If it’s early days for your new building business, 2025 might be the first year that you need to complete an HMRC Self Assessment tax return. It can be a daunting task but with the right knowledge under your tool belt, it shouldn’t be too taxing. Here’s everything you need to know.
What is Self Assessment?
Self Assessment is simply the method that HMRC use to collect Income Tax and Class 2 National Insurance contributions from people if you don’t pay tax or National Insurance through an employer under ‘Pay As You Earn’ (PAYE).
Most self-employed building business owners fall into the Self Assessment category and have until midnight on 31 January to submit a tax return for the previous tax year and pay their tax online.
The UK tax year runs from 6 April to 5 April the following year. So for example, 31 January 2025 is the Self Assessment deadline for the tax year dated 6 April 2023 to 05 April 2024.
Who needs to do it?
All self-employed people need to submit a tax return, but Self Assessment also applies if earn you income from rental property, savings, dividends and investments, crypto, or from any foreign income.
Use HMRC’s checker tool to find out if you need to fill in a tax return for your building business or any other income you receive.
Tax and subcontractors
As a building business, you must also register with the Construction Industry Scheme (CIS) if you intend to pay subcontractors. When you pay your subcontractor, you will need to deduct an amount from their pay as an advance payment on tax for HMRC. You'll need to file a monthly return and keep records on file.
It will help your subcontractor if they register with CIS too - it's not manditory for them to be registered, but they will be subject to a higher rate of deduction if they aren't. HMRC have a helpful video explaining how to invoice materials for CIS contractors.
How to register
You should register for Self Assessment within three months of starting to trade in your building business, and at the latest by 5 October following the end of the tax year, which is the deadline for Self Assessments due by 31 January.
To register, you’ll need a Government Gateway user ID. This is also the user ID that’s used to log into the GOV.UK website for other reasons such as to access a childcare account or to obtain a new passport, so you may already have one. If you don’t, you can set this up during the registration process.
You will need two forms of evidence to confirm your identity, for example your passport and driving licence. However, HMRC may also offer you the chance to use their new identity checking app instead, which uses the camera on your phone to verify your identity against the driving licence photo they hold on file.
Obtain your Unique Taxpayer Reference (UTR)
Once you have registered, you will be given a 10-digit Unique Taxpayer Reference code (UTR) which you will need to keep safe. You will need to use this to complete your tax return, but bear in mind that it can take up to 15 days to arrive by post (although it will be available sooner via the HMRC website or app) so make sure you do this as soon as possible.
You only need to register once – next year you can just log in and complete your tax return without repeating this registration step.
If you’re reading this in late January and haven’t registered yet, you could be at risk of receiving a fine. However, it’s not necessarily too late – you can still register and complete your assessment online once you receive your UTR code. It’s best to do so as soon as possible to minimise or avoid fines. Please contact HMRC for further advice.
Download the HMRC app
If you have received your UTR, you can complete your Self Assessment and pay either online or via the HMRC app, where you can also access useful information and contact HMRC. To download the app, visit:
- App Store for iOS
- Google Play Store for Android
What documents do you need for Self Assessment?
HMRC ask you to keep records - this includes proof of your income and expenses such as receipts, invoices and bank statements.
Before you start your Self Assessment, check you have the documents needed to complete your tax return with the checklist below. Don’t worry if you start the assessment form and realise you have forgotten a vital piece of paperwork – you will be able to save your progress in the Self Assessment form and log in again at a later time to complete it.
Essential Documents:
- Unique Taxpayer Reference (UTR).
- National Insurance number: This is used to verify your identity and link your tax record.
- Self-employment earnings and expenses records: Keep detailed records of all your income and expenses from your building business, including receipts, invoices, bank statements, and purchase orders. These are crucial for calculating your taxable profit.
- Business bank statements: If you have a separate business bank account, gather statements for the entire tax year.
- Starting date of your business: You need to know the exact date you began trading to set your tax reporting period.
Additional Documents (depending on your circumstances):
- P45 form(s): If you left any employed work within the tax year, you'll need a P45 from each employer.
- Car, van and travel expenses: Including vehicle lease and purchase.
- Business assets purchase records: If you bought any business assets during the year, keep proof of purchase for capital allowances claims.
- Construction Industry Scheme (CIS) statements or payslips: If you are a self-employed building contractor who has paid sub-contractors and retained their portion of tax to pay HMRC. Here’s HMRC’s guidance on declaring CIS as an employer.
- Other income sources: Gather documentation for any income not related to your self-employment, such as:
- Pensions
- Investment income
- Rental property income
- Capital Gains: If you have sold assets, you can earn up to £3,000 before paying tax. You’ll need the date and value of both the of sale of your asset(s) and the original purchase.
What expenses can I claim for?
Income Tax is paid on your income after expenses are deducted. Your Self Assessment form splits these expenses out into allowable expenses and capital allowances. But what’s the difference?
Capital allowances
The nuts and bolts of your business, allowing you to deduct some or all of the cost for items including:
- Tools
- Machinery
- Vans
Allowable expenses
Running costs including:
- Staff costs – subcontractors and salaries
- Costs to run your business premises – heating, lighting, rates
- Travel costs – Fuel, parking permits etc
- Clothing – branded items, work boots etc
- Materials and stock
- Professional and financial services – lease payments, banking charges, or financial advice (eg hiring an accountant)
- Website build
- Marketing costs
- Training and professional development
If your allowable expenses are less than £1,000 in the tax year, you can claim for a tax-free trading allowance, but this won’t allow you to claim for capital allowances.
The lists above are by no means exhaustive and knowing what you can and can’t claim allowable expenses for can be tricky. So, it’s wise to either visit the HMRC website for advice on expenses or call HMRC directly. Alternatively, you may wish to speak to an accountant who can provide clarification on which expenses to include.
How to pay
The quickest and easiest way to pay is by using the HMRC app. This YouTube video shows you how to pay though online banking.
You may have questions about your tax bill or statement. It can be difficult getting through to HMRC on the phone during January, so they've put together this video about understanding your tax statement which may help.
Occasionally, HMRC will issue you with a refund – to make sure this happens swiftly, make sure you provide your correct bank account details on the assessment form.
You must pay in full on time or face penalties. However, if you are unable to pay, the important thing is to not panic or ignore the problem as it will not go away. HMRC can help you to find an affordable route to payment. If you owe less than £30,000 it may be possible to set this up online – simply go to GOV.UK and search for ‘HMRC payment plan’. If you owe more or need to discuss your circumstances, you can speak to HMRC directly for assistance.
Ultimately, if you don’t pay or seek payment terms, the implications can be very serious, so it’s worth paying on time and taking a pro-active approach.
Deadlines and important dates
- 5 October – Deadline for Self Assessment registration
- 31 January – Deadline for Self Assessment submission and payment of the first instalment of Income Tax and Class 2 National Insurance contributions.
Get help with your tax return
HMRC phone lines provide excellent and thorough advice on all matters of Self Assessment. However, lines can become extremely busy in the lead up to 31 January.
Fortunately, there are many other ways you can find the help you need with HMRC including these useful guides and resources. They estimate that around two thirds of calls could be resolved using online support, saving you time in lengthy call queues.
A good place to start is their series of video tutorials on YouTube and a customised step by step guide to help people who are completing Self Assessment for the first time.
Don’t forget, if you are awaiting a direct response from HMRC, you can check when to expect a reply online.
