Money Matters Guide
for the Construction Industry
Helping Contractors, Subcontractors, and Tradespeople Take Control of Their Finances
Banking
Business Banking for UK Construction Professionals:
A Practical Guide
Money Matters: Financial Management for UK Construction Businesses
In the construction industry, managing finances efficiently is as crucial as laying a solid foundation. Whether you’re a sole trader, contractor, or run a limited company, having the right business bank account can streamline your operations, ensure compliance, and support growth.
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Why a Business Bank Account Matters
Legal Compliance: Limited companies are legally required to maintain a separate business bank account. Sole traders are not required to do so, but it is advisable for the following reasons:
Financial Clarity: Separating personal and business finances simplifies accounting, tax returns, and cash flow management. It’s important that in the event of a legal issue your business finances are kept separate from your personal assets.
Business banking services: Business accounts will often provide specific services such as overdrafts, credit, and software or in-person advice to help with accounting, cash management and so forth.
Professionalism: Clients and suppliers often prefer transactions through a dedicated business account. This enhances your credibility and professionalism.
Make sure your account is protected by the Financial Services Compensation Scheme (FSCS). There are many digital banking services available online. The FSCS will ensure that up to £85,000 of your money is protected. It also holds the bank to high standards for data security, customer services and operational processes. More about the FSCS.
Business Bank Accounts for Construction Professionals
There are a number of factors to keep in mind when you’re looking for a business bank account and it’s important to choose one that suits your circumstances and priorities.
Even if you already have an account you might still benefit from changing to another provider that offers better deals, services or benefits.
When looking at the accounts on offer, always look at the small print. For example, many banks offer fee-free banking for the first year, and then a monthly charge after that. It’s important to check how long does such offers last, and what happens after they finish? The comparison sites provided show the pros and cons of each choice, make sure to read these.
Things to think about when you’re choosing a business bank account
Prepare the following documents:
Proof of Identity: Valid passport or driving licence.
Proof of Address: Recent utility bill or bank statement.
Business Details: Company registration number, incorporation documents, and HMRC correspondence.
Most banks offer online applications, with some accounts being set up within minutes.
How to Open a Business Bank Account
Most banks offer online applications, with some accounts being set up within hours. For more traditional banks the process may take a little longer.
Sole Trader Accounts
Prepare the following documents: - Proof of Identity: Valid passport or driving licence. - Proof of Address: Recent utility bill or bank statement. The address should refer to the business premises. For sole traders this will probably be your home address, but if you have a separate office in another building use that address. Also have the following information ready: - Business name - Estimated annual turnover (HMRC correspondence can help here) - Personal details, including home address history, National Insurance number. Online applications will require identity verification. You may be asked for a live photo, so make sure you have a mobile device ready to take photographs. You will probably be asked for a photograph of your signature as well. What happens next: The bank will review your application. This may take a matter of hours or even minutes for online applications. High street banks will typically take a few days. Once your application is accepted and processed you will receive your account details and card by post within a few days. The PIN code for your card will be sent separately.
Limited Company Accounts
Prepare the following documents: - Company documents - Proof of UK company registration. This is the Certificate of Incorporation - Company registration number from Companies House - Articles of Association and Memorandum of Association Also have the following information ready: - Proof of Identity: Valid passport or driving licence for all individuals connected with the account. - Proof of Address: Recent utility bill or bank statement for the past three years. The address should refer to the business premises. - Shareholder details if they own more than 10% of the business. Business Information: - Business name and registered address (the address registered with Companies House) - Business plan and information about business activities - Estimated annual turnover The application process will be similar to that for Sole Traders, see above.
Choosing the Right Bank Account
Things to think about when you’re choosing a business bank account
Fees:
-Is the bank covered by the FSCS? - Account fees: - Is there an introductory offer? - If so, what is it and how long does it last? - What will the fees be when your deal expires?
