How to Start a Construction Business in the UK [2025 Guide]

The UK construction industry is on modest but positive growth in 2025, with new housing, infrastructure, and green retrofitting projects driving demand across regions.

It’s one of the most resilient sectors in the country, but also one of the most competitive.

Survival is not guaranteed: according to recent statistics, only about 39-40% of all UK businesses born in 2018 survived to their fifth anniversary.

So, how do you make sure yours does?

From registration and licensing to winning your first jobs and growing sustainably, here’s how to lay strong foundations when starting a construction business and prepare for long-term success.

Understanding the UK construction market in 2025

Before you register your company or invest in tools, you need to understand the current demand, local opportunities, and where your skills fit in.

Choose your focus area

Construction is a huge sector, so narrowing your focus will help you stand out:

• Residential construction: Think house builds, loft conversions, home extensions, or retrofitting. Ideal for sole traders and small building companies.
• Commercial and industrial builds: Office spaces, warehouses, and fit-outs. Typically, more complex and suited to teams or subcontractor networks.
• Infrastructure and public works: Roads, water systems, and schools are often government-funded and require formal prequalification.

You can also specialise in a niche, such as:

• Eco-home retrofits
• Listed building restorations
• Passive house design
• High-end renovations
• Plumbing for high-rise flats

Choosing a niche gives you a competitive edge and helps you become the go-to specialist in your area.

💡 Need help brainstorming business name ideas? Check out 80+ Handyman Business Name Ideas to Stand Out Locally in 2025.

Do local market research

Begin by analysing:

• What kinds of construction projects are common in your area?
• Is there a shortage of certain services (e.g., flat roofing, heritage carpentry)?
• Who are your competitors and how are they rated online?
• Are new housing developments or regeneration projects planned nearby?

Use free resources like:

• Local council planning portals
• Google and Checkatrade reviews
• Construction industry trade magazines
• Client surveys or interviews

If you understand not just what’s being built now, but what’s coming in the next 5 – 10 years, it will help you future-proof your services.

Legal requirements and setting up your company

Once you’ve chosen your niche, it’s time to make it official.

Choose a legal structure

You have three main options: sole trader, limited company, and partnership.

If your profits will exceed £30,000 – £40,000, going limited is often more tax-efficient and protects your personal finances.

Register with the right authorities

• HMRC: Required for all business types.
• Companies House: If you're forming a limited company.
• CIS (Construction Industry Scheme): Required if you work with or pay subcontractors.
• VAT: Register if your turnover will exceed £90,000 (2025 threshold), or voluntarily if it suits your cash flow.

💡 ANNA offers a straightforward way to register a Limited Company and open a business account at the same time. The process is quick and fully online, with key filings handled for you. It’s a practical option if you want to get your company set up with minimal hassle.

Construction startup costs and managing your finances

Running a construction business is more than just turning up with your toolkit. To compete with established firms and remain profitable, you must take your finances seriously from the outset.

Breakdown of startup costs

Here’s a more realistic view of what you might spend during the first 6 – 12 months:

You could get started with under £3,000 if you already own tools and a van, but many new companies spend closer to £7,000 – £12,000 for a fully professional setup.

Ongoing monthly costs to budget for

Don’t forget to plan for recurring expenses:

• Fuel and transport maintenance
• Website hosting and business email
• Software subscriptions (e.g., Xero, Fergus, Tradify)
• Marketing and lead platform subscriptions
• Mobile phone, data, stationery
• Bookkeeping and accounting services
• Any repayments on loans or lease agreements

Many new construction firms fail not because of a lack of work, but because of cash flow gaps between jobs and late client payments.

💡 ANNA notifies you immediately whenever money enters or leaves your account, helping you keep track of your cash flow in real-time.

Where to find startup funding

If personal savings aren’t enough:

✅ Apply for a Start Up Loan (up to £25,000) through the British Business Bank: these are government-backed with fair rates

✅ Explore local grants or regional funding schemes, especially if you’re doing green retrofits or training apprentices

✅ Look into equipment leasing instead of buying machinery outright

✅ Use a business credit card with a low-interest intro rate for small purchases

Ensure that any loan repayments are manageable, even during slow months. Include repayment schedules in your business plan projections.

💡 Did you know you can earn cashback on everyday business expenses with your ANNA card? From train tickets to office furniture, it’s a simple way to give a little back to your business.

Pricing: charge what you’re worth

One of the most common mistakes new builders make is underpricing their work. It might be tempting to copy competitor pricing, but it can backfire.

Use a pricing strategy that accounts for:

• Direct materials: Include wastage and delivery fees
• Labour costs: Pay yourself AND subcontractors a fair rate, including holidays and NI
• Overheads: Factor in insurance, fuel, marketing, software, and admin
• Profit margin: Aim for at least 15 – 20% profit after all costs

👉 For example:

A kitchen refurb might cost £2,000 in materials, £1,800 in labour, and £500 in overheads. Add a 20% margin = £900.

