What an hour has to earn once CIS, VAT and the van are in the number

Someone offers you £280 a day and it sounds like £280 a day. It is the figure you repeat in the van on the way home, and it is the figure you use in your head when you work out whether you can afford the thing you want to afford. It is also the top of a column, not the bottom of one, and the distance between the two is roughly the difference between a good year and a year you cannot explain.

This page takes £280 apart. Days you can actually sell, the van, the tools, the pension nobody pays for you, the tax, and the CIS deduction that is not a cost at all but changes when you have money. Then it does the same arithmetic for a job you priced rather than a day you sold, because that is where the number starts moving.

How contractors describe the problem

The gap between hours worked and hours billed, counted by someone who has been doing it long enough to have a rule of thumb:

"for every hour I spend on a customers site working and being paid to work, I spend 2 hours in total on the business"

ProDave on BuildHub

And the size of the load that has to sit on top of bare labour, from a builder explaining why the sum keeps coming out the way it does:

"We often have discussion around how much profit you need to add onto the basic labour cost to make a small buiulding business wash it's face.. it's around 40 - 50% just to keep the show on the road."

Gus Potter on BuildHub

In the same conversation another member sets his floor and then lists, in five words, what an employee gets and he does not: "No sick or holiday pay".

Start with the days you can actually sell

A year has 260 weekdays in it. You will not sell 260 of them.

Eight of them are bank holidays in England and Wales, nine in Scotland. Some are yours because you took them. Some are yours because a supplier let you down or the client had not cleared the room. And a large block of them are days you worked hard and invoiced nobody for, because pricing a job feels like work but does not feel like a day.

185 billable days. That is 71% of the weekdays in the year, and it is a reasonable rather than a pessimistic figure: it assumes you are busy, healthy and only lose ten days a year to weather and dead time combined.

185 days at £280 is £51,800 of turnover. That is the real top line, and it is already £21,000 below the £72,800 that 260 days at £280 would suggest.

Take £280 apart

Turnover is not income. Between the two sit the things that make the work possible, and the awkward part is that most of them are annual while your rate is daily, so they rarely appear in the same sentence as the £280.

HMRC's own flat rate is a useful sanity check on that block. Under simplified expenses, business mileage in a van is worth 55p a mile for the first 10,000 miles from 6 April 2026 (it was 45p before that date) and 25p a mile after. Fourteen thousand business miles is therefore £6,500 of running cost in HMRC's arithmetic, which is the same order of magnitude as the £7,950 those line items add up to, and tells you they are not invented.

Then the line nobody sends you an invoice for. An employed bricklayer on a site is automatically enrolled into a pension at a legal minimum of 8% of qualifying earnings between £6,240 and £50,270, of which the employer pays at least 3%. Self-employment has no equivalent, so matching what the employed version of you gets is a decision you make and fund yourself.

Total overheads: £15,220. Against 185 billable days, that is £82.27 a day before you have paid yourself a penny or paid a pound of tax.

What actually lands

Now the tax. These are 2026-27 figures: personal allowance £12,570 and Class 4 National Insurance at 6% on profits between £12,570 and £50,270 then 2% above, both UK-wide; the 20% basic rate to £50,270 is the England, Wales and Northern Ireland band. Class 2 liability was abolished from 6 April 2024, and profits above the £7,105 Small Profits Threshold are treated as paid, so a busy sole trader has nothing to pay there.

Divide that by the 185 days you sold and £280 has become £163.99. Divide it by every day you actually worked, all 197 of them including the quoting and the invoicing, and it is £154.

Divide it by the hours. Nine hours on each of 185 site days is 1,665. Add the 30 days of quoting, admin and training at eight hours, and the five hours a week that go on evenings and Sunday mornings, and you are at roughly 2,100 hours a year. £30,337.40 across 2,100 hours is £14.45 an hour.

The National Living Wage from 1 April 2026 is £12.71. So a £280 day rate, worked hard and run tidily, clears the statutory minimum by £1.74 an hour, and does it while carrying the van, the tools, the risk and the paperwork that an employee carries none of. That is the honest reason Gus Potter's 40% to 50% is not a greedy number.

If Scotland is where you work, the income tax layer differs: six bands, and the 42% higher rate starts at £43,662 where the rest of the UK reaches 40% at £50,270, so an identical Scottish subbie hits the higher rate around seven thousand pounds earlier. CIS, National Insurance, VAT and Companies House are UK-wide.

The CIS deduction is not a cost. It is a date.

This is the part that makes UK arithmetic different from everywhere else, and the part that gets misread in both directions.

If your £280 is labour on a job inside the Construction Industry Scheme (Finance Act 2004, Part 3, Chapter 3), the contractor paying you takes a slice before you see it and pays it to HMRC against your name. Registered, that is 20%. Unregistered, 30%. With gross payment status, nothing.

