Allowable expenses for builders, trades and CIS subcontractors

What are allowable expenses?

They are the running costs of your business, taken off your income before tax is worked out. GOV.UK puts it this way: You can deduct these costs to work out your taxable profit before paying Income Tax as long as they’re allowable expenses.

Only business costs count. GOV.UK says you can only claim for costs related to business purchases, and Allowable expenses do not include money taken from your business for personal use.

These rules are for sole traders and partners. If you work through a limited company, skip to the section on companies.

What expenses can builders and tradespeople claim?

The everyday costs of doing the work, as long as you paid them for the business:

• Materials. Materials you buy for a customer’s job, if you paid for them yourself.
• Tools. Tools and equipment you use for the work. How you claim depends on how long they last and how you keep your books (see below).
• Protective workwear. Safety boots, hard hats and overalls you wear only for work, including cleaning and repairing them.
• Van running costs. Fuel, insurance, repairs, servicing, road tax, breakdown cover and parking for a van you use for the business.
• Subcontractors and staff. What you pay a subcontractor or labourer to work for you, and wages and employer’s National Insurance if you employ people.
• Phone. The business share of your mobile and internet bills.
• Insurance. Public liability insurance and any other policy for the business.
• Training. Courses that keep your skills in your trade up to date.
• Bank charges. Charges on the account you use for the business, and interest on business loans.

GOV.UK’s list of costs you can claim includes staff costs, for example salaries or subcontractor costs and things you buy to sell on, for example stock or raw materials.

Can I claim for tools?

Yes, but how you claim depends on the tool. If it is the kind you would normally get through in less than 2 years, such as drill bits, blades or a cheap set of chisels, it is an allowable expense. GOV.UK says you can claim items you’d normally use for less than 2 years as allowable expenses.

For tools and equipment you keep, such as a mitre saw or a mixer, it depends on how you keep your books. You claim them as:

• allowable expenses if you use cash basis accounting
• capital allowances if you use traditional accounting

Most sole traders are on cash basis now: From the 2024 to 2025 tax year, cash basis is the default method of accounting. Repairs are an expense either way: You can claim expenses for repairs and maintenance of business premises and equipment.

GOV.UK, cash basis: Unlike traditional accounting, you claim the cost of other equipment you buy to keep and use in your business as a normal allowable business expense rather than as a capital allowance.

What are capital allowances?

Tax relief on things you buy and keep for the business, such as equipment, machinery and vans. GOV.UK says They let you deduct some or all of the value of an item from your profits before you pay tax.

Under traditional accounting, this is how you claim for tools and kit you keep, and In most cases you can deduct the full cost of these items from your profits before tax using annual investment allowance (AIA).

Under cash basis you only need them for a car: If you’re a sole trader or partnership and you use cash basis, you can only claim capital allowances on business cars.

Under traditional accounting, the Budget changes these too. For new vans and plant (not cars) bought from 1 January 2027, the first-year allowance is set to rise from 40% to 50%. The yearly writing-down allowance on the main pool is set to fall from 14% to 12% for accounting periods that start on or after 1 April 2027 for companies, or 6 April 2027 for sole traders and partnerships. If your accounting period runs across that date, you get a blended rate for that period. Both changes are planned (needs Parliament to pass Finance Bill 2026-27). More on the Budget for builders and trades.

Can I claim workwear and PPE?

Protective clothing, yes. Everyday clothes, no. GOV.UK names protective clothing needed for your work, such as safety boots or hard hats, and clothing that protects your everyday clothes while you work, such as aprons or overalls - if you only use them for work. You can claim for buying, cleaning or repairing them.

Jeans, T-shirts and ordinary boots you wear on site do not count. You cannot claim for everyday clothing, such as suits, shirts, dresses or ordinary shoes - even if you wear them for work.

Can I claim my van?

Yes: either what it costs to run, or a flat rate per business mile. The running costs GOV.UK lists include:

• Vehicle insurance
• Repairs and servicing
• Fuel
• Parking
• Vehicle tax licence fees
• Breakdown cover

Source: GOV.UK, car, van and travel expenses.

If you use the van privately as well, you claim only the business part. You can only claim allowable expenses for the business costs.

The flat rate is used instead of the actual costs of buying and running your vehicle, for example insurance, repairs, servicing, fuel, so it is one or the other for each van. You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowances for, or you’ve included as an expense when you worked out your business profits.

Buying the van itself: under traditional accounting, If you use traditional accounting and buy a vehicle for your business, you can claim capital allowances on the cost of the purchase. Under cash basis, a van is not a car, so the rule for any vehicle that is not a car applies: For all other types of vehicle, claim the cost as allowable expenses.

Which journeys count is the part most people get wrong when they work on different sites. Our mileage guide covers the rates and which journeys count.

Can a CIS subcontractor claim for materials?

Yes, if you paid for them. On your Self Assessment return you enter your total pay before deductions were taken, as ‘income’, so the materials a contractor paid you for are in your income. What you spent on them goes in as an expense.

