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 | SPECDR
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.
Why a Business Bank Account Matters
Legal Compliance: Limited companies are legally required to maintain a separate business bank account.
Financial Clarity: Separating personal and business finances simplifies accounting, tax returns, and cash flow management.
Professionalism: Clients and suppliers often prefer transactions through a dedicated business account, enhancing your credibility.
Top Business Bank Accounts for Construction Professionals
HSBC Small Business Banking Account: Offers 12 months of free banking and access to business specialists.
Lloyds Bank Business Account: Tailored for startups and small businesses, with free accounting software and no account fee for 12 months.
Tide Business Account: A digital-first option with no monthly fees, 24/7 support, and FSCS protection up to £85,000.
Starling Bank Business Account: Highly rated for customer satisfaction, offering a free account with robust mobile banking features.
How to Open 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.
Types of Business Bank Accounts
Sole Trader Accounts
While not legally mandatory, having a separate account helps in tracking business expenses and income, making tax filing more straightforward.
Limited Company Accounts
Essential for legal and financial separation between the company and personal finances. Banks typically require company registration details to open such accounts.
Partnership Account
Designed for businesses with multiple owners, these accounts facilitate shared access and management.
Choosing the Right Bank Account
Consider the following when selecting a business bank account:
Fees:
Look out for monthly charges, transaction fees, and other costs.
Online Banking:
Ensure the bank offers robust online services for easy account management.
Integration:
Compatibility with accounting software can save time and reduce errors.
Customer Support:
Responsive support is vital, especially when dealing with financial matters.
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 in Construction
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.
Construction Industry Scheme (CIS)
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.
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.
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.
SPECDR,
Learn, Grow, Collaborate
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.specdr.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.