CIS, Tax & Expenses: Keep More of What You Earn
How CIS works, what you can claim, and the Self Assessment habits that stop a nasty January bill, a plain-English guide for UK tradesmen.
- CIS deductions are prepaid tax, keep statements to reclaim them.
- Set aside 20-30% of every payment for tax.
- Claim every allowable expense to cut your bill.
Tax Is Where Tradesmen Quietly Lose Money
This guide is for self-employed UK tradesmen who want to understand CIS, tax and expenses well enough to keep more of what they earn, without needing to become accountants. None of this is a substitute for advice from a qualified accountant, but understanding the basics stops the common, expensive mistakes. (Tax rules change; always check current HMRC guidance or ask your accountant.)
What CIS Actually Is
The Construction Industry Scheme (CIS) is how HMRC collects tax from many construction payments. If you work as a subcontractor for a contractor, they deduct money from your payments and pass it to HMRC as an advance on your tax bill. Registered subcontractors usually have 20% deducted; unregistered ones have 30%. That alone is a reason to register. You keep more of each payment up front.
Note that CIS applies to construction-type work between a contractor and subcontractor. Work you do directly for a homeowner is not normally within CIS, but you still declare that income through Self Assessment.
Self Assessment Basics
As a self-employed tradesperson you file a Self Assessment tax return each year covering the tax year to 5 April. The online filing and payment deadline is 31 January. You pay income tax and Class 4 National Insurance on your profit (income minus allowable expenses), and HMRC may also ask for "payments on account", advance instalments towards next year's bill, which catches a lot of tradesmen off guard in their second year.
The golden rule: put aside roughly 20-30% of everything you are paid into a separate pot for tax. The January bill is then money you already have, not a crisis.
What You Can Claim as Expenses
Allowable expenses reduce your taxable profit, so claiming everything you are entitled to directly lowers your bill. Common allowable costs for tradesmen include:
Tools and equipment, purchases, hire and replacements. Van and travel, fuel, insurance, servicing, or the simplified mileage rate. Materials and consumables. Protective clothing and branded workwear. Insurance, including public liability. Phone and a share of home/admin costs. Accountancy fees, certification, training and trade body membership. Advertising and lead-generation costs.
Keep every receipt and record it as you go, reconstructing a year of expenses in January is how tradesmen miss claims and overpay tax. Simple accounting software or even a disciplined spreadsheet pays for itself many times over.
VAT, Do You Need to Register?
You must register for VAT once your taxable turnover passes the threshold (£90,000 as of 2024/25, but check the current figure). Below that it is optional. Many tradesmen working mainly for homeowners stay below it deliberately, because adding 20% VAT can make you less competitive on domestic jobs. If most of your work is for VAT-registered businesses, registering can make sense. This is a genuine "ask your accountant" decision.
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