That deduction is not an expense. It does not belong in the overheads. It is a payment on account of the £6,242.60 of tax and National Insurance that the year actually generates, which means the only real question is how much of your own money HMRC is sitting on, and for how long.

Read the right-hand column as an interest-free loan you did not agree to make. Registering as a subcontractor turns £9,297 of it into £4,117, which is the cheapest move in the whole sum: it is a form, and it is covered in getting registered so 20% is taken instead of 30%. Getting the rest back, whether by Self Assessment as a sole trader or through the Employer Payment Summary as a company, is claiming your CIS deductions back.

One more piece of the mechanism worth having: the deduction applies to the labour element and excludes the direct cost of materials. A supply-and-fix job at £280 labour plus £600 of materials has £56 taken, not £176. If you have been letting a contractor deduct across the whole invoice, that is real money you are lending them the use of. The CIS deduction calculator splits it either way in a few seconds.

What gets quoted, and what those numbers carry

There is no published day rate for a self-employed trade in the UK. What exists is what people say out loud, and it is worth reading with the £163.99 in mind.

Run DannyT's £230 through the same year and 185 days give £42,550 of turnover. The overheads do not shrink because the rate did, so £15,220 still comes off, leaving £27,330 of profit, £3,837.60 of tax and NIC, and £23,492.40 in the hand. That is £127.00 a billable day, or £11.19 an hour across 2,100 hours, which is under the National Living Wage. A £50 difference in a day rate is not a £50 difference. It is £9,250 of turnover and £6,845 of income, because overheads are fixed and only the top of the column moved.

Four things move a rate up in ways that survive contact with a client:

Supply and fix instead of labour only. Materials carry a margin, and they sit outside the CIS deduction base, so the same job pays more and withholds less.

A registration the client cannot work around. Gas Safe, NICEIC, Part P, an approved installer scheme. The rate follows the thing only some people can sign off.

Gross payment status. It does not raise the rate, but main contractors read it as a solvency signal at the point they choose between two quotes, and it is 20 points of cash flow. The tests and the annual re-test are in gross payment status.

VAT registration, once turnover in any rolling twelve months passes £90,000. Because the domestic reverse charge means most subcontractors collect no VAT from VAT-registered customers while still paying it on every merchant run, registration usually puts you in a repayment position rather than a paying one. Registering for VAT in construction has the arithmetic and the monthly-returns trick that goes with it.

A priced job pays you for the hour you saved

A day rate has one lever and it is the rate. Get faster, buy better, organise the sequence so nobody is waiting on a delivery, and the reward is that you finish early and bill less. Every improvement you make to your own trade is handed to the person paying you.

A priced job inverts that.

Take a bathroom priced at £3,400 for labour, budgeted at twelve days. That is £283.33 a day, near enough exactly the day rate, which is how it should be priced. Do it in nine because you have done forty of them and you had the materials on site on day one, and the same £3,400 is £377.78 a day. The client paid what was agreed and got the room back three days early. You kept the three days.

Put half a year of work on that footing and the year changes shape:

That is £8,995.76 more turnover on identical days, from identical hours, with the van and the insurance and the accountant costing exactly what they cost before. At a marginal 26%, 20% income tax plus 6% Class 4, about £6,656 of it lands. The day rate version of that same year produced £30,337.40 in total, so a single change in how the work is sold moves take-home by more than a fifth.

There is a second effect that shows up later. A day rate is priced against you personally, so the ceiling is your own attendance, and the only way past it is to work more days than a year contains. A priced job is priced against an outcome, so it can absorb a second pair of hands, an apprentice, better plant, or a Saturday from someone else, and the difference between what the outcome sells for and what it costs to deliver stays with the business. That is the point at which the arithmetic stops being about your hour and starts being about your capacity, and it is the reason a day rate quietly caps a business that is otherwise doing everything right.

Where your figures beat these ones

The strongest version of this arithmetic is the one with your van finance in it, your accountant's fee, and the number of days you genuinely lost last year rather than the number you would like to have lost. Pull last year's bank statements and the annual figures are all in there: insurance in one lump, the tyres, the tickets, the twelve months of phone bills.

The two that repay the most attention are your real billable days, because optimism there is what makes every other number look better than it is, and your split between day rate and priced work, because that is the one you can change this month. If the answer comes out somewhere you did not expect, an accountant who works with construction will tell you inside an hour whether your trading structure is costing you money on top of it.

What it costs

Quoting, invoicing and the rate arithmetic that sits behind them are part of AEC Stack, and there is no monthly subscription. The platform fee is 2.5% of each invoice processed through the platform.

That matters here for a specific reason. A fixed monthly cost is one more line in the £15,220, spread across 185 days whether the year was busy or thin. A percentage of what you invoice moves with the work: in a quiet January it is close to nothing, and in a full August it is a share of money that has already arrived.

Put your own rate, your own overheads and your own honest day count into a working set of books and quotes, and find out what your hour is earning before you agree the next one.