

You need to register as self-employed within 3 months of starting work, or face a £100 penalty. You'll also want to register for CIS separately.

Step-by-step:

1. Register as self-employed at gov.uk/register-for-self-assessment
2. Register as a CIS subcontractor (call HMRC on 0300 200 3210 or do it online)
3. Apply for gross payment status if eligible
4. Register for VAT if turnover exceeds £90,000 (2025/26 threshold)

If you also hire subcontractors, you'll need to register as a CIS contractor too — that's a separate registration with different obligations.

Allowable Expenses for Builders

This is where builders can legitimately reduce their tax bill significantly. Everything you spend "wholly and exclusively" for business purposes is deductible.

Common expenses HMRC expects to see

Expense	Notes
Materials and supplies	Timber, cement, bricks, screws, nails — everything used on jobs
Tool purchases and repairs	Power tools, hand tools, saw blades, drill bits
Van costs	Fuel, insurance, repairs, MOT, road tax
Protective clothing	Steel-toe boots, hard hats, hi-vis, dust masks
Insurance	Public liability, employer's liability, professional indemnity
Skip hire and waste disposal	Including waste carrier licence fees
Scaffolding hire	Rental costs for scaffolding on jobs
Plant hire	Diggers, concrete mixers, generators, compressors
CSCS card and training	Card renewal, site safety courses, SMSTS/SSSTS
Phone and broadband	Business proportion of personal phone
Accountancy fees	If you use an accountant for your return
Advertising	Checkatrade, MyBuilder, van signwriting, business cards

Use our Freelancer Tax Tracker Spreadsheet (£9) to log these expenses and see your tax savings in real time.

Materials and Supplies

Materials are usually a builder's biggest expense — and your biggest tax deduction. But HMRC has specific rules:

Materials you buy for a specific job

Fully deductible. Keep receipts from Jewson, Travis Perkins, Screwfix, wherever you buy. If you're paid for materials separately under CIS, the gross payment (before CIS deduction) includes materials — so make sure your CIS deduction is calculated on labour only not labour plus materials.

Stock materials

If you buy materials in bulk (e.g., keeping a supply of common fittings), you can only deduct what you actually use in the tax year. Stock left over at year-end should be valued and carried forward.

Materials for your own property

Absolutely not deductible. HMRC specifically looks for builders who claim materials that actually went into their own home renovation. This is a common cause of tax investigations.

Van and Vehicle Costs

Your van is essential. You have two ways to claim:

Option 1: Actual costs

Track every cost — fuel, insurance, repairs, road tax, MOT, tyres, breakdown cover. Claim the business percentage. If you use the van 80% for work and 20% personal, you claim 80% of all costs.

Option 2: Mileage allowance (simplified expenses)

• First 10,000 business miles: 45p per mile
• Over 10,000 miles: 25p per mile

Which is better? For most builders running a van that does 15,000+ business miles per year, actual costs usually win. But if you've got a fuel-efficient newer van and low repair bills, mileage could be better. Use our mileage calculator to compare.

Van purchase

If you buy a van (not lease), you can claim capital allowances:

• Annual Investment Allowance (AIA): Deduct the full cost (up to £1 million) in year one
• Only the business percentage is deductible
• If you sell the van later, you'll need to add a "balancing charge" — tax on the profit above written-down value

Tools and Equipment

Small tools (under about £500 each) are treated as revenue expenses — deduct the full cost in the year you buy them.

Larger items count as capital expenditure:

• Table saws, planer thicknessers, compressors: Claim through AIA (full cost in year one)
• Scaffolding you own: AIA or writing down allowances
• Generators: AIA

Keep receipts for everything. Even small purchases add up — a builder spending £30/week on consumables (blades, drill bits, sandpaper, fixings) saves over £300 in tax per year at basic rate.

Using Subcontractors

If you hire other tradespeople to help on jobs, you become a CIS contractor with legal obligations:

1. Verify every subcontractor with HMRC before paying them
2. Deduct CIS tax (20% or 30%) from their payments
3. File monthly CIS returns with HMRC (even if you made no payments)
4. Keep records of all payments and deductions for 3 years

Penalties for getting this wrong are harsh — £100 per month per missing return, plus interest on unpaid deductions.

The subcontractor's payments are an expense for you. The gross amount (before CIS deduction) goes on your Self Assessment as a business cost.

Tax-Saving Strategies for Builders

1. Claim everything you're entitled to

Most builders under-claim. If you buy something for work, it's probably deductible. The common ones people miss: phone bill proportion, home office costs (if you do admin at home), parking at sites, congestion charges, toll roads.

2. Time your purchases

Need a new van or expensive tools? Buy them before your year-end to get the AIA deduction in the current year. This can drop you into a lower tax band.

3. Pension contributions

Every pound you put into a pension reduces your taxable profit. If you earn £50,000 and put £5,000 in a pension, you're taxed on £45,000. At higher rate, that saves you £2,000. Read our self-employed pension guide.

4. Reclaim CIS overpayments

File your Self Assessment as early as possible. Many builders are owed thousands in CIS refunds. The sooner you file, the sooner you get the money back.

5. Consider flat rate VAT

If you're VAT registered, the flat rate scheme charges you a fixed percentage of turnover. For "general building" the rate is 9.5%. If your actual VAT-eligible expenses are low (because materials are supplied by the contractor), this can save money vs standard VAT.

Should You Go Limited?

Once your profits exceed about £50,000, a limited company can save significant tax. But for builders, it's more complicated:

• IR35 risk: If you work for one or two main contractors, HMRC may treat your company as a "personal service company" and tax you as if employed
• CIS still applies: Limited companies in construction are still subject to CIS
• More admin: Company accounts, corporation tax, payroll, annual returns
• Accountant costs: Typically £1,000-£2,000/year vs £200-£400 for sole trader

The tax saving at £60,000 profit is roughly £3,000-£4,000 per year. So it's worth it — but only if you're genuinely running a business, not just working for one contractor.

Making Tax Digital (MTD)

From April 2026, self-employed people earning over £50,000 must use MTD-compatible software to keep digital records and submit quarterly updates to HMRC.

If your turnover is below £50,000, you have until April 2027 (for those earning over £30,000). Below £30,000, no date set yet.

What this means for builders:

• You'll need digital bookkeeping software (FreeAgent, Xero, QuickBooks, or similar)
• You'll submit income and expense summaries every quarter
• Your annual Self Assessment still happens, but with pre-populated figures

Start keeping digital records now, even if you're not yet required to. It makes your year-end filing much easier and ensures you're claiming all your expenses. Read our complete MTD for self-employed guide.

Key Tax Dates for Builders

Date	What
5th of every month	CIS monthly return deadline (if you're a contractor)
5 April	Tax year ends
31 July	Second payment on account due
5 October	Deadline to register for Self Assessment (new businesses)
31 October	Paper return deadline
31 January	Online return deadline + first payment on account

Related Guides

• Self-Employed Plumber Tax Guide
• Self-Employed Electrician Tax Guide
• Complete Allowable Expenses Guide
• How to File Your Self Assessment
• Self-Employed Tax Calculator