CIS deductions and refunds, van and tool costs, PPE, materials, NIC, VAT and MTD for Income Tax explained for UK self-employed waterproofing and tanking specialists.
Waterproofing is a trade where the tax problem is built into how you get paid. You quote a basement tanking job, a cavity-drain membrane install or a damp-proof course, do the work for a main contractor, and find that 20% has already been sliced off your invoice before the money lands. That is the Construction Industry Scheme (CIS) doing its job, and for a self-employed waterproofing specialist it is the single biggest thing shaping your tax position.
This guide is written for the structural-waterproofing trade specifically: how your profit is actually taxed once CIS is in the picture, why you are almost always owed money back, the equipment and materials costs that drag your taxable profit down, and how the VAT reverse charge and Making Tax Digital change the admin. Get the labour-versus-materials split and your deduction statements right and the annual return becomes a refund claim rather than a headache.
As a sole trader you pay Income Tax on profit, which is your total turnover minus allowable expenses, regardless of how much CIS was deducted along the way. For 2025/26 the personal allowance covers the first GBP 12,570, then you pay 20% to GBP 50,270, 40% to GBP 125,140 and 45% above, with the personal allowance tapering away between GBP 100,000 and GBP 125,140 to create an effective 60% band. Class 4 National Insurance is 6% on profit between GBP 12,570 and GBP 50,270 and 2% above, with Class 2 NIC settled through Self Assessment.
CIS deductions are not a separate tax. They are advance payments toward exactly that Income Tax and Class 4 NIC bill. At the year end HMRC adds up what you actually owe on your profit, subtracts the CIS already taken, and the difference is either a small balancing payment or, far more often, a refund to you.
Scottish waterproofing contractors pay Scottish Income Tax through six bands (19%, 20%, 21%, 42%, 45% and a 48% top rate) and carry an S-prefixed tax code, while National Insurance and CIS stay UK-wide. Welsh contractors have a C-coded tax code at rates currently matching the rest of the UK. If your code looks wrong, perhaps because a part-time PAYE job or an old employment is distorting it, run it through the tax code checker.
If you subcontract waterproofing, tanking or damp-proofing for a main contractor, that contractor is legally required to deduct CIS from your labour and pay it to HMRC. Register for CIS and the rate is 20%; fail to register and it is 30%, so registration is the easiest 10% you will ever save. The deduction applies to your labour element only. Genuine materials you supply and itemise separately are excluded, which is why splitting them out on every invoice matters.
The mechanics matter because they explain the refund. CIS takes 20% off your labour from the very first pound, before you have used any of your GBP 12,570 personal allowance and before you have claimed a single expense. By the time you file, your tax-free band plus your van, tools, materials and PPE have shrunk your taxable profit dramatically, so the tax genuinely due is usually well below the 20% already handed over. For the full mechanics of registration, gross payment status and reclaiming, see our dedicated guide to the CIS subcontractor scheme, and estimate your own position with the CIS tax calculator.
The non-negotiable habit is collecting your payment and deduction statements. Every contractor must give you one for each pay period showing the gross figure, the materials, and the CIS taken. Without those statements you cannot evidence the deductions on your return, and an unevidenced deduction is a refund you do not get.
An expense is allowable when incurred wholly and exclusively for the business. Waterproofing is a materials-and-equipment-heavy trade, so your expense list is far longer than an office worker's, and every claimed pound reduces both the Income Tax and the Class 4 NIC on your profit.
| Expense | What qualifies | Notes |
|---|---|---|
| Van and vehicle | Fuel, insurance, tax, servicing, repairs, finance interest, or simplified mileage at 45p/25p | Pick mileage or actual cost and stay consistent across the year |
| Tools and small plant | Scabblers, chasing tools, mixing drills, paddles, trowels, hand pumps, sump pumps | Claimed in full, usually via the Annual Investment Allowance |
| Larger plant and access | Tower scaffolds, ladders, dehumidifiers, generators, skip and plant hire | Hire is a running cost; bought plant goes through capital allowances |
| Materials | Tanking slurry, liquid and sheet membranes, cavity-drain membrane, sumps, primers, fixings | Deductible; itemise separately from labour for CIS |
| PPE and safety | Respirators and FFP masks, dust filters, knee pads, gloves, goggles, overalls, boots | Protective gear is allowable; everyday clothing is not |
| Barrier and skin creams | Protective creams for cement and chemical contact | Allowable trade safety cost |
| Insurance | Public liability, tools cover, van insurance | Trade insurance is fully deductible |
| Trade and CPD | Property Care Association or similar membership, training that updates existing skills | New-trade training is not allowable |
| Phone and admin | Business share of mobile, home-office admin time, software | Exclude the private proportion |
| Accountancy and bank | Bookkeeping, Self Assessment, CIS refund handling, business banking | Fully deductible |
Travel between jobs is where waterproofing contractors leave money on the table or claim too much. You move between sites, builders' merchants and your home base, and that genuine business travel is deductible. You choose either simplified mileage (45p per mile for the first 10,000 business miles, then 25p) or a fair business proportion of actual van running costs including fuel, insurance, repairs and finance interest. You cannot mix the two for the same vehicle in the same year, so work out which gives the larger deduction and stick with it. Ordinary commuting from home to a single regular workplace is not allowable, but travelling to varying client sites is.