Online Banking:
Ensure the bank offers robust online services for easy account management. - Do you prefer a digital/online service or a bank with a high street branch?
Integration:
Compatibility with accounting software can save time and reduce errors.
Benefits?
What extra benefits does the account offer? - A credit line - An overdraft - Free bank transfers (how many?) - Access to a business adviser - Accounting and cash flow software - Multi-currency account? - International payments? - No credit checks - Will the account pay you interest? If so, what is the rate?
Customer Support:
Responsive support is vital, especially when dealing with financial matters. - Is it online or in person? - What hours is it available?
Reputation / Customer Satisfaction
What is the Trustpilot or DeFaqto rating?
Specify Advice
Where to look (bear in mind that the top results might be adverts or promoted links – scroll past them to find the search results): Go Compare: https://www.gocompare.com/current-accounts/business-bank-accounts/ Money Supermarket: https://www.moneysupermarket.com/current-accounts/business-bank-accounts/ Money.co.uk: https://www.money.co.uk/business/bank-accounts
TAX, VAT & CIS
Understanding TAX, VAT & CIS in the Construction Industry:
What You Need to Know
Navigating tax and financial obligations in the construction sector can be complex – but staying compliant is crucial to protecting your business and avoiding costly penalties.
Here’s a quick guide to help construction professionals across the UK and Northern Ireland stay on track with TAX, VAT and the Construction Industry Scheme (CIS).
VAT (Value added tax) in Construction
Who should pay VAT?
Businesses with a VAT taxable annual turnover of £90,000 or more are liable to pay VAT. You should consult your accountant about this, as it is complex. There is more information here: https://www.gov.uk/how-vat-works
VAT rules vary depending on the type of construction work you carry out. Key points include:
Standard rate (20%) applies to most construction services and materials.
Reduced rate (5%) may apply to some residential renovations or energy-saving materials.
Zero rate (0%) applies to new builds of dwellings or qualifying buildings.
VAT Reverse Charge also applies to most B2B construction services under CIS. Instead of charging VAT to your contractor, you state it on the invoice and the contractor accounts for it. Ensure you’re invoicing correctly and understand your obligations to avoid underpayment.
TAX Responsibilities
If you’re self-employed, a subcontractor or running a construction business, you must register with HMRC and complete an annual Self-Assessment tax return.
For limited companies, Corporation Tax must be filed and paid on profits – don’t forget to include allowable business expenses to reduce your tax bill.
Stay Compliant, Stay Protected
Late filings, missed payments, or incorrect returns can lead to fines or HMRC investigations. Always:
Keep accurate records of payments, invoices, and receipts.
Use a qualified accountant or construction-specific bookkeeping software.
Set calendar reminders for VAT returns, CIS submissions, and tax deadlines.
Construction Industry Scheme (CIS)
You are advised to talk to your accountant or tax adviser about CIS.
From the government website (https://www.gov.uk/what-is-the-construction-industry-scheme):
“Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC). The deductions count as advance payments towards the subcontractor’s tax and National Insurance.
Contractors must register for the scheme. Subcontractors do not have to register, but deductions are taken from their payments at a higher rate if they’re not registered. If you’re already registered as a contractor, you can sign in to CIS online to file your monthly returns or to verify a subcontractor.
Who counts as a contractor or subcontractor
Register as a contractor if either:
– You pay subcontractors for construction work
– Your business does not do construction work but you have spent more than £3 million on construction in the 12 months since you made your first payment
Register as a subcontractor if you do construction work for a contractor.
You must register as both if you fall under both categories.
Work covered by CIS
CIS covers most construction work to:
– A permanent or temporary building or structure
– Civil engineering work like roads and bridges
For the purpose of CIS, construction work includes:
– Preparing the site – for example, laying foundations and providing access works
– Demolition and dismantling
– Building work
– Alterations, repairs and decorating
– Installing systems for heating, lighting, power, water and ventilation
– Cleaning the inside of buildings after construction work
Exceptions
You do not have to register if you only do certain jobs, including:
– Architecture and surveying
– Scaffolding hire (with no labour)
– Carpet fitting
– Making materials used in construction including plant and machinery
– Delivering materials
– Work on construction sites that’s clearly not construction – for example, running a canteen or site facilities
The CIS guide for contractors and subcontractors has more detail on what is and is not covered by the scheme.”
