Welcome to our tax guide for self employed builders
Are you a self employed builder looking for help with your business accounts and personal tax return?
About the Author
Sarah Blundell is a Fellow of the Association of Chartered and Certified Accountants (ACCA) and has more than 20 years of experience in the accounting field. As the founder of her own practice, she focuses on delivering outstanding fully digital services tailored for small businesses.
Sarah is a fully qualified chartered accountant with the ACCA. The Association of Chartered Certified Accountants is a global body for professional accountants that commits to acting in and upholding the public interest. This means you can be assured of our professional conduct and that your best interests are part of our core values.
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In this article we discuss:
- Introduction
- What Is The Construction Industry Scheme (CIS) And How Does It Work?
- What Is The Difference Between A CIS Contractor & A CIS Subcontractor?
- Are Building Subcontractors Under CIS Self Employed?
- What Do I Need To Do To Start Trading As A Self Employed Builder?
- Why Do I Need To Register For CIS?
- Net Payment Status & Gross Payment Status For CIS Workers Explained
- When Do I Need to Tell HMRC I Am Self Employed?
- How Do I Register as Self Employed With HMRC?
- How Do I Claim A CIS Tax Refund?
- What Do I Need To Include In My Self Assessment Tax Return?
- What If I Have Made A Financial Loss?
- When Do I Need to File A Self Assessment Tax Return and Pay Tax?
- What Income Do I Pay Income Tax And National Insurance On?
- What Allowable Costs Can Building Subcontractors Under CIS Claim?
- What Self Employment Expenses CAN’T I claim On My Tax Return?
- Can Making Pension Contributions Save Me Tax?
- How Do I Pay Any Tax Liability Due?
- What Are the Tax Thresholds and Rates for Self Employed?
- What Records Do I Need to Keep?
- How Can I Keep My Accounts & Business Finances Organised?
- Meeting Key Deadlines
- Do I Need to be VAT Registered?
- Should I Set Up A Limited Company?
- What About Making Tax Digital (MTD)?
- Further Information
Introduction
This tax guide aims to give self employed builders in the construction industry a better understanding of the tax requirements side of their business, which many self employed people may find a daunting task.
This guide is for both sole traders and limited companies. Any limited company guidance will be shown in blue text.
When you work for yourself as a self employed individual under the construction industry scheme, income you receive has either 20% or 30% tax deducted from it at source.
We cover how to register as a self employed builder in the building trade, tax and national insurance contributions, allowable expenses, how much tax you pay, tax relief, when and how to pay your tax, and completing your annual return and accounts.
Working for yourself has so many benefits. Whether you are a Limited Company or a sole trade, you decide the rules, who you want to work for and when. Taxes can be a big factor that put many people off working for themselves.
Simple Taxes are here to change that. Specialising in UK taxes, accounts and tax returns for self employed builders, let your dedicated accountant worry about the tax requirements side of your business for you.
While using a professional accountant isn’t a legal requirement, it can be extremely beneficial. With a keen eye for spotting allowable expenses, they will ensure you remain compliant with HMRC and Companies House legislation when it comes to your tax affairs. They should also be able to save you some money!
What Is The Construction Industry Scheme (CIS) And How Does It Work?
The CIS scheme (construction industry scheme) was introduced as a HMRC scheme to collect income tax throughout the tax year from construction workers, by a CIS deduction.
The scheme helps self employed builders and CIS subcontractors by making sure they pay the right amount of tax on their earnings.
This means building subcontractors under CIS don’t need to worry about putting tax to one side to owe at a later date.
CIS contractors must withhold tax when paying subcontractors, under CIS rules.
The contractor will request the subcontractor’s personal or limited company unique taxpayer reference and withhold 20% tax (if the subcontractor or limited company is CIS registered) or 30% tax (if the subcontractor or limited company is not CIS registered).
The contractor will then complete monthly CIS returns and the CIS tax deducted is paid directly to HMRC on behalf of the subcontractor or their limited company.
This CIS tax deducted is basically an advance payment of the subcontractor’s tax that would be due at the end of the year (5th April) when completing their personal or company tax return.
What Is The Difference Between A CIS Contractor & A CIS Subcontractor?
A contractor deals with the end client and pays subcontractors to assist with the job. They are usually responsible for the full project.
A subcontractor worker reports to the contractor rather than the end client. They are usually hired to assist with a specific area of the project.
Are Building Subcontractors Under CIS Self Employed?
When you work for a contractor who pays you as a subcontractor worker, even through you will have tax deducted at source under CIS, you are still classed as being self employed.
You must therefore inform HMRC that you are self employed and working as a CIS subcontractor, whether that be as a sole trader or a limited company.
What Do I Need To Do To Start Trading As A Self Employed Builder?