Materials are the other big one. When you buy the tanking slurry, membrane rolls, sumps and primer yourself, those costs are deductible against your profit. They also need itemising separately on your invoice so the contractor only applies CIS to your labour. Recording the wrong split, lumping materials into the labour figure, means CIS is over-deducted and your cash flow suffers all year before the refund arrives.
Everyday clothing is never allowable even if you ruin it on site; only genuine PPE and branded uniform qualify. The private share of your van, phone and any dual-use kit must be excluded. Fines, parking penalties and the cost of your own lunch on a normal working day are not deductible. And tools or a van bought before you actually started trading are pre-trading expenditure, claimed once you begin rather than ignored.
Take a CIS-registered tanking specialist who invoices GBP 52,000 over the year, of which GBP 40,000 is labour and GBP 12,000 is materials he supplied and itemised.
CIS deducted in-year: 20% of the GBP 40,000 labour = GBP 8,000 taken at source.
Allowable expenses:
Taxable profit: GBP 52,000 minus GBP 23,200 = GBP 28,800
Income Tax: GBP 28,800 minus GBP 12,570 = GBP 16,230 at 20% = GBP 3,246
Class 4 NIC: GBP 16,230 at 6% = GBP 974
Total tax and NIC due: GBP 4,220. But GBP 8,000 of CIS was already deducted, so HMRC owes a refund of roughly GBP 3,780. That gap is the whole point of filing carefully: claim every legitimate cost and the over-deduction comes back to you. Run your own figures through the sole trader tax calculator to see where you land before you file.
For a waterproofing subcontractor, the refund is built in the moment CIS is deducted. Keep every deduction statement and every materials receipt, and filing turns a 20% withholding back into cash.
You must register for VAT once taxable turnover exceeds GBP 90,000 in any rolling 12-month period, and a busy waterproofing contractor supplying materials can hit that faster than expected. Once registered, most construction work you do for another VAT-registered contractor falls under the VAT domestic reverse charge. In practice this means you do not add VAT to those labour-and-materials invoices; instead the contractor accounts for the VAT to HMRC. You still recover the VAT on your own purchases, the van, tools, membrane and PPE, through your returns. The reverse charge stops VAT being charged up and down the subcontract chain, so check whether your customer is the end client or another contractor before deciding how to invoice.
Making Tax Digital for Income Tax Self Assessment replaces the annual return with quarterly digital submissions and a year-end finalisation. The thresholds are based on gross income, not profit, and importantly that means your turnover before any CIS deduction:
For a CIS subcontractor this is a meaningful shift. Instead of bagging up a year of invoices and deduction statements each January, you record each job, each materials purchase and each CIS deduction digitally as it happens and send HMRC a quarterly summary using compatible software. The upside is that your refund position becomes visible through the year rather than being a once-a-year surprise. Our guide to MTD for sole traders walks through the quarterly rhythm in plain terms.
Not registering for CIS. Staying unregistered means 30% deducted instead of 20%, tying up even more of your cash until the refund. Registration is quick and pays for itself immediately.
Losing deduction statements. Without the contractor's payment and deduction statements you cannot prove the CIS taken, and unproven deductions are refunds you forfeit.
Lumping materials into labour. If your invoice does not split materials out, CIS is applied to the whole amount and over-deducts you all year.
Mixing mileage and actual van costs. Pick one method per vehicle per year. Switching mid-year creates an unreliable claim.
Forgetting the private-use split. Van, phone and dual-use kit must have the personal share removed, or the claim is overstated and exposed on review.
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