How tax works for electricians
Electricians work in several different ways: employed on PAYE, self-employed subcontracting for builders, running their own domestic and commercial jobs, or trading through a limited company. Many do a mix. The tax rules that matter most are:
- The Construction Industry Scheme (CIS), because installing lighting and power systems in buildings is construction work. Contractors deduct tax from your labour before they pay you.
- The VAT domestic reverse charge, which changes how you invoice other VAT-registered building businesses once you are registered.
- Tools, test equipment and your van, which are among your main costs and are claimed in specific ways.
How CIS works for electricians
If you do construction work for a contractor, the contractor deducts tax from your payments and passes it to HMRC as an advance payment towards your tax and National Insurance. The rates are:
- 20% if you are registered for CIS
- 30% if you are not registered
- 0% if you have gross payment status
The deduction only applies to your labour. The contractor first takes off VAT, materials you paid for, equipment hired for the job, and fuel (other than for travelling), then applies the rate to what is left. That is why it pays to show materials separately on invoices and keep the receipts. The contractor must give you a payment and deduction statement within 14 days of the end of each tax month; keep every one, because they are your evidence of tax already paid.
Homeowners are not contractors under CIS, so a householder paying you directly for a rewire makes no deduction. CIS applies to your work for builders, developers and other construction businesses.
Gross payment status lets contractors pay you in full. To qualify you need a history of paying tax and filing on time, a business bank account, and turnover over the last 12 months (ignoring VAT and materials) of at least £30,000 as a sole trader, or £30,000 per director or £100,000 in total for a company. For a longer explanation, see our guide to the Construction Industry Scheme.
Worked example: a CIS electrician's refund in 2026/27
Dan is a self-employed electrician registered for CIS. He invoices a main contractor £48,000 in the year, of which £8,000 is materials he bought. The contractor deducts 20% of the £40,000 labour, so £8,000 goes to HMRC. Dan also does £10,000 of domestic jobs for homeowners, with no deductions.
| Item | Amount |
|---|---|
| Contractor work (gross, before CIS) | £48,000 |
| Domestic jobs | £10,000 |
| Total income | £58,000 |
| Less materials (£8,000 contractor jobs, £2,000 domestic) | (£10,000) |
| Less van: 8,000 business miles at 55p | (£4,400) |
| Less tools and test equipment | (£1,500) |
| Less public liability insurance | (£600) |
| Less competent person scheme fees | (£500) |
| Less regulations update training | (£400) |
| Less business share of phone | (£300) |
| Taxable profit | £40,300 |
Income Tax: £40,300 minus the £12,570 personal allowance is £27,730, at 20% = £5,546.00. Class 4 National Insurance: 6% of £27,730 = £1,663.80. Total liability: £7,209.80.
Dan's contractor has already paid £8,000 to HMRC. On his Self Assessment return he enters the full £48,000 as income and the £8,000 as CIS deductions, and HMRC repays the difference: £790.20. Scottish Income Tax bands apply instead if you live in Scotland.
Sole trader or limited company?
Here is the same £60,000 of profit, before paying the owner, under each structure for 2026/27. The company pays a £12,570 director's salary and the rest as dividends, and has no other employees.
| Sole trader | Limited company | |
|---|---|---|
| Employer National Insurance: 15% of (£12,570 minus £5,000) | None | £1,135.50 |
| Corporation Tax: 19% of £46,294.50 left after salary and employer NI | None | £8,795.96 |
| Income Tax on profit or salary | £11,432.00 | £0.00 |
| Class 4 National Insurance | £2,456.60 | None |
| Dividend tax: 10.75% of £37,498.54 minus the £500 allowance | None | £3,977.34 |
| Total tax and National Insurance | £13,888.60 | £13,908.80 |
The sole trader figures are Income Tax of 20% on £37,700 (£7,540) plus 40% on £9,730 (£3,892), and Class 4 at 6% on £37,700 (£2,262) plus 2% on £9,730 (£194.60). With dividend tax at 10.75% (basic rate) and 35.75% (higher rate) from April 2026, the company in this example saves no tax at all, even before its extra accounting costs. It can still suit electricians who retain profit in the business, want limited liability, or employ others. The Employment Allowance, which offsets up to £10,500 of employer National Insurance, is not available to a company whose only employee is its director. A company's CIS deductions are set against its monthly PAYE bill through payroll, not claimed on the Corporation Tax return. Try the sole trader vs limited company calculator with your own numbers.
