It can be easy to put off your tax return and leave it to the new tax year (which starts on 6 April). But being prepared means you could breeze through your tax return and have time left over to get back to building your construction business.
In this blog, we look at how to get your records in order, the changes to Making Tax Digital (MTD) and where you can find help if you’re struggling with your business taxes and bookkeeping.
Contracting vs subcontracting tax
As someone working within the construction industry as either a contractor or subcontractor, you'll need to consider the Construction Industry Scheme (CIS).
CIS is a scheme that HMRC has set up to collect contributions towards tax and national insurance from subcontractors in the construction industry. It applies if your business is based in the UK or does construction work in the UK. There are more details on who needs to register and exceptions for certain jobs on the HMRC website.
As a contractor, you must register for the scheme because you are required to take deductions from subcontractor, these deductions count as advance payments towards the subcontractor’s tax and national insurance. Subcontractors don’t have to register, but deductions are taken from your payments at a higher rate if you're not. Tax Aid has more information.
For subcontractors, you need to make sure that when you submit your Self Assessment or Corporation Tax return you reflect the CIS deductions correctly.
If you work as both a subcontractor and contractor you will be expected to register for both parts of the CIS scheme.
Get your records in order
You’ll need to keep a record of any incomings and outgoings for your business. So keeping your records in order throughout the year could save you time and stress when it comes to submitting your tax return.
You should also keep a copy of any bank statements and record any payments into or out of the business, whether that’s to you or your employees. And because you need to keep the records for at least five years, we suggest you find a solution that’s easy to access like FreeAgent.
As a self employed contractor or subcontractor you can claim expenses which will reduce your tax bill, these expenses must however be for your business and personal use. For example if you use your van or mobile phone for both business and personal reasons you will only be able to claim for the proportion relevant for your business. You should also remember to keep receipts as records for your expenses.
Chase late payments
As a small business, you can also take this time as an opportunity to follow up on any outstanding invoices that haven’t been paid or are overdue.
With Mettle you can create and send customised invoices on the go. The invoicing tool also gives you a view of all outstanding and upcoming payments. You can set up automated reminders so that you don’t have to chase invoices yourself and hopefully receive payment without even thinking about it.
Limited company taxes
As a limited company, your accounting period might be different to the tax year but you should start thinking about your personal tax return and storing any records of salary or dividends you have been paid as a director.
You’ll also need to make sure you’re registered to pay Corporation Tax, which you can do by signing in to your business tax account. From there, you’ll need to keep accounting records and prepare a Company Tax Return to work out how much Corporation Tax to pay.
The deadline to pay – or report if you have nothing to pay – is usually nine months after the end of your accounting period, according to HMRC. Your Company Tax Return will need to be filed 12 months after your accounting period.
MTD for VAT
Making Tax Digital (MTD) is a government scheme designed to make it easier for people and businesses to track their tax by keeping and submitting digital records.
Since 2019, VAT-registered businesses with a taxable turnover above the VAT registration threshold (currently £85,000) have needed to keep their records digitally and provide their VAT return information to HMRC through MTD-compatible software, like FreeAgent, Xero and Quickbooks.
MTD for Income Tax was previously set for the upcoming 2024 tax year but it’s been delayed until April 2026.
Businesses, self-employed individuals, and landlords with income over £50,000 will be mandated to join first, whilst those with income over £30,000 will be mandated from April 2027.
Ask for help if you need it
To make sure you don’t pay too much tax, check what allowances you can use and what you can claim as expenses. HMRC has lots of online articles which will help you understand the rules which apply to you and your business.
If you need more support, you can also get help from an accountant. Finding a good accountant will help avoid mistakes and they may find opportunities for you to save money on your tax return.