To trade as a self employed builder subcontractor under the construction industry scheme cis you must complete the below simple steps:
Register for self assessment either via the HMRC website, or a Simple Taxes accountant. You will be provided with a UTR number which any contractor you work for will request, so that they can verify you with HMRC.
Register as a CIS subcontractor – this can be done at the same time as registering for self assessment, even though they are two separate registrations. If you already have a unique taxpayer reference and HMRC login you can register through your HMRC online login. You must therefore inform HMRC that you are self employed and working as a CIS subcontractor, whether that be as a sole trader or a limited company.
When registering for CIS you must select net or gross payment status. All construction industry scheme CIS subcontractors are eligible for net payment status, where your tax is deducted at source. You must meet certain criteria to qualify for gross. We discuss this in more detail later in this blog.
Call the HMRC CIS helpline, or speak to an assistant online, if you need further help.
Why Do I Need To Register For CIS?
When you are working for yourself as a self employed subcontractor in the construction industry, you don’t HAVE to register for CIS. However, it is in your best interests to do so.
If you don’t, under CIS rules, you will have extra tax deductions at source of a huge 30%. When you are registered, you will only be paying tax CIS deductions at source of 20%.
You should therefore inform HMRC of your self employment status sooner rather than later.
Net Payment Status & Gross Payment Status For CIS Workers Explained
Net payment status:
All construction worker subcontractors qualify for net payment status CIS deductions
CIS deductions are taken at 20% from your gross income at source, you receive the net payment after deductions
It’s very possible for CIS subcontractors to overpay tax, therefore you must complete a self assessment return at the end of each year (5th April), to claim your CIS refund. If you are trading as a limited company, the CIS tax must be reclaimed through the company payroll.
Gross payment status:
No CIS deductions are taken from subcontractors payments at source
You must meet certain criteria to qualify:
Your turnover must be at least £30,000
You’ve paid your tax and National insurance contributions on time in the past
You have a business bank account
Your business does construction work in the UK.
When Do I Need to Tell HMRC I Am Self Employed?
When your gross sole trader income (before expenses are deducted) goes over the £1,000 trading allowance in a tax year (6th April to 5th April), you will need to sign up for self assessment to inform HM Revenue that you are self employed. You must complete a self assessment tax return to pay any income tax and NI due on your self employment income.
If you setup a limited company and become a company director, you should register for self assessment. This is because any money you withdraw from your company will need to be declared as income on your self assessment tax return.
Once the tax year ends on 5th April, you will need to inform HMRC and register as self employed by 5th October.
How Do I Register as Self Employed With HMRC?
This can be done online through the HMRC website. Or Simple Taxes can do this for you.
When you register, you will need to provide HMRC with various personal information such as your name, address, date of birth, national insurance number, etc.
Once HMRC have processed your registration, you will receive your unique taxpayer reference number in the post. You will need this unique taxpayer reference number to file your personal self assessment return.
How Do I Claim A CIS Tax Refund?
In most cases building subcontractors under CIS in the construction industry will have overpaid tax at source, and be due a rebate at the end of each tax year when they file their self assessment tax returns or limited company payroll year end.
This is due to the CIS deductions taken from subcontractors at source not taking utilising their tax free personal allowance (currently £12,570 in 24/25).
They can get this tax back from HMRC after the tax year end 5th April. You will need to keep your CIS deduction statement (s) as part of your accounting records for 6 years plus the current tax year. HMRC will often request sight these when processing your refund.
A CIS tax refund is claimed by completing your annual self assessment cis tax returns if you are operating as a sole trader. If you are trading as a limited company, the CIS tax must be reclaimed through the company payroll.
The business bank account details should be incldued on the self assessment tax return so that the refund claim can be paid directly into your bank. Otherwise, HMRC will issue a cheque in the post which can be a slower process.
What Do I Need To Include In My Self Assessment Tax Return?
Your tax return should include:
Your total self employment amount earned from construction work, before CIS tax was deducted (gross income)
Your total CIS deductions
Any business expenses
Any other income sources such as dividends, interest, foreign income, rental income, etc
Business bank details incase you are due a refund.
What If I Have Made A Financial Loss?
If you make a loss in the tax year, due to your allowable expenses paid exceeding your income received, you will have no income tax bill, but you must still declare your self employment figures to HMRC. The loss can be carried forward and offset against future self employment profits. Alternatively, if you have employment income, the self employment loss can be set off sideways against your employment income, which may result in a tax rebate.
Limited company losses can also be carried forward against future profits, or carried back one year to receive a rebate if you originally paid corporation tax in the previous year.
When Do I Need to File A Self Assessment Tax Return and Pay Tax?
The tax year ends on 5th April each year. You then have until 31st January the following year to file your self assessment return and pay any tax due on any profits.
If your tax liability (not profit) exceeds £1,000 you will be required by HM Revenue & Customs to make an advance payment on account towards the following tax year. These amounts are payable on 31st January and 31st July.
