Accounting for tradespeople

Trades businesses rarely fail because the work is bad. They struggle because the pricing was based on last year's materials, the paperwork got away from them, or the tax bill arrived unannounced.

Any system that requires you to sit at a desk will fail. Photograph every receipt at the merchant's counter using a capture app, use a separate business account and card for everything, and reconcile once a week for twenty minutes.

A genuine commercial van generally attracts capital allowances, VAT recovery where you are registered, and a far lower benefit-in-kind charge than a car. Double-cab pick-ups sit in a grey area and should be checked individually before purchase rather than after.

Tools, plant, test equipment and access equipment normally qualify for capital allowances. Keep the invoices — a bank line on its own is a weak claim.

Quotes based on prices from six months ago are the quickest route to an unprofitable job. Price materials at the point of quoting, state a validity period on quotations, and review labour rates annually against what employing someone actually costs.

If most of your customers are domestic, crossing the VAT threshold effectively adds 20% to your prices or removes it from your margin. Model it before you get there, and consider whether the cash accounting scheme suits your payment patterns.

There is no universal answer. It depends on profit, how much you need to withdraw, whether you employ, and how much administration you are prepared to carry. We compare the two on your actual figures rather than a rule of thumb.