SBX Accountants | Construction Tax Guide 2025/26

Helping Construction Businesses Stay Compliant and Cash-Flow Ready

Running a construction business means juggling multiple responsibilities - and staying on top of tax is one of the biggest. From VAT and CIS to PAYE and Corporation Tax, the rules can be complex and time-consuming.

That’s why SBX Accountants has put together this practical, up-to-date guide for the 2025/26 tax year. It’s built specifically for sole traders, contractors, and growing construction firms who want to stay compliant, avoid penalties, and manage cash flow effectively.

Construction Tax Overview

Construction businesses face a range of tax obligations, depending on their structure and scale. These typically include:

• Corporation Tax (for limited companies)
• Income Tax & National Insurance (for sole traders and partnerships)
• CIS deductions (contractor/subcontractor scheme)
• VAT (complex and varied in construction)
• PAYE & Employer NICs (if you employ staff)
• Capital Gains Tax (on property and asset disposals)
• Stamp Duty Land Tax (when buying property or land)

At SBX, we help you stay ahead of your responsibilities and stay clear of HMRC trouble.

Key Tax Deadlines for 2025/26

Missing a deadline can be costly. Here are the key dates to remember:

• Self Assessment Tax Return: 31 January 2026
• Payments on Account: 31 July 2025 and 31 January 2026
• CIS Returns: 19th of each month (22nd if paying electronically)
• Corporation Tax: Due 9 months + 1 day after company year-end
• VAT Returns: Due 1 month + 7 days after quarter ends
• PAYE Payments: Submit payroll to HMRC on or before each payday. Then pay the tax and National Insurance due by the 22nd of the following month if paying electronically (or by the 19th if paying by post).

Corporation Tax for Limited Construction Companies

If you run your business as a limited company, you’ll pay Corporation Tax on profits:

• 19% on profits up to £50,000
• 25% on profits over £250,000
• Marginal Relief applies in between

Sole Traders & Partnerships: Income Tax and NIC

For those operating as self-employed:

Income Tax (2025/26):

• 0% up to £12,570
• 20% from £12,571 to £50,270
• 40% from £50,271 to £125,140
• 45% above £125,141

National Insurance (2025/26):

• Class 2: Voluntary if under threshold
• Class 4: 6% between £12,570–£50,270, then 2% above that

CIS: Construction Industry Scheme

If you hire subcontractors or work as one, CIS applies:

• Register with HMRC as a contractor and/or subcontractor
• Deduct:
• 20% (registered subcontractors)
• 30% (unregistered)
• 0% (Gross Payment Status holders)
• Submit monthly CIS returns by the 19th
• Provide deduction statements to subcontractors
  

VAT in Construction

VAT rules are especially complex in this sector:

• Standard Rate (20%): Applies to most repair and maintenance work
• Reduced Rate (5%): For energy-saving improvements and qualifying conversions
• Zero Rate (0%): For new residential construction

Reverse Charge VAT also applies to many B2B construction services:

• If you're a VAT-registered contractor receiving services from another VAT-registered subcontractor, you may need to account for the VAT yourself under the Domestic Reverse Charge rules.
• In this case, the subcontractor doesn’t charge VAT on their invoice. Instead, you (the contractor) account for both the input and output VAT.

These rules can be tricky to understand if you are new to the industry, reach out to us if you would like and advice or guidance as to how these operate.

Capital Allowances & Tax Reliefs

Qualifying capital investments may entitle you to:

• Annual Investment Allowance (AIA): Up to £1 million
• First-Year Allowances: For new electric vans, zero-emission vehicles
• Full Expensing: For certain new plant/machinery
• Writing Down Allowances: On long-term-use equipment

Capital Gains Tax (CGT)

Selling property, land, or assets?

• 18% CGT: For basic rate taxpayers
• 24% CGT: For higher rate taxpayers (updated from 28% as of April 2024)
• £3,000 annual exemption (2025/26)
• Limited companies pay tax on disposals via Corporation Tax

If you're exiting a business or selling a company asset, Business Asset Disposal Relief (BADR) may reduce CGT to 14%, increasing to 18% from April 2026.

Avoiding Common Tax Pitfalls

In construction, the most common compliance errors include:

• Late or missed filings (CIS, VAT, PAYE)
• Misclassifying workers (employee vs. subcontractor)
• Poor digital recordkeeping
• Overclaiming VAT or expenses

We help you avoid costly penalties with efficient, tailored systems that keep your business audit-ready.

Why Choose SBX Accountants for Construction Tax

We specialise in the construction sector and understand its unique challenges. Our support includes:

• Tailored tax and structure advice for tradespeople and builders
• Full support for CIS, VAT, PAYE, and Company Tax Returns
• MTD-ready cloud systems and software setup
• Hands-on help with bookkeeping, payroll, and HMRC submissions

Construction Tax FAQs

1. Do I need to register for VAT as a builder? If your VAT-taxable turnover exceeds £90,000 in 12 months (as of 1 April 2024), registration is mandatory. Voluntary registration can be beneficial in some cases.
2. How does CIS work for subcontractors? Contractors deduct tax at 20% or 30%, depending on your status. With Gross Payment Status, you receive full payment and settle tax via your return.
3. Can I claim tools and safety gear? Yes. Most tools, workwear, and PPE are deductible, either as expenses or capital allowances, depending on value and use.
4. Can you help with MTD compliance? Absolutely. We help businesses get set up with the right software and submit reports on time.
5. Is the Super Deduction still available? No — it ended in March 2023. However, Full Expensing and AIA remain in place for qualifying purchases.

Ready to Take Control of Your Construction Tax?

Whether you need help with CIS returns, VAT compliance, payroll, or long-term tax planning, SBX Accountants is here to support you.



Call SBX today to speak with a construction tax specialist who understands your industry and your goals.