If you’re a contractor, you must:
- Register with HMRC for CIS.
- Verify subcontractors’ status before making payments.
- Deduct 20% (registered) or 30% (unregistered) from labour-only payments and submit these to HMRC.
If you’re a subcontractor, you can:
- Register for CIS to receive payments with 20% deductions.
- Offset these deductions against your own tax and National Insurance liabilities when submitting your return.
Money Matters
Guide
Whether you’re a sole trader, subcontractor, or managing a growing construction firm, strong financial management is key to long-term success. With fluctuating cash flow, material costs, tax obligations, and payment delays, it’s vital to stay organised and plan ahead.
Separate Your Business and Personal Finances
Keep a dedicated business bank account. Mixing personal and business transactions makes it harder to track your financial performance and can cause issues during tax season.
Track Every Project's Profitability
For every job: Record labour costs, material expenses, and overheads Compare actual costs vs estimates Calculate margins to identify profitable work and loss-makers Use project management or accounting software to stay on top of numbers in real time.
Plan for Growth, Not just Survival
Think long-term: Budget for new tools, vans, and staff. Build your credit score. Forecast seasonal fluctuations. Invest in marketing and digital presence. SPECDR can help you with this!
Set up a cash buffer
Construction often involves long payment cycles. Build a cash reserve to cover. Delayed payments, Unexpected material costs, Emergency repairs or breakdowns. A rule of thumb is to aim for at least 3 months of operating costs saved as a buffer.
Get Paid Faster
Invoice promptly and clearly. Use digital payment methods and reminders. Consider staged payments for larger jobs. Always include payment terms (e.g. 14 days) and chase unpaid invoices consistently.
Work with a Construction-Savvy Accountant
A good accountant can help you: Maximise allowable expenses Claim CIS refunds quickly Plan for Corporation Tax and VAT Avoid compliance penalties Don’t leave it until year-end – regular check-ins can save you thousands.
Understand Your Financial Position
Know your: Cash flow (what’s coming in and going out) Profit & loss (are you really making money?) Outstanding debts Upcoming tax bills Review these monthly or with your accountant to stay on top of your finances.
Use the Right Tools
Invest in construction-friendly financial tools: Xero, QuickBooks, or FreeAgent for bookkeeping Money Squirrel to automatically allocate income to VAT, CIS, tax, and savings Job management apps to monitor costs and staff time Specdr for more efficient, sourcing of supplies, services or staff
Get to Grips with TAX & VAT Responsibilities
Register for Self Assessment or Corporation Tax, depending on your structure. VAT registered? Know your rates – standard, reduced, or zero – and understand the Reverse Charge VAT rules for construction services. If you fall under the Construction Industry Scheme (CIS), keep accurate records of deductions and ensure submissions are made on time. Consider using digital tools like Money Squirrel to automatically set aside funds for tax and VAT so you’re not caught short at deadline time.
Stay Compliant
Late tax, incorrect VAT claims, or mismanaged CIS can lead to HMRC fines and audits. Always: File on time, Keep records for at least 6 years, Get advice when in doubt.
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Final Thoughts
Selecting the right business bank account is a foundational step for any construction professional. It not only ensures compliance but also facilitates efficient financial management, paving the way for business growth.
For more insights and tailored advice, explore our resources at www.specifyhub.co.uk.
Disclaimer
SPECIFY DOES NOT PROVIDE FINANCIAL ADVICE. All content provided is for informational purposes only and should not be construed as financial, investment, or legal advice. You should consult with a qualified financial advisor before making any financial decisions.