The contractor leaves materials out when working out your CIS deduction, but that does not take them off your tax return. Keep every materials receipt: it backs up the expense. Materials bought for your own home do not count, as GOV.UK rules out any goods or materials bought for private use.

Can I claim what I pay my own subcontractors?

Yes. What you pay a subcontractor or labourer to work for you is a business cost, and so are wages if you employ people.

If you pay someone else for construction work, you may need to register as a CIS contractor too, and send monthly returns. When a subcontractor is also a contractor

Can I claim my phone bill?

The business share of it. GOV.UK lists phone, mobile, fax and internet bills among the costs you can claim, but You cannot claim for any non-business use of premises, phones or other office resources.

Work out the share in a way you can explain, such as how much of the bill was work calls. If half your calls are to customers and suppliers, you claim half the bill.

Can I claim training courses?

Yes, if the course is for the work you already do. GOV.UK allows training that helps you:

• improve skills and knowledge you currently use for your business
• keep up-to-date with technology used in your industry
• develop new skills and knowledge related to changes in your industry

Not training to start a new business, or to expand into new areas of business that are not directly related to your industry.

Source: GOV.UK, training courses.

What expenses can I not claim?

Anything personal, and a few business costs GOV.UK rules out by name:

• Everyday clothes, even if you only wear them to work
• Ordinary travel between home and work, and any private driving
• Parking tickets, speeding fines and other penalties
• Anything bought for yourself or your home, and money you take out for yourself
• Depreciation of your tools and equipment
• Paying back a loan or finance, as opposed to the interest on it
• The cost of preparing and sending your Self Assessment tax return

GOV.UK, for example: You cannot claim for everyday clothing, such as suits, shirts, dresses or ordinary shoes - even if you wear them for work. And on loans: You cannot claim for repayments of loans, overdrafts or finance arrangements.

Food on a normal working day is not on GOV.UK’s list; its travel guidance allows meals on overnight business trips.

And if you use the £1,000 trading allowance instead, you claim no expenses at all: You cannot claim expenses if you use your £1,000 tax-free ‘trading allowance’.

From 6 April 2027 the trading allowance is set to rise to £3,000, once Parliament passes the Finance Bill. What else the Budget changed.

Not sure about one cost? If you’re not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

Do expenses affect my CIS refund?

They lower the profit your tax is worked out on, and your CIS deductions are then set against that tax. GOV.UK says the deductions are advance payments towards your tax, and once your return is in, HMRC will work out how much tax you owe and take off any deductions taken by contractors.

So every allowable expense you record lowers the tax your deductions have to cover. Whether that leaves you a refund or a bill depends on your whole tax position for the year, so expenses alone cannot promise a refund. How to claim a CIS refund

Allowable expenses for a CIS subcontractor: a worked example

A subcontractor paid £40,000 in the year, with £7,200 taken off under CIS and £9,760 of allowable expenses, has a taxable profit of £30,240.

The subcontractor is a sole trader on cash basis, verified at 20%. They claim the van at what it actually cost rather than the flat rate, and 50% of their £480 phone bill was for work. The amounts are an example, not typical figures.

The £7,200 taken off during the year counts towards the tax on the £30,240 profit. If the expenses had not been recorded, the profit would be the full £40,000, and the tax the deductions are set against would be worked out on that.

The CIS rate comes from HMRC. The income and expense amounts are an example year.

Can I use simplified expenses instead?

For your van and for working from home, yes, if you are a sole trader. Simplified expenses are a way of calculating some of your business expenses using flat rates instead of working out your actual business costs. You do not have to use simplified expenses. Simplified expenses cannot be used by limited companies or business partnerships involving a limited company.

If you do your paperwork at home for 25 hours or more a month, a flat monthly amount replaces working out the business share of your household bills:

The flat rate does not include telephone or internet expenses. Tools, materials and everything else are still claimed at what they cost: You must calculate all other expenses by working out the actual costs.

The flat rates per mile for your van

What records do I need to keep for expenses?

A receipt or invoice for every cost. GOV.UK says Keep records of all your business expenses as proof of your costs. You then tell HM Revenue and Customs (HMRC) your allowable expenses for the tax year on your Self Assessment tax return.

GOV.UK counts these as proof:

• All receipts for goods and stock
• Bank statements, chequebook stubs
• Sales invoices, till rolls and bank slips

You do not need to send in proof of expenses when you submit your tax return. But you should keep proof and records so you can show them to HMRC if asked. Keep them for 5 years after the 31 January Self Assessment deadline for that tax year. How long to keep your records

What if I work through a limited company?

Then you are not self-employed, and the company claims its costs instead. If you run a limited company, you are not ‘self-employed’, even if you’re the owner and sole employee. You can deduct the costs of running your business to work out your taxable profit before paying Corporation Tax.

Simplified expenses are not open to companies, and the company gets its CIS deductions back through payroll rather than a tax return. CIS refunds for limited companies