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Tax & Accounting for UK Tradesmen
Understand your tax obligations without the headache. Sole trader vs Ltd, VAT, CIS, and legitimate expenses.
Sole Trader vs Limited Company
Most tradesmen start as sole traders. It is simpler and you keep all profit after tax.
Sole Trader
- • Set up in minutes
- • All profit is yours
- • Pay Income Tax + National Insurance
- • You are personally liable
Limited Company
- • More paperwork
- • Pay Corporation Tax (currently 25%)
- • Can pay yourself dividends
- • Company is separate entity
VAT Explained
- Threshold: Register when you hit £85,000 turnover in 12 months
- Rates: Standard 20%, Reduced 5% (some energy work), Zero 0% (most food)
- Voluntary: Can register early - useful if your customers are VAT registered
- Flat Rate Scheme: Simplified scheme for small businesses (avg 14% tax)
CIS (Construction Industry Scheme)
If you work for main contractors in construction, they deduct 20% tax from your payment before paying you.
How to Reclaim CIS
You claim this back via your Self Assessment tax return. It effectively reduces your overall tax bill.
Allowable Expenses
Reduce your tax bill by claiming legitimate business expenses:
Vehicle
- Van purchase (capital allowance)
- Fuel, servicing, repairs
- Insurance, road tax
- Parking, tolls
Business Costs
- Tools and equipment
- Mobile phone (business %)
- Website and hosting
- Insurance
Recommended Accounting Software
QuickBooks
User-friendly, great for invoicing
Xero
Excellent bank integration
QuickFile
Free option for basic needs