Construction Industry Tax Made Simple: What You Can (and Can’t) Claim in 2025

Navigating tax in the construction industry can be daunting, especially with shifting rules around CIS (Construction Industry Scheme), allowable expenses, and VAT obligations. At Rothstone Accountants, we’ve worked with builders, subcontractors, and property developers across London to keep their tax affairs clean and optimised. Here’s what you need to know in 2025.

1. CIS — Construction Industry Scheme: What It Means for You

If you’re a subcontractor, contractors will deduct tax at source before paying you. This is either at 20% (registered) or 30% (unregistered). Make sure you’re registered with HMRC to avoid unnecessary deductions.

2. Allowable Expenses for Construction Workers

Many miss out on legitimate expenses they can claim. These include:
– Protective clothing and safety gear
– Tools and equipment (either full cost or depreciation)
– Mileage and travel to temporary sites
– Insurance
– Accountancy fees

At Rothstone, one of our clients — a self-employed electrician in Ilford — was unaware he could reclaim over £1,500 in tool costs. We amended his previous return and secured a rebate.

3. VAT and the Domestic Reverse Charge

Since March 2021, the domestic reverse charge means VAT is no longer paid to the supplier for most construction services. Instead, the buyer accounts for it. It affects cashflow — and we’ve seen businesses struggle when not planned correctly.

4. Should You Operate as a Sole Trader or Limited Company?

There’s no one-size-fits-all. A limited company can offer tax savings and protection, but also adds complexity. For high earners or growing operations, it’s usually worth it. Rothstone can model your numbers before you make the switch.

Final Thoughts

Whether you’re laying bricks or managing sites, your focus should be on the job — not deciphering HMRC’s rulebook. Our team at Rothstone Accountants helps construction clients across the UK file returns, reduce tax, and stay compliant. Book a free 15-minute consultation to get tailored advice.