Finance Guide for Tradespeople
CIS, deposits, vans, tools and getting paid on time — the money setup that lets a trade business actually scale.
A sole-trader setup can suit one-person trade work with manageable risk and simpler administration. A partnership or limited company may suit co-owners, investment, contractual risk or staff arrangements; hiring subcontractors or crossing a fixed profit figure does not automatically require incorporation. If you work in construction, check whether you need to register for CIS as a contractor, subcontractor or both. Always take a deposit, issue an invoice and state a payment date.
Sole trader, partnership or limited?
A single trader may prefer sole-trader administration; co-owners should compare a partnership agreement with a company and obtain legal advice about joint liability. Employing staff, owning a vehicle or taking a larger contract does not by itself require incorporation. A company can help separate business liabilities, but insurance, director duties, guarantees and the actual contract still matter. There is no universal £40,000–£50,000 tax crossover: compare a dated salary/NIC/dividend scenario, company costs, retained profit and the personal tax position before deciding.
| Structure | Best for | Liability | Admin |
|---|---|---|---|
| Sole trader | One-person work where direct ownership and simpler administration fit | Personal | Self Assessment |
| Partnership | Two partners, similar contribution | Personal & joint | Partnership return + SA |
| Limited company | Hiring, vans, contracts > £20k | Limited | Full company filings |
CIS — Construction Industry Scheme
If you are paid by another business for construction work — building, alterations, decorating, demolition, civil engineering — CIS almost certainly applies. As a subcontractor, you register with HMRC and the contractor deducts 20% from your labour (30% if you don't register) before paying you; the deductions count as advance tax. As a contractor, you must verify subcontractors with HMRC, deduct the right percentage and file a monthly CIS300 return by the 19th.
Working unregistered means you'll be paid net of 30% rather than 20% — a painful cashflow hit and slow to put right. Register as soon as you start construction work.
Banking, deposits and quotes
Open a business current account and a separate savings account for tax. Add a business credit card for materials runs — the float between buying materials and getting paid is the single biggest cashflow squeeze most trades feel.
7,500 bonus points
Make the first card transaction; the referral page says the 7,500 points are credited after this transaction.
Offer details confirmed 3 November 2026. Review due 3 December 2026.
- Earn cashback or Avios on eligible business spend
- Unlimited free employee cards on the published plan
- Promo code
SETTINGUP— terms and eligibility apply.
For any job over £500, take a deposit of 25–50% upfront to cover materials. Use a written quote that includes scope, materials list, labour estimate, payment schedule, payment terms and what triggers a variation. Quotes prevent disputes more reliably than any other single document.
Van, tools and materials
Common trade expenses
0/8 · 0%Vans are claimed differently from cars: you can usually claim 100% of running costs and capital allowances on the purchase price, providing there's no significant private use beyond commuting and incidental personal trips. Cars are more restricted — get advice if the work vehicle could be classified as either.
Getting paid — and on time
Trade businesses fail more often on cash flow than on revenue. Build a simple invoicing rhythm: deposit on contract signature, stage payments at agreed milestones for jobs over a week, and final payment on completion (not "30 days after"). Issue the invoice the same day work is signed off; include a payment link (Stripe, GoCardless, bank transfer details); chase at +7, +14 and +21 days with escalating tone. The Late Payment of Commercial Debts Act gives you the right to claim 8% interest above base plus a fixed compensation fee on overdue B2B invoices — mention it in your second reminder.
VAT and the reverse charge
The £90,000 threshold applies as elsewhere. The key wrinkle for construction is the Domestic Reverse Charge: for most B2B CIS-applicable services between VAT-registered businesses, the customer accounts for the VAT, not you. You issue an invoice with no VAT charged but a note explaining the reverse charge. Your bookkeeping software handles this once set up. Domestic (consumer) jobs are still standard-rated at 20%.
Frequently asked questions
It removes the 20% deduction and pays you gross — massively better for cash flow. Eligibility requires a turnover test (£30k/£100k/£200k depending on structure), a compliance history with HMRC and a UK bank account in the business name.
Public liability (£2m–£5m), employer's liability (£10m if you have any employees — legally required), tools cover for vans, and contract works insurance for larger projects.
Usually yes — most vans qualify for the Annual Investment Allowance, letting you deduct 100% of the cost against profit in the year of purchase.
30% of profit for a sole trader, plus a buffer for the first year's Payments on Account. As a limited company, 19–25% of profit for Corporation Tax plus a personal tax pot for dividends.
Related guides
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Information on this page is general guidance for UK small businesses and is not financial, tax or legal advice. Tax rules, allowances and product terms change. Always check current information with HMRC, Companies House or a qualified professional before making decisions.