Running a construction business is about more than finishing jobs on time and keeping costs under control. It is also about making sure that your profit is protected. One area where many firms lose out is tax. With the right planning, you can reduce your tax bill and keep more cash in the business.
Here are five practical ways construction companies can save money on tax.
Claim all allowable expenses
Many firms still miss out on relief simply because they do not claim everything they are entitled to. In construction, this covers much more than office costs. You can claim for tools, protective clothing, safety equipment, mileage to and from sites, and even food and accommodation if you are working away. Keeping proper records makes sure you do not pay more tax than you should.
For more information, please see: https://www.gov.uk/what-is-the-construction-industry-scheme
Use the Construction Industry Scheme (CIS) properly
If you work as a subcontractor, CIS deductions are taken at source. By filing your return correctly, you may be able to reclaim some of this, especially if you have expenses to offset. For contractors, managing CIS is just as important, as mistakes can lead to penalties and extra costs. A clear system keeps everything compliant and avoids unnecessary tax.
Take advantage of capital allowances
Construction businesses often buy vehicles, machinery, and equipment. These can qualify for capital allowances, which give you tax relief on the cost. The Annual Investment Allowance currently allows you to claim full relief on qualifying purchases up to £1 million. This can be a real benefit if you are investing in new kit.
Look into R&D tax credits
Research and development is not just for laboratories. Construction firms often qualify when they develop new methods of building, trial eco-friendly solutions, or create ways to reduce waste. If you are doing something different or innovative on site, it may qualify. The relief can lower your corporation tax or even give you a cash repayment.
Plan carefully for VAT
VAT in construction can be complicated, with different rates depending on the type of work. Planning ahead can stop costly mistakes. For example, reduced rates can apply to certain refurbishments and zero-rating can apply to new build housing. Getting this right helps avoid overpaying and makes pricing jobs more accurate.
Good tax planning is not about cutting corners, it is about using the rules in your favour. In construction, where margins are often tight, every saving makes a difference.
If you are not sure which of these apply to your business, it is worth speaking to someone who knows both the tax system and the construction industry.
Want to keep more of what you earn?
We specialise in supporting construction businesses across Suffolk and Essex, helping owners save tax, stay compliant, and grow with confidence. If you would like to talk through how these strategies could work for your business, get in touch today.
Please see another An Accounting Gem blog: https://www.aag-accountants.co.uk/this-weekend-in-ipswich-15-17-august-culture-trails-fresh-thinking/
Google 5.0