Total quote = £5,200. If you quote £4,000, you’re paying to do the job.

How to get clients for your construction business

You don’t need a massive advertising budget to land your first jobs, but you do need to be visible, credible, and fast to respond.

Build your local presence first

Most new construction companies begin by operating within a 10–to 15–mile radius. Focus your efforts on visibility in your local area:

✅ Set up your Google Business Profile – This is what pops up on Google Maps when locals search “builder near me.” Add photos, business hours, and a mobile number.

✅ List on Checkatrade, MyBuilder, and Rated People – These platforms connect you with homeowners who are actively looking for help. Expect to pay per lead, so only respond to jobs that match your niche.

✅ Join local Facebook groups (e.g. “Watford Builders & Traders” or “Hampshire Trades Hub”) – Answer questions, offer advice, and show your expertise without hard selling.

✅ Get business cards, van decals, and branded clothing – These build trust and recognition, even before someone visits your website.

Build trust with a professional website

Even a basic website helps clients take you seriously. Include:

• A list of services (e.g., “Home Extensions,” “Bathroom Fitting,” “Driveways”)
• Photos of past projects (even if it’s just 3 – 5 to start)
• Customer testimonials
• Your contact info and trading hours
• Optional: Online quote form or WhatsApp contact button

How to run a construction business day to day

It’s easy to underestimate the amount of administration, planning, and coordination required to run even a small construction business.

Whether you’re working alone or managing a small team, your daily setup needs to keep projects moving, clients happy, and finances in check.

Decide what you’ll do yourself and what you’ll outsource

As the owner, you might start by doing everything. But as soon as you can, begin delegating or outsourcing tasks to free up your time.

Delegation allows you to grow beyond a one-person operation. For example, using subcontracted labour instead of hiring employees gives you flexibility without the commitment of payroll and HR admin.

💡 Many new construction business owners use a virtual admin or accountant from the start to manage invoicing, taxes, and paperwork.

ANNA Payroll is straightforward software for managing salaries, tax filings, and payslips.

You can add up to five employees, calculate pension contributions and student loan deductions, and file directly to HMRC.

Payslips, P45s, and P60s are created automatically and stored securely.

If you already use an ANNA business account, draft payroll payments are set up for you after each filing, but the payroll tool also works independently.

Define your workflow and communication process

Even small construction jobs require coordination. Establish a process from the start for how you’ll manage:

• Site assessments and quotes: How fast will you respond? Will you quote on-site or follow up within 24 hours?
• Contracts and payment terms: Will you use formal contracts, email agreements, or pro-forma invoices?
• Project management: How will you track jobs in progress, materials needed, and daily tasks?
• Client updates: Will you text clients, email them, or send photo updates?

You can start simple with a job diary or whiteboard, but having a system early on avoids missed steps, delays, and unhappy clients.

You can also create professional invoices in minutes with ANNA’s free invoice tool. Just fill in the details, and we’ll generate a ready-to-send PDF for your client – quick and simple.

Think about health, safety, and compliance early

Even if you’re working on small domestic jobs, you must follow UK construction safety rules.

Here’s what to get in place:

• CSCS cards for yourself and anyone working on-site
• RAMS templates (Risk Assessment and Method Statement)
• First aid training and kit for your van
• Accident logbook and incident reporting process
• PPE for all jobs — high-vis, gloves, boots, eye protection

If you're working with subcontractors, make sure they’re also compliant and insured.

Taxes, accounting, and compliance for construction businesses

Taxes and compliance can be a headache for new construction business owners, but getting this right early on will save you stress, penalties, and HMRC letters down the line. It also helps you understand whether your business is actually profitable, not just busy.

Construction-specific tax obligations

If you pay subcontractors, or if you're a subcontractor yourself, you’ll likely need to register for CIS with HMRC.

• Contractors must deduct 20 – 30% from subcontractors’ pay and send it to HMRC
• Subcontractors have deductions made unless registered for gross payment status

Other tax registrations you may need

• Self-Assessment: Required for all sole traders
• Corporation Tax: Required if you’re running a limited company
• VAT: Mandatory if your turnover exceeds £90,000 in any 12-month period. Optional VAT registration can help with reclaiming input tax, especially if you buy materials in bulk.

💡ANNA +Taxes gives you all the tools you need to stay in control of your finances, without overspending.

For just £3 a month for the first three months (£24/month after), you get access to automated VAT, PAYE, and Corporation Tax filing, a receipt scanner, expense sorting, and a personalised tax calendar.

You can also create invoices, manage payroll, and set money aside automatically using tax Pots. It’s an all-in-one system that saves time, reduces admin, and keeps your accounts tidy at a budget-friendly price.

Final tips and common mistakes to avoid when starting a construction business

Ready to begin your construction business? Register your business with ANNA and take care of your admin, taxes, and invoicing all in one place.