CIS deductions and refunds, allowable plant, tool, vehicle and PPE expenses, National Insurance, the VAT reverse charge and MTD for self-employed underpinning specialists.
Underpinning is hard, physical, high-stakes work: excavating beneath an existing foundation, shoring the trench, and pouring concrete to take a building's weight back down to firm ground. The tax position of a self-employed underpinning specialist is shaped by two things almost no office-based trade has to think about. First, you are almost always inside the Construction Industry Scheme, which means money is deducted from your pay before it reaches you. Second, your costs are dominated by plant, materials and a working vehicle rather than a laptop and a desk.
Get those two things right and your Self Assessment usually ends with HMRC paying you back. This guide covers how your profit is taxed, the specific expenses that apply to deep groundwork and footing repair, the records to keep on every job, National Insurance, VAT and the reverse charge, and when Making Tax Digital starts for you.
As a sole trader you pay Income Tax on profit, which is everything your contractors paid you (gross, before any CIS deduction) minus your allowable expenses. For 2025/26 the personal allowance covers the first GBP 12,570, then you pay 20% up to GBP 50,270, 40% to GBP 125,140 and 45% above. The personal allowance tapers away between GBP 100,000 and GBP 125,140, creating an effective 60% band in that zone. Class 4 National Insurance is 6% on profit between GBP 12,570 and GBP 50,270 and 2% above, and Class 2 NIC is settled through Self Assessment.
The crucial point is that CIS deductions come off your gross labour, not your profit. So a contractor might pay you GBP 30,000 of labour for the year, deduct GBP 6,000 under CIS, and hand you GBP 24,000. HMRC has already had GBP 6,000 of your tax. When you file and deduct your van, plant hire and tools, your actual tax and NIC are often well below that GBP 6,000, and the balance comes back as a refund.
Scottish underpinners pay Scottish Income Tax through six bands (19%, 20%, 21%, 42%, 45% and a 48% top rate) on an S-prefixed tax code, while National Insurance stays UK-wide. Welsh workers carry a C-coded tax code at rates currently matching the rest of the UK. If you also have a PAYE job, perhaps labouring on the books for one firm and subcontracting for others, your code can easily end up wrong; run it through the tax code checker so you are not taxed twice on the same allowance.
The Construction Industry Scheme governs how you are paid. The contractor you work for is required to deduct tax from the labour element of your invoices and send it to HMRC. If you are registered with CIS the rate is 20%; if you are not, it jumps to 30%, so registering is worth real cash flow every month. The deduction applies to labour only, not to materials or plant hire you have separately invoiced, which is one reason itemising your invoices matters.
Because underpinning is labour-intensive but also carries heavy plant and material costs, the gap between what is deducted and what you actually owe is often large, which is exactly why a refund is the norm. Our full breakdown of how the scheme works for subcontractors lives at CIS for subcontractors, and you can model your own refund with the CIS tax calculator.
| CIS situation | Deduction from labour | What it means |
|---|---|---|
| Registered subcontractor | 20% | Standard position; usually a refund at year end |
| Not registered | 30% | Higher deduction, bigger refund but worse cash flow |
| Gross payment status | 0% | Paid in full, settle all tax via Self Assessment |
An expense is allowable when it is incurred wholly and exclusively for the business. Unlike a desk-based trade, your deductions are dominated by plant, materials and a working vehicle. Capturing them properly is what turns the CIS deductions into a refund.
| Expense | What qualifies | Notes |
|---|---|---|
| Plant and equipment | Cement mixers, breakers, acrow props, trench shoring boxes, pumps, generators, compactors | Owned plant via the Annual Investment Allowance; hire is fully deductible |
| Plant hire | Mini-diggers, excavators, dumpers, concrete pumps, dewatering pumps | Keep every hire invoice; often a large line item |
| Hand tools and consumables | Shovels, trowels, drills, saw blades, shutter pins, fixings | Replaceable kit is deductible; durable plant may be AIA |
| Materials you buy | Cement, ballast, rebar, shuttering ply, grout, mass concrete | Deduct when you fund them; bill separately so they sit outside the CIS deduction |
| PPE and protective clothing | Hard hats, steel toe boots, hi-vis, gloves, knee pads, respirators, ear defenders | Genuine protective gear is allowable; everyday clothing is not |
| Vehicle | Van running costs and fuel, or HMRC mileage at 45p/25p per mile | Pick one method per vehicle and stick to it for the year |
| Insurance | Public liability, plant and tool cover, employer's liability if you use labour | Fully deductible business insurance |
| Scheme and trade costs | CITB levy, CSCS card, SMSTS/health and safety tickets, trade memberships | Cards and tickets that keep you working are allowable |
| Admin and home office | Phone, accountancy, bank charges, quoting and invoicing software, flat-rate home office | Use the simplified flat rate or a fair proportion of actual costs |
Buying your own breaker, mixer or set of shoring props is capital expenditure, but the Annual Investment Allowance lets you deduct the full cost in the year you buy, up to a generous limit that no solo underpinner will hit. Hiring plant is simpler still: an excavator, dumper or concrete pump hired for a job is a straight running cost, deducted in full. Either way, keep the invoice. Plant hire on a deep underpinning job can run to thousands in a single week, and missing those invoices is the fastest way to overpay tax.
