Builders, trades and CIS: compare MTD accountants in Wigan

Construction makes up 19.3% of the borough’s 9,265 businesses, far above the 13.1% across the North West. Among the 1,315 sole traders registered for VAT or PAYE, 255 are in shops and the motor trade, 235 in transport and 205 in construction.

The ONS survey estimates about 16,300 self-employed people, 10.3% of those in work, with a margin of plus or minus 3.1 points. With 120 accountancy and tax firms, that is roughly 136 self-employed people per firm by our calculation, against about 110 across the region. Accountants who understand CIS will be in demand in the run-up to April 2027.

Say you are a registered subcontractor and you invoice a contractor £3,000 for a job: £2,200 of labour and £800 of materials you bought yourself, with no VAT. The contractor takes the materials off before working out the deduction, so the 20% is charged on £2,200 only. That is £440, and you are paid £2,560.

In your Making Tax Digital records, that one job becomes three entries. The income is the full £3,000, because that is what you earned. The £800 of materials is an expense. The £440 deducted is tax you have already paid, which is set against your bill when the year is finalised. Recording the £2,560 that reached your bank as your income would understate your turnover, and could hide the fact that you have crossed the threshold.

Established subcontractors can apply to HMRC to be paid without deductions. For a sole trader, HMRC looks at three things. The business must do construction work, or supply labour for it, in the UK and be run through a bank account. Turnover over the last 12 months must be at least £30,000, leaving out VAT and the cost of materials. And you must have paid your tax and National Insurance on time in the past.

Gross payment status helps cash flow, because nothing is held back from each payment, but it also means the whole tax bill lands at the year end and through payments on account. Making Tax Digital’s quarterly updates make that easier to plan, because you can see your profit building up through the year rather than finding out in January.

Builders and trades have more costs than most sole traders, and every one that is missed is profit you pay tax on. Under Making Tax Digital each cost goes into the software in its category, so it pays to photograph receipts on the day rather than keep a carrier bag of them in the van.

Before a contractor pays a new subcontractor, they check the subcontractor with HMRC. If you are registered for CIS, they deduct 20%. If you are not, they deduct 30%. Both are advance payments of tax, so the money is not lost, but at 30% far more of your cash is tied up until the year end.

Registering is free. You need your Unique Taxpayer Reference from Self Assessment, and once you are registered every contractor who checks you sees the lower rate. If you are starting out as a subcontractor in the borough, register for Self Assessment and CIS together, then set up your Making Tax Digital software at the same time, so the three pieces fit from the first invoice.

Two subcontractors can invoice the same amount and look very different on paper. A labour-only subcontractor, such as a bricklayer working on a contractor’s materials, has CIS deducted from almost the whole invoice, and nearly all of the turnover counts towards the gross payment status test. A supply-and-fit subcontractor, such as a kitchen fitter buying the units, has the materials taken off before the deduction, and those materials are also left out of the gross payment status turnover test.

For Making Tax Digital the threshold works the same way for both: the full invoices count as turnover. So a supply-and-fit trade with heavy materials costs can be over £30,000 of qualifying income while its profit is modest. Keep every materials invoice with the job it belongs to, because it matters three times: for the CIS deduction, for your expenses and for any gross payment status application.

Not every accountant is used to CIS, and a subcontractor’s first Making Tax Digital year is easier with one who is. Ask whether they reconcile CIS statements against your records each quarter, whether they can apply for gross payment status for you when you qualify, and whether they handle the CIS returns if you also take on subcontractors yourself.

The borough has 120 accountancy firms, and with construction making up almost a fifth of local businesses, many will have trade clients already. Ask for an example of how they set up a builder’s records, and which software they use for CIS and Making Tax Digital together.