Tax for plumbers and heating engineers: rates, CIS and VAT
Reviewed by Rob Webb, practising accountant since 2015 · Last reviewed September 2026 · Figures are for the 2026/27 tax yearReviewed by Rob Webb, practising accountant since 2015 · Last reviewed September 2026 · Figures are for the 2026/27 tax yearSelf-employed plumber? You pay nothing on the first £12,570 of profit, then 20% income tax plus 6% National Insurance, rising to 40% and 2% once profit passes £50,270.
Subcontract under CIS? 20% comes off your labour as you go. And once your turnover passes £90,000 in any rolling 12 months, you must register for VAT.
Want to check your own costs? See what you can claim as a plumber →
If you invoice for your work, carry your own tools, and decide which jobs to take, you are self-employed and must file a Self Assessment return. That applies equally to a heating engineer on new-build sites under CIS and to a plumber working directly for homeowners.
Register with HMRC by 5 October after the end of the tax year you started in. If you take subcontract work, register separately as a CIS subcontractor as well — it takes the deduction rate from 30% down to 20%.
The trading allowance covers £1,000 of gross trading income, measured before you deduct parts. Plumbing turnover almost always exceeds it, so treat it as a rule for occasional side work rather than something that will apply to you. An increase to £3,000 has been announced but no start date has been confirmed.
Here is a busy year for a heating engineer doing boiler installations and servicing, part of it as a subcontractor for a main contractor.
| Line | Amount |
|---|---|
| Turnover | £86,000 |
| Parts, boilers and materials | £21,000 |
| Van fuel, servicing and repairs | £5,600 |
| Van insurance | £910 |
| Tools, press fittings and equipment | £1,900 |
| Gas Safe registration | £780 |
| ACS reassessment and training | £640 |
| Public liability insurance | £520 |
| Workwear and protective equipment | £260 |
| Phone and internet (business share) | £360 |
| Waste and scrap disposal | £240 |
| Accountancy | £300 |
| Total expenses | £32,510 |
| Profit | £53,490 |
| Less personal allowance | £12,570 |
| Taxable profit | £40,920 |
| Income tax at 20% on £37,700 | £7,540.00 |
| Income tax at 40% on £3,220 | £1,288.00 |
| Income tax | £8,828.00 |
| Class 4 NI at 6% on £37,700 | £2,262.00 |
| Class 4 NI at 2% on £3,220 | £64.40 |
| Class 4 NI | £2,326.40 |
| Total liability | £11,154.40 |
| Less CIS deducted (20% of £18,000 labour) | £3,600.00 |
| Balance to pay | £7,554.40 |
Two things to read out of this. Profit of £53,490 crosses £50,270, so £3,220 of it is taxed at 40% while the Class 4 rate on that same slice drops to 2%. And CIS deductions do not automatically produce a refund — here they cover about a third of the bill and £7,554.40 is still payable by 31 January 2028. HMRC will also normally ask for payments on account towards the next year, due 31 January and 31 July.
If you subcontract to a main contractor on construction work, the contractor deducts tax from your labour before paying you: 20% if you are registered, 30% if not, 0% with gross payment status. Those deductions are advance payments towards your income tax and Class 4 National Insurance.
Split labour and materials on every invoice. The deduction applies to labour only, so a £6,000 job with £2,500 of boiler and parts should see the deduction taken on £3,500. If the invoice is not split, a contractor may deduct on the whole amount and you carry the cost for a year.
Report gross turnover on your return, claim your expenses normally, then set the CIS suffered against the resulting bill. Keep every payment and deduction statement. Under Making Tax Digital, HMRC pre-populates CIS deductions at finalisation, which is a useful cross-check but not a substitute for your own records.
Direct work for householders is outside CIS altogether, so a plumber doing both has some income with deductions taken and some without. Both go into the same turnover figure.
| What you can claim | What to watch |
|---|---|
| Boilers, cylinders, radiators, pipe and fittings | Where you recharge parts to a customer, the recharge is turnover and the purchase is an expense. Never net them off |
| Gas Safe registration and ACS reassessment | The five-yearly reassessment and the annual registration are both allowable |
| Flue gas analyser and its annual calibration | The analyser itself may be capital. The calibration is a straightforward expense |
| Press tools, pipe freezers, drain cameras | Higher-value tools go through capital allowances, not straight to expenses |
| Van running costs, or mileage at 55p then 25p | One basis per vehicle and you must keep to it. Flat rate rules out capital allowances on that van |
| Van racking, pipe tube and tool security | Fitted racking is normally capital; replacing a broken lock is a repair |
| Scrap and waste disposal, old boiler removal | Tip charges and skip hire are allowable. Keep the transfer notes |
| Manufacturer training and warranty registration schemes | Allowable where it updates existing skills or is required to install a product you already fit |
| Public liability and tools insurance | Only the business element if the cover sits inside a household policy |
| Emergency call-out phone and job management software | Business share of the phone; software subscriptions in full |
| Protective clothing, knee pads, branded workwear | Protective or branded only — ordinary clothes are not allowable |
| Working from home for quotes and invoicing | £10 a month for 25–50 hours, £18 for 51–100, £26 for 101+. Phone and internet claimed separately |
VAT creep on a rolling 12 months.
