Tax tips for construction workers

As a self-employed construction worker, you’re responsible for your taxes. If you don’t pay what you should to the HMRC, they can ask debt collectors to seize and sell your possessions.

Tax avoidance can lead to criminal convictions that result in fines or prison sentences. So it’s crucial to take them seriously, but you should also have all the information you need to keep your work compliant.

This guide discusses tax tips for construction workers, which includes:

• Construction industry scheme
• Gross payment status
• Deductible expenses

One set of essential tax tips for construction workers is the UK Government’s Construction Industry Scheme (CIS). It’s a way to give advance payments of tax and National Insurance contributions for any subcontractors you hire.

You must register a contractor through the UK Government portal if you pay subcontractors to assist you with construction work.

The scheme covers most construction work, which includes:

• Civil engineering (roads, bridges)
• Permanent or temporary building
• Preparing sites (foundations)
• Demolition
• Installing systems (heating, power, water)

You don’t need to register for the scheme if your work includes:

• Surveying or architecture
• Carpet fitting
• Scaffolding hire
• Making or delivering materials

If you are a subcontractor yourself, it’s your choice whether you register for the CIS. But if you don’t, it could mean that the tax and National Insurance you pay is higher.

It’s ideal to pay the minimum amount of taxes that you can legally, so you have more money to pay yourself and set aside. As a self-employed construction worker, it’s critical to prepare for periods when you may be unable to find work.

You can be a contractor and subcontractor at the same time. For example, you can carry out contracted work for a builder and hire an electrician you know to help you.

Another set of tax tips for construction workers is for work on a subcontracted basis. When you register for the Construction Industry Scheme or at a later date afterwards, you can apply for gross payment status.

It means that contractors will pay you the total amount for the work, and you’ll pay your tax responsibilities at the end of the tax year. 

The benefits of that might include:

• Finding work — you’ll have more money available after a job to help advertise your services for the next.
• Paying debts — if you have money to settle a loan sooner, it will mean you pay less interest.

Essentially it gives you control over your tax repayments. With gross payment status, the responsibility is on you. The downside is the convenience that CIS payments offer that come straight out of your payments.

You can apply for gross payment status through the UK Government portal, but there are some things you need to show to qualify:

• Past taxes paid on time
• Proof you work in construction
• A business bank account

A separate account for your construction work will help with your taxes, and there’s even one you can access through your phone.

Countingup is a business account with built-in accounting software. The app is simple and lets you access your money anywhere.

A significant set of tax tips for construction workers is the expenses you can claim back. If these are vital to your work, it could mean you get tax relief for the costs.

If you need to buy a new vehicle, computer or phone for work, you can claim tax back on those as capital expenses. You’ll likely need a car to travel to places, a computer to process plans and a phone to speak to clients.

Just as the cost of the car itself, you can also claim back road tax and insurance. Without your transport, you would be unable to get to work, so it’s a necessity for what you do.

In addition, you can also claim the costs of fuel to keep the vehicle running. So keep your receipts every time you fill up.

Over the year, though, that could lead to mountains of paper billings. But with Countingup’s receipt capture feature, you can scan them in straight away with your phone’s camera to add them to your accounts.

Of course, the tools you buy or hire are critical to your work, so you can claim those back. You can also claim for protective clothing like helmets and high visibility jackets.

When you work all day, your food is considered a necessity, so you can often claim back your lunch.

Lastly, you can claim back the costs of insurance, licences and trade union fees. For example, you might take out public liability insurance to help you pay court fees and compensation if you damage property or injure someone.

When it comes to your expenses, it’s often difficult to keep track of each one and separate them within your accounts. But if you can’t see which costs are where, it can make claims more difficult.

Luckily, Countingup has an expense categorisation feature. It’s the perfect way to sort your costs, and it even uses HMRC approved labels to define each type for you.

Easy-to-use accounting software can be the perfect way to simplify your taxes as a self-employed construction worker. It can take away the hassle of trawling through paperwork and allow you to focus on what you do best.

A building site is not the best environment to keep receipts together, and something can easily spill and ruin them. 

In addition, the hard work that goes into your construction work is physically demanding. The last thing you want to do is worry you aren’t doing your taxes correctly.

Countingup answers those problems for you. The business account with built-in accounting software provides you with a tax estimates feature, and it’s a revolutionary tool that tells you how much you should put aside each month.

So if you decide to apply for gross payment status, it will mean that you won’t have any issues when it’s time to do your income tax Self Assessment at the end of the tax year.

If you pay through the construction industry scheme, Countingup can still be a lifesaver to sort invoices.

Invoicing is a crucial part of the work for contractors and subcontractors. It’s a way to send a professional bill for your services and store it in case of any payment issues.

Countingup also offers a great invoicing on the go feature. It lets you create, send and store them on the app. It makes your financial management seamless and straightforward, the perfect tool for the job.

Get started for free.

For more relevant tips, see:

• How to run a small construction business
• How to calculate overhead and profit in construction
• What is tendering in construction