If you file your self assessment return and pay tax after the 31st January deadline, you will incur penalties.
What Income Do I Pay Income Tax and National Insurance On?
You will pay tax and National Insurance on your self employed business profits each UK tax year. This is your total income in the tax year, less any business related expenses.
If you have additional income sources such as PAYE income from employment, rental income, foreign income, savings interest, capital gains, investment income, any other income, etc, you will need to include these on your self assessment tax return too.
Limited company directors pay tax on the money they withdraw from their company.
What Allowable Costs Can Building Subcontractors Under CIS Claim?
When calculating your taxable income for the year, you can claim allowable tax deductible business related expenses against your income on your self assessment return, to arrive at your taxable profit figure.
Below is a list of business allowable expenses construction industry workers can claim as tax deductions for tax relief against their income in their CIS tax returns. They can deduct the below tax deductible expenses from their self employed builder income as a business expense.
Keeping a record of your income and expenses and CIS statements is so important when you are self employed. Builders can significantly reduce their tax bill with their claimable expenses. The more expenses builders incur that they remember to claim, the less tax they will pay.
🌟 Accountancy fees – Simple Taxes
📢 Advertising & marketing – website, website hosting, flyers, socials, images
💸 Bad debts – unpaid invoices
🏦 Bank charges – interest, card & payment fees
📚 Bookkeeping software – QuickBooks (<—– use this link for 90% off for 7 months)
🛡️ Business insurance – e.g. PolicyBee – public liability, contractors’ insurance
💻 Computer software – estimating, project management, accounting
👥 Employees – wages, CIS subcontractors, pensions, NI
🛠️ Equipment & tools – saws, drills, power tools, grinders, sanders, ladders, cranes, scaffolding
🏠 Home office – % of home bills
🤝 Influencer marketing – e.g. Social Cat
⚖️ Legal & professional fees – licences, contracts, legal advice
🏗️ Materials & stock – timber, cement, nails, bricks, paint, consumables
📱 Mobile phone – % business use
🚗 Motor vehicle costs – vans, fuel, maintenance, insurance
🎓 Professional subscriptions – trade associations, building bodies
📬 Registered office address – 1st Formations to protect your home address
🏢 Rent & rates – storage, yard, site office
✉️ Stationery & postage – office supplies, postage
🎓 Training – health & safety, site management, new skills
🧳 Travel & subsistence – to job sites, hotels, meals
🦺 Uniform – PPE, gloves, hard hats, boots, branded workwear
What Self Employed Expenses CAN’T I Claim On My Tax Return?
Below are some examples of costs that self employed musicians may incur but CAN’T be claimed as a self employed allowable expense:
- Any items used for personal
- Business trips that are extended to personal trips
- Childcare costs
- Client entertaining
- Fines e.g.: parking, speeding, unpaid tolls
- Food/meals unless working away from home
- Gym memberships
- Journey from home to usual workplace
- Late payment and filing penalties from HMRC
- Life insurance payments, unless ‘relevant life’ policy
- Uniform which can be seen as dual purpose
- Wages, tax and NI for yourself when trading as a sole trader
Can Making Pension Contributions Save Me Tax?
You might be curious about whether your private pension contributions can help you save on taxes. The good news is that they can, depending on your situation.
For sole traders, while pension contributions aren’t considered a business expense, they can still be advantageous when filing your self-assessment tax return if your earnings exceed £50,000. Your basic rate tax band can be increased by the amount you contribute to your pension.
If you operate a limited company, paying your pension contributions directly from the company into your pension fund is a very tax-efficient strategy. These contributions qualify as allowable expenses, which means you can benefit from corporation tax relief.
Online pension providers like Pension Bee offer a fantastic user-friendly platform to help you start building your pension savings.
How Do I Pay Any Tax Liability Due?
You can pay any tax you owe using your online HMRC account.
If you don’t have an online login you can set one up here.
Alternatively, you can see here the other methods of paying HMRC:
Credit or debit card
Direct Debit
Online or telephone transfer
Cheque through the post
Through your tax code (must owe less than £3k and file return online by 30th December)
At your bank or building society
What Are the Tax Thresholds and Rates for Self Employed?
When you’re self-employed, your tax isn’t one flat rate — it’s made up of a few different layers depending on how much profit you make.
Instead of listing figures here, it’s much easier (and more accurate, as rates can change) to refer directly to HMRC’s official pages:
- Income Tax rates: https://www.gov.uk/income-tax-rates
- National Insurance (self-employed): https://www.gov.uk/self-employed-national-insurance-rates
- Dividend tax rates (if you also take income from a limited company): https://www.gov.uk/tax-on-dividends
In simple terms, your tax is usually made up of:
- Income Tax on your profits
- National Insurance contributions
- Possibly dividend tax if you operate through a limited company
If you’re unsure how this applies to you, it’s always worth finding out, so you’re not caught off guard later in the year.
