Trades FAQ's
At Mayflower, we work with dozens of tradespeople, and these are some of the most common questions we are asked each week. If you want to discuss anything further, please get in touch.
Should I lease or buy a van?
There isn’t a one-size-fits-all answer. The right choice depends on your cash flow, how long you expect to keep the van, and whether you value lower monthly costs or long-term ownership.
Buying a van gives you full ownership and can be more cost-effective if you plan to keep it for many years. Leasing can reduce the upfront cost and provide predictable monthly payments, which may be attractive for growing businesses that want to preserve cash.
As a rule of thumb:
- Buying may suit tradespeople who want to own the vehicle long term and keep monthly commitments lower once any finance is repaid.
- Leasing may suit those who regularly replace vehicles, want newer, theoretically more reliable vans, or prefer to spread costs over time.
The tax treatment can also differ depending on whether you buy, lease, use hire purchase, or operate through a limited company. Taking advice before signing an agreement can help ensure you choose the most tax-efficient option for your business.
How can I grow my trades business?
The best growth strategy depends on your goals, but most successful trades businesses grow by winning more of the right work, improving pricing, and building systems that reduce reliance on the owner.
For many electricians, plumbers and other tradespeople, the biggest opportunities include:
- Increasing prices regularly if demand is strong and your diary is consistently full.
- Generating more repeat business by staying in touch with existing customers and asking for referrals.
- Specialising in higher-value work, such as commercial contracts, EV charger installations, renewable energy systems or heating upgrades.
- Improving online visibility through Google reviews, a professional website and local SEO.
- Employing or subcontracting additional staff once work starts to exceed your personal capacity.
- Tracking profitability by job to identify the work that generates the best returns.
Many tradespeople focus solely on winning more work. Often, the fastest route to growth is improving margins, cash flow and efficiency so that more of your turnover turns into profit. Regular management information can help you identify where the biggest opportunities exist.
How do I take on a subcontractor?
Taking on a subcontractor can be a great way to increase your capacity without employing staff, but it’s important to set things up correctly from the start.
If you’re in the construction industry, you’ll usually need to register as a contractor under the Construction Industry Scheme (CIS) before paying subcontractors for construction work. You’ll also need to verify subcontractors with HMRC and, where required, deduct CIS tax from their payments.
Before work starts, it’s sensible to:
- Agree rates and payment terms in writing.
- Confirm whether CIS applies.
- Verify the subcontractor with HMRC.
- Obtain invoices for work completed.
- Keep records of all payments and deductions.
It’s also important to ensure the worker is genuinely self-employed. Treating someone as a subcontractor when they should be an employee can lead to unexpected tax and payroll liabilities. Taking advice before engaging workers can help you avoid costly mistakes.
Be careful too, if you take on subcontractors, the turnover you earn could require you to register for VAT.
Should I Register for VAT?
You must register for VAT if your taxable turnover exceeds the VAT registration threshold (£90,000 at the time of writing). However, some tradespeople choose to register voluntarily before reaching that point.
Voluntary registration can make your business appear more established and allows you to reclaim VAT on many business expenses. However, it also means charging VAT on your invoices, which may make your prices less competitive if most of your customers are private individuals rather than other VAT-registered businesses.
You may benefit from VAT registration if:
- Most of your customers are businesses that can reclaim VAT.
- You incur significant VAT on tools, materials or equipment.
- You’re approaching the VAT threshold and want to prepare early.
Before registering, it’s worth considering whether schemes such as the Flat Rate Scheme or standard VAT accounting are most suitable for your business. Taking advice can help ensure VAT registration supports your growth rather than creating unnecessary costs.
What’s the difference between mark-up and margin?
Mark-up and margin are both ways of measuring the profit on a sale, but are calculated different ways. Confusing the two can be costly.
Mark-up is where you take the cost of something, and add your profit on as a percentage.
For example, if it costs you £100 in labour and parts to supply a job, marking this up by 25% would generate revenue of £125, and therefore profit would be £25.
The confusion occurs where people assume this 25% is the same as your margin – it’s not, it’s in fact lower.
Your margin would be your profit divided by your revenue, that being £25 / £125. This is a margin of 20%.
Mark-up is useful because you work backwards from your costs, but mark-up percentages are always lower than margins.
Here’s a useful table with some common figures.
How Do I Look After My Business Records?
Keeping good records doesn’t have to be complicated, but it can save a lot of time, stress and money when it comes to preparing your accounts and tax returns.
We recommend keeping all business invoices, receipts, bank statements and other financial records in a digital format wherever possible. Using software such as Xero, Dext or Hubdoc can help you store documents safely and reduce paperwork.
Good practice includes:
- Keeping a separate business bank account.
- Saving invoices and receipts as you receive them.
- Reconciling your bookkeeping regularly.