Allowable expenses for electricians
| Expense | Claimable? | Notes |
|---|---|---|
| Materials, cable and fittings | Yes | Keep receipts; they also reduce CIS deductions |
| Tools and test equipment | Yes | Relieved in full through the Annual Investment Allowance, or as an expense on the cash basis |
| Van: mileage rate or actual costs | Yes | 55p a mile for the first 10,000 business miles in 2026/27, or the business share of actual costs |
| Public liability and tool insurance | Yes | |
| Competent person scheme membership | Yes | Business subscription |
| Training to update skills you use, such as wiring regulation updates | Yes | Training to start a new, unrelated business is not |
| Protective clothing and safety boots | Yes | Everyday clothing is not |
| Phone, software and accountancy fees | Yes | Business share |
| Parking fines | No |
Vans. Sole traders can use the 55p mileage rate for a van if they have not claimed capital allowances or an expense deduction for buying it, but once they use the rate they must stick with it until the van is replaced. On the cash basis, a van's purchase cost is an allowable expense, unlike a car. If your company provides a van you use privately, beyond insignificant private use, you pay tax on a van benefit of £4,170 a year, plus £798 if the company pays for private fuel. A zero-emission van has a nil benefit.
VAT and the domestic reverse charge
You must register for VAT if taxable turnover passes £90,000 in any rolling 12 months. Once registered, the domestic reverse charge applies when all of these are true:
- the work is a construction service reported under CIS, such as installing lighting or power systems
- it is standard or reduced rated
- your customer is VAT registered and CIS registered
- your customer has not told you in writing that it is an end user or intermediary supplier
When it applies, you do not charge VAT; your invoice states that the reverse charge applies and the customer accounts for the VAT. It does not apply to work for homeowners, who are not VAT registered, and it is not used for installing security systems such as burglar alarms and CCTV when supplied on their own. Because you stop receiving VAT from contractors but still pay VAT on materials, you may find HMRC owes you VAT each quarter, and you can apply to move to monthly VAT returns.
Two scheme restrictions apply. You cannot use the Cash Accounting Scheme for reverse charge supplies, and reverse charge sales are excluded from Flat Rate Scheme calculations, so check whether that scheme still makes sense for you. For work outside the reverse charge, the flat rates are 14.5% for labour-only construction (materials under 10% of turnover) and 9.5% for general building or construction. See our Flat Rate Scheme guide for how the scheme works.
Key deadlines for 2026/27
- Every month (if you pay subcontractors yourself): CIS return to HMRC by the 19th, and deductions paid by the 22nd if paying electronically.
- 5 October 2026: register for Self Assessment if you started trading in 2025/26.
- 31 January 2027: file your 2025/26 return and pay any balance and first payment on account for 2026/27.
- 31 July 2027: second payment on account for 2026/27.
- 31 January 2028: file your 2026/27 return.
Making Tax Digital for Income Tax applies from 6 April 2026 if your self-employment and property income before expenses was over £50,000 in 2024/25, from April 2027 if over £30,000 in 2025/26, and from April 2028 if over £20,000 in 2026/27. Dan's £58,000 turnover would put him in scope. That means digital records and quarterly updates by 7 August, 7 November, 7 February and 7 May.
How GoForma helps electricians
GoForma is a UK online accountancy practice working with self-employed people and limited companies across the country by phone, video, email and WhatsApp. Our accountants are ACCA and AAT qualified, and FreeAgent accounting software (worth £360 a year) is included in every package.
- Start Sole Trader (£44 a month plus VAT, 50% off for the first 3 months): your Self Assessment return, including your CIS deductions, with a dedicated personal accountant. Start Sole Trader + VAT and Start Sole Trader + MTD are £68 a month plus VAT.
- Start Bundle (£88 a month plus VAT, 50% off for the first 3 months): year-end accounts and Corporation Tax return, payroll for one director and a dedicated accountant.
- Operate Bundle (£128 a month plus VAT) adds VAT returns, your director's Self Assessment and the confirmation statement. See Operate Bundle.
All packages are rolling monthly. To check your CIS refund, VAT position or structure, book a free consultation.