You need a van or truck to carry tools, props and materials between sites. You can claim either actual running costs (fuel, insurance, servicing, repairs, the business share of the purchase via capital allowances) or the simplified mileage rate of 45p per mile for the first 10,000 business miles and 25p after that. The simplified method needs only a mileage log and suits most sole traders; heavy commercial vehicles with high fuel and maintenance bills sometimes do better on actuals. Ordinary commuting to a regular base is not allowable, but travel between sites and to suppliers is.
The private share of your phone, van and dual-use items must be stripped out. Everyday clothing is never allowable, even rugged workwear, although genuine PPE and branded uniform are. Fines, parking penalties and the cost of your own lunch on site are not deductible. And materials a contractor supplied and paid for are not yours to claim.
Underpinning records have one extra layer over a normal trade: the CIS paper trail. Keep your monthly deduction statements, your sales invoices (ideally splitting labour, materials and plant hire so the CIS deduction is applied correctly), and every purchase and hire receipt. Photograph receipts at the merchant counter before they fade. A simple rule that saves underpinners a fortune: never throw away a deduction statement, because that is the document proving tax was already paid on your behalf.
For an underpinning specialist, the refund lives in two piles of paper: your CIS deduction statements, which prove the tax already paid, and your plant and material receipts, which prove your real costs. Lose either and you overpay.
Take a registered underpinning subcontractor paid GBP 52,000 of labour across the year, with the usual plant and material outlay.
Gross labour: GBP 52,000 (CIS deducted at 20% = GBP 10,400 already paid to HMRC)
Allowable expenses:
Taxable profit: GBP 52,000 minus GBP 22,000 = GBP 30,000
Income Tax: GBP 30,000 minus GBP 12,570 = GBP 17,430 at 20% = GBP 3,486
Class 4 NIC: GBP 17,430 at 6% = GBP 1,046
Total tax and NIC due: GBP 4,532. But HMRC already holds GBP 10,400 from CIS deductions, so this underpinner is owed a refund of roughly GBP 5,868. Run your own figures through the CIS tax calculator or the sole trader tax calculator to estimate yours before you file.
You must register for VAT once taxable turnover passes GBP 90,000 in any rolling 12-month period. Many established underpinning specialists working off-the-books labour plus materials reach this, so watch your rolling total. Once registered, the construction industry has a special rule: the VAT domestic reverse charge. If you supply CIS construction services to another VAT-registered contractor who is not the end user, you do not charge VAT on your invoice. Instead the contractor accounts for it on their own return. Your invoice must state that the reverse charge applies and show the VAT rate that would have applied.
You still reclaim VAT on your own purchases of plant, hire and materials, which for an equipment-heavy trade is worth having. The reverse charge does not apply when you work directly for an end user, such as a homeowner having their Victorian terrace underpinned, where you charge VAT in the normal way. Getting this wrong is a common construction error, so flag every invoice clearly.
Making Tax Digital for Income Tax replaces the annual return with quarterly digital updates and a year-end finalisation. The thresholds are based on gross income before CIS deductions and before expenses:
Because the test is on gross turnover, an underpinner billing GBP 52,000 of labour is in scope from April 2026 even if profit after plant and materials is far lower. The practical shift is recording each invoice, deduction statement and plant receipt digitally as it happens rather than stuffing a year of paperwork into a January panic. For a CIS trade that is no bad thing: keeping the deduction figures current makes your refund quicker to calculate. Our guide to MTD for sole traders walks through the quarterly rhythm in plain terms.
Binning CIS deduction statements. Those statements are your proof of tax already paid. Lose them and you risk losing the refund they unlock.
Not registering for CIS. Staying unregistered means 30% deducted instead of 20%, starving your cash flow all year for no reason.
Forgetting plant hire invoices. A week of excavator and pump hire is a large deduction. Miss it and you hand tax to HMRC you do not owe.
Charging VAT when the reverse charge applies. Invoicing a VAT-registered contractor with VAT added, when the reverse charge should apply, creates errors for both of you.
Claiming everyday clothing. Tough work trousers are not allowable; only genuine PPE and branded uniform are.
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