VAT registration is compulsory once taxable turnover passes £90,000 in any rolling 12-month period. Not the tax year — any 12 consecutive months. A plumber at £86,000 in the example above is close enough that one large installation in the spring can push the running total over without the tax year figure ever looking alarming.
This bites hardest on domestic work. Householders cannot recover VAT, so registering means either a 20% price rise to your customers or a 20% cut in your own margin. Once you are over, you cannot choose to come back under by ignoring it.
The practical step is to keep a running 12-month turnover total in your bookkeeping and look at it every month, not every year. Then the decision is yours in advance — price differently, spread an installation across a year end, or plan for registration — rather than a letter after the fact.
Note that VAT and Making Tax Digital for Income Tax are separate. Being VAT-registered does not put you into Making Tax Digital for Income Tax, and being in Making Tax Digital does not register you for VAT.
Qualifying income decides it: gross self-employment turnover plus gross property income, added together, before expenses, on the previous year's return.
Employment income, partnership profit shares, dividends and pensions are excluded from the test. Note that CIS turnover counts gross, before deductions.
The heating engineer above, at £86,000, is inside Making Tax Digital now. Quarterly updates for 2026/27 are due 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027, with the final declaration on 31 January 2028. Each update is cumulative from 6 April, so the February one restates nine months in full.
Records go in compatible software and are kept for at least five years after the 31 January deadline. With turnover under £90,000 you may report income and expense totals only; above it, category detail is required — another reason the VAT threshold figure is worth watching.
Penalties for missed updates are points-based: £200 at four points, then £200 per miss. Late payment is nothing up to 15 days, 3% at day 15, a further 3% at day 30, then interest at 10% annualised charged daily from day 31.
If you do direct domestic work only, have no CIS, and your year is one van and a folder of invoices, HMRC's free online return is adequate and you should use it rather than pay a fee.
If your turnover is comfortably under £20,000, you are outside Making Tax Digital for now and an annual return is genuinely simple.
If you run a limited company, you need company accounts and a corporation tax return, which is not what this service covers.
And if you are already VAT-registered and want advice on schemes, the domestic reverse charge for construction services, or a VAT inspection, that is a specialist area. Ask directly whether whoever you approach handles it, including us.
No. Only the slice above £50,270 is taxed at 40%. Everything between £12,571 and £50,270 stays at 20%. Class 4 National Insurance works in the opposite direction on that top slice, dropping from 6% to 2%.
Yes, in full. The annual registration fee and the ACS reassessment that keeps it current are both allowable business costs because they maintain a qualification you already hold.
Ask them to correct the deduction statement and adjust the next payment. If they will not, you still report gross turnover and claim the full deduction actually suffered, so you are not out of pocket permanently — but it does delay the money until the year end.
Only if you are VAT-registered. Registration becomes compulsory once your taxable turnover passes £90,000 in a rolling 12-month period. Some energy-saving and qualifying residential work has its own VAT treatment, so check the specific job rather than assuming a single rate.
Not as a straightforward expense. A van is capital, so it goes through capital allowances. And if you have chosen the flat mileage rate for that van, you cannot claim capital allowances on it at all — that is the trade-off for the simpler method.
You need a PAYE scheme and must report each payday under Real Time Information. Wages and employer's National Insurance become expenses in your accounts, which reduces your own taxable profit. Your Self Assessment position is otherwise unchanged.
Filed Tax prepares and files returns for plumbers and heating engineers, including CIS reconciliation. Send your invoices, deduction statements and costs, and we do the figures. £25 a month covers all four Making Tax Digital quarterly updates, the final declaration, unlimited questions and deadline reminders, and the first month is free. Rob Webb reviews every return before it is filed.
Rob is a Certified Xero Advisor with a BSc from the University of Salford. Last reviewed September 2026 against GOV.UK guidance current at that date. This guide is general information, not personal tax advice. Figures are for the 2026/27 tax year and can change at each Budget — always confirm the current numbers on GOV.UK or ask us to check your situation.