What Records Do I Need to Keep?
When you work for yourself you are legally required to keep all of your business records (business account bank statements, sales invoices, purchase and expenses invoices), for 6 years plus the current year.
This is in case HMRC ever ask you for proof of your refund claim and figures. They can issue penalties if the required documents not available.
Documents building subcontractors under CIS must keep should include:
CIS payment and deduction statements
Mileage logs
Buisness bank statements
Invoices
Purchase receipts
How Can I Keep My Accounts & Business Finances Organised?
Here are a few tips for keeping accurate records and keeping on top of your business accounts and money, which will in turn help you complete your self assessment returns at the end of the year:
Open a business bank account – this keeps all of your trading transactions (income and expenditure) in one place, separate to your personal income, making completing your year end return 100 times easier. A bank account is a legal requirement if you are trading as a limited company. Online banks such as Monzo offer low fees and a quick setup.
Use accounting software such as Quickbooks – keep on top of your bookkeeping so you can see how your business is performing. Need help with bookkeeping and setting up Quickbooks? Simple Taxes can help.
Keep all your receipts and bank statements in one place – either by cloud storage like Google Drive, Quickbooks, or in a box.
Meeting Key Deadlines
As a self-employed builder, staying on top of key dates and deadlines is crucial to avoid complications with your tax and National Insurance contributions. Here are some important dates and tips to keep in mind:
- Self-Assessment Deadline: The deadline for submitting your self-assessment tax return is 31 January following the end of the tax year. Make sure to file your return and pay any tax liability by this date to avoid penalties.
- Self-Assessment Payment on Account Deadline: If you expect to owe more than £1,000 in tax, you’ll need to make advance payments on account towards your next tax liability. These payments are due on 31 January and 31 July each year.
- Limited company accounts filing deadline: 9 months after your year end. The exact date can be found by searching your company name on the Companies House website.
- Limited company confirmation statement deadline: 12 months after your date of incorporation. The exact date can be found by searching your company name on the Companies House website.
- Limited company monthly director payroll deadline: The 19th of each month. A director payroll for the optimum amount will ensure limited company directors get their annual qualifying year towards their state pension.
By meeting these key dates and deadlines and keeping accurate records, you can ensure you’re staying on top of your tax and National Insurance contributions and filing obligations as a self-employed builder.
Do I Need to be VAT Registered?
If your total sales before expenses surpass the VAT threshold within a year, you’ll need to register for VAT. Currently, this threshold is set at £90,000.
You can easily register online via your Government Gateway account on the HMRC website. For more details, you can visit the HMRC site HERE.
Should I Set Up A Limited Company?
If you are currently trading as a sole trader, as your sole proprietorship expands, switching to your own Limited Company might be a smart move. This change can provide several advantages, including limited liability that protects your personal assets from business obligations, enhanced tax efficiency through improved planning strategies, a more professional image that can attract customers and suppliers, and greater ease in securing funding.
However, it also brings some drawbacks, such as increased administrative responsibilities, potentially higher accounting fees, and reduced privacy since your business information will be accessible on Companies House. It’s wise to consult an accountant if you have any questions.
What About Making Tax Digital (MTD)?
Making Tax Digital (MTD) is HMRC’s move towards a fully digital tax system. Instead of doing everything through one big Self Assessment tax return at the end of the year, self-employed people will gradually move to keeping digital records and sending updates to HMRC using approved software throughout the year.
This doesn’t happen all at once — it’s being introduced in stages. From April 2026, it will apply to sole traders with income (before expenses) over £50k, and more people will be brought in over the following years.
What this means for you in real terms is:
- You’ll need to keep your bookkeeping up to date in software
- You’ll submit updates to HMRC during the year, rather than just once annually
- You’ll need MTD-compatible software like QuickBooks to stay compliant – see our discount link at the top of this blog for an introductory 90% off.
👉 You can read more about Making Tax Digital directly on the HMRC website here:
https://www.gov.uk/government/publications/making-tax-digital
Further Information
For further information on self employment, please read the HMRC guidance here.
If you are unsure how much tax you need to pay, and need help with your taxes, get in touch with our expert team today at www.simpletaxes.co.uk.
Send your details to Simple Taxes today, for a fast reply within 24 hours from your own dedicated accountant.
Disclaimer
The information contained in this blog is for general information purposes only, and not for accounting and tax advice. You should speak to a qualified professional about your specific circumstances before acting upon any of the information in this blog.
We are happy to be affiliates for several of the suppliers mentioned in this blog and across our website. This means that if you decide to make a purchase after clicking one of our links, we might earn a commission at no additional cost to you. We suggest these suppliers because we believe they offer valuable products and services, not just because of the small commissions we could earn.
Last Updated: April 2026
