Being a self-employed builder, you are eligible to claim many expenses that you might not be aware of. In this article, we will cover the following:

  • What is a self-employed builder?
  • Why become self-employed?
  • What is CIS for self-employed builders?
  • How do expenses work?
  • What are the six most common expenses?
  • How do I claim expenses?
  • How do I set up a business account?

What is a self-employed builder?

A self-employed builder is simply someone that has decided to work for themselves instead of being employed by a business. In the UK, the construction sector has the largest self-employed workforce. Out of the almost five million people self-employed in the UK, over 900,000 are in construction.    

Why become self-employed?

The main difference between working for yourself and working for someone else is freedom. When you work for someone else, the employer decides how much you get paid, when you work and where you work. When you’re self-employed, you decide:

  • Your work schedule
  • Your hourly rate
  • The location you want to work in
  • Who you work for

However, being self-employed can be really difficult because you have to worry about finding clients, finding clients, not having a set schedule, balancing your finances and paying tax.

What is CIS for self-employed builders?

The Construction Industry Scheme (CIS) is used by HM Revenue and Customs (HMRC) to collect tax from subcontractors in the construction sector. If you work as a builder and you’re self-employed, you can register for this scheme. 

The main benefit of registering for the CIS is you only get 20% deducted from your pay. When you’re not part of the scheme, you get 30% deducted. The 20% almost always works out as being more tax than you owe. As a result of this, you can claim a tax rebate for what you have overpaid from the first day of each tax year. Which usually adds up to around £2,000. 

How do expenses work?

When you’re self-employed, you frequently have to spend money on items that you need for your business. However, you will be able to deduct the cost of these items from your overall income when you calculate the tax that you owe. Therefore, you only pay tax on your profits. 

What are the common expenses for self-employed builders?

If you’re working under the CIS, then there are several expenses you can get a return on to increase your rebate. 

1) Travel Expenses

You can reclaim travel expenses in two different ways. First, if you use your car 75% of the time for work, you can claim 75% of leasing payments, fuel, car insurance, road tax etc. This option works out great if you bought a vehicle, especially for work.

Or you can use HMRC’s expense rate known as ‘the mileage allowance‘. It starts at 45p per mile for the first 10,000 miles and drops to 25p per mile after. However, it’s better suited to those that already own their vehicle and didn’t take a loan to purchase it.  

2) Tools and equipment

If you needed to purchase tools or hire some for a particular job, then as a CIS worker, you can claim for the purchase and replacement of tools or equipment as a business expense. These items include:

  • Power tools and drills
  • Safety equipment such as helmets, reflective vests
  • The cleaning and repairing of the above equipment

3) Meals and public transport

If your contract is less than 24 months, you are entitled to claim back tax for:

  • Meals you paid for, like work lunch, the food at a contractor’s cafe
  • Transport to and from construction sites (bus ticket, the tube etc.)

4) Admin costs

This includes things like accounting costs, stationery, postage etc. It also includes your phone bill. If you use your phone for at least 50% of the time for work, then you’re entitled to claim 50% of the phone bill.

5) General business expenses

As a self-employed builder, you are entitled to claim expenses on several general business costs, including:

  • Insurance
  • Union fees
  • Home office

6) Capital expenses

When you’re a self-employed builder under CIS, you are able to claim back expenses, as long as they are solely used for business use. For example, if you buy a laptop that you use exclusively for work or a vehicle that’s only for travelling to job sites.  

How do I claim expenses?

To be able to claim these expenses, you need to follow these three easy steps:

  1. You must register as self-employed
  2. When you’re registering as self-employed, you must also register for CIS
  3. You can then claim for anything you paid for something that is only used for work and paid for “out of pocket”.

If you don’t have that many expenses and your costs are less than £1,000, you can claim your £1,000 tax-free allowance instead. 

How do I set up a business account?

Setting up a business account is essential for self-employed builders. By opening a business current account with Countingup, you will be able to take care of your finances more efficiently. Our simple app with built-in accounting software helps you to:

  • Scan and record receipts on your smartphone
  • Prepare and send invoices in seconds
  • Automate expense categorisation
  • View ongoing tax estimates so that you know how much to set aside

Save time to focus on what matters most with Countingup

Countingup is the business current account and accounting software in one app. With all your financial information in one place, Countingup offers real-time profit and loss data, so you can quickly and easily understand your business’ performance at a glance.

The app also provides automatic expense categorisation and a receipt capture tool, so you can make sure your accounts are always accurate. And with automated invoicing, you can save time and get paid faster.  Find out more here and sign up for free.