If you work in construction, you already know it’s not a “simple” business. You’ve got multiple jobs on the go, materials flying in and out, subcontractors, vans, tools, and payments that don’t always land when you expect them to.

That’s exactly why tax issues crop up so often in the construction industry. The good news? Most of the common pitfalls are totally avoidable with a few solid habits (and the right support).

Below are the most common construction tax mistakes we see and what to do instead.

1) Mixing business and personal spending

It’s easy to do when you’re on the move: you grab fuel, lunch, a few bits from the builders’ merchant and the receipts end up in pockets, gloveboxes, and tool bags.

Why it’s a problem:

When personal and business spending are mixed together, it becomes harder to claim the right expenses, prove them to HMRC, and keep your records clean.

How to avoid it:

• Use a dedicated business bank account and card
• Pay yourself a regular amount (so you’re not dipping in and out)
• Keep receipts as you go (a quick photo uploaded to an app such as Dext)

2) Missing allowable expenses (or claiming the wrong ones)

Construction businesses often miss out on legitimate tax deductions or claim things that aren’t allowable.

Commonly missed expenses include:

• Tools and equipment 
• Protective clothing (PPE) and safety gear
• Vehicle costs (fuel, repairs, insurance, depending on your method)
• Mobile phone costs (business portion)
• Training and certifications (where relevant)
• Office/admin costs (including software)

How to avoid it:

• Keep a simple list of “typical expenses” for your business and review it monthly
• Decide whether you’re using mileage or actual vehicle costs (and stick to one method)
• Ask before you claim if you’re unsure; it’s much easier than fixing it later

3) CIS mistakes (Contractors and subcontractors)

The Construction Industry Scheme (CIS) is one of the biggest areas where things go wrong.

Common CIS pitfalls:

• Not verifying subcontractors correctly
• Applying the wrong deduction rate
• Missing CIS returns deadlines
• Not keeping proper records of deductions and payments
• Confusing CIS with “tax already sorted” (it isn’t always)

How to avoid it:

• Verify every subcontractor before paying them
• Keep CIS statements organised and easy to find
• Set a monthly reminder for CIS returns (and don’t leave it until the last minute)
• Get your bookkeeping up to date so your CIS position is always clear

4) Poor record-keeping 

If your bookkeeping is done “when you get a minute”, it usually means it’s done in a rush or not at all.

Why it’s a problem:

• You can’t see what you’re really earning
• You miss deadlines
• You risk penalties and interest
• You end up paying more tax than you need to

How to avoid it:

• Set a weekly admin slot (even 30 minutes helps)
• Use cloud bookkeeping software so everything is in one place
• Keep your invoices and receipts organised by job or month

5) VAT surprises (especially when you grow)

VAT can catch construction businesses out, particularly when turnover increases quickly.

Common VAT pitfalls:

• Not registering on time
• Charging VAT incorrectly (or not charging it when you should)
• Getting confused by the Domestic Reverse Charge
• Forgetting to account for VAT on certain purchases

How to avoid it:

• Monitor turnover regularly so you’re not caught off guard
• Get advice early if you’re close to the VAT threshold
• Make sure you understand whether the Domestic Reverse Charge applies to your work

6) Not setting money aside for tax

This one is simple and incredibly common.

If you’re self-employed or a company director, your tax bill doesn’t come out of your bank automatically. That means it’s up to you to plan for it.

How to avoid it:

• Put aside a percentage of income into a separate “tax pot” account
• Review your profit regularly (not just your bank balance)
• Get a tax estimate during the year so there are no nasty surprises

7) Late filings and missed deadlines

Late submissions can lead to penalties, interest, and stress you really don’t need.

How to avoid it:

• Keep a simple calendar of key dates (Self Assessment, VAT, CIS, Companies House)
• Don’t wait for year-end, keep things updated monthly
• If you’re behind, tackle it early (it’s always fixable)

A simple checklist to stay on track

If you want a quick way to keep your construction finances tidy, start here:

• Separate business and personal spending
• Keep receipts weekly (not yearly)
• Track CIS properly (verify, deduct, file on time)
• Review turnover for VAT
• Set aside money for tax
• Keep bookkeeping up to date so you can see your real numbers

Need a hand keeping it all organised?

If you’re in construction and want to feel confident that your bookkeeping and tax are on track (without spending your evenings buried in paperwork), we can help.

At Bluebells Bookkeeping, we support construction businesses with tidy, reliable bookkeeping and clear guidance, so you can focus on the job, not the admin.



If you’d like to chat, get in touch and we’ll point you in the right direction.