- Keeping records of mileage and vehicle expenses.
- Retaining records for at least six years.
Accurate records not only help you stay compliant with HMRC requirements but also give you a clearer picture of how your business is performing and where improvements can be made.
How Do I Work Out the Profit on My Jobs?
Knowing which jobs make money is one of the best ways to improve your business. Many tradespeople know their turnover but aren’t always sure which jobs are actually generating the most profit.
A simple way to calculate job profit is:
Income from the job
Less materials
Less subcontractor costs
Less direct labour costs
Less other job-specific expenses
= Job profit
For example, if you charge £5,000 for a job and spend £2,000 on materials, £1,000 on labour and £300 on other costs, your profit is £1,700.
It’s also important to remember that business overheads such as insurance, vehicle costs, software subscriptions and accountancy fees still need to be covered. A job that looks profitable on the surface may be less attractive once these costs are taken into account.
Tracking profitability by job can help you identify your most valuable customers, price work more effectively and focus on the types of projects that generate the best returns.
I Am Subcontracting for Someone. Why Have They Taken Tax From Me?
If you’re working as a subcontractor in the construction industry, the contractor may be required to deduct tax from your payments under the Construction Industry Scheme (CIS).
Under CIS, contractors send these deductions directly to HMRC on your behalf. The tax isn’t usually an additional cost. Instead, it acts as an advance payment towards your Income Tax and National Insurance liabilities.
The amount deducted depends on your registration status:
- 20% if you’re registered for CIS.
- 30% if you’re not registered or haven’t been verified by HMRC.
- 0% if you’ve been granted Gross Payment Status by HMRC.
You should receive a CIS deduction statement showing how much has been deducted and paid to HMRC. These deductions can then be taken into account when your tax return is prepared and may reduce the amount of tax you need to pay, or even result in a refund.
If you’re unsure whether the correct deductions are being made, we can help review your CIS statements and ensure you’re receiving credit for all tax already paid.
Installing energy-saving materials such as insulation, solar panels and heat pumps in homes is zero-rated until 31 March 2027. Repairs, refurbishment and extensions to existing homes are 20%, as are architects’ and surveyors’ fees, even on new builds.
Get the evidence and certificates before you invoice. If HMRC disagrees later, the VAT usually comes out of your margin.
Does Making Tax Digital (MTD) Apply to Me?
Possibly. Making Tax Digital is HMRC’s programme to move tax reporting online, and whether it applies depends on how your business is structured and your level of income.
If you’re VAT registered, you’re already likely to be required to keep digital records and submit VAT returns using MTD-compatible software such as Xero, QuickBooks or Sage.
For sole traders and landlords, MTD for Income Tax is being introduced in phases. This will require affected individuals to keep digital records and submit regular updates to HMRC throughout the year instead of relying solely on an annual tax return.
If you’re unsure whether MTD applies to you, we can review your circumstances and help you prepare well before the rules affect your business. Getting the right software and processes in place early can make compliance much easier and provide better financial information throughout the year.
If you operate through a Limited Company, MTD would not apply.
How Can I Get Paid Quicker for My Jobs?
Getting paid quickly is one of the easiest ways to improve cash flow. Many tradespeople focus on winning more work when the real issue is collecting money faster.
Some simple ways to speed up payment include:
- Sending invoices as soon as the work is completed.
- Taking deposits before larger jobs begin.
- Clearly agreeing payment terms upfront.
- Accepting card and online payments.
- Chasing overdue invoices promptly.
- Asking for stage payments on longer projects.
It can also help to make payment easy for customers. Including a payment link or QR code on your invoice often reduces delays compared to asking customers to arrange a bank transfer themselves.
If you’re regularly waiting to be paid, it’s worth reviewing your invoicing process. Even reducing your average payment time by a couple of weeks can make a significant difference to cash flow and reduce the need for overdrafts or borrowing.
Should I Set Up a Limited Company?
There isn’t a fixed profit level at which a limited company becomes the right choice. The decision depends on your profits, future plans, level of risk and how you want to take money from the business.
Many tradespeople start as sole traders because it’s simple and involves less administration. However, as profits grow, a limited company can offer tax planning opportunities and the protection of limited liability.
A limited company may be worth considering if:
- Your profits are increasing year on year.
- You don’t need to withdraw all of the profits personally.
- You’re taking on larger contracts.
- You want to build cash reserves within the business.
- You’re concerned about personal liability.
On the other hand, limited companies have additional responsibilities, including annual accounts, Corporation Tax returns, payroll and Companies House filings.
The right answer depends on your circumstances. We can compare your position as a sole trader and as a limited company to help you decide whether incorporation would genuinely leave you better off.
Let’s Make Finance Feel Easier
Mayflower are ready when you are. Book a free discovery call and see how we can help you grow—with confidence and peace of mind.