Plumber day rate: turning a trade rate into what you actually keep

Turning a trade rate into what you keep

1. Start from the days you can actually charge. Quoting, travelling, chasing materials and waiting on other trades are all unbilled. Most self-employed tradespeople bill considerably fewer days than they work, and a rate set as though every working day were chargeable is a rate that has already been discounted.
2. Add the costs the rate carries. Van, fuel, tools and their replacement, public liability cover, any scheme membership or certification, and materials float where you buy before you are paid. These come out of the rate before anything reaches you, and they are the reason two tradespeople quoting the same figure can earn very different money.
3. Decide whether you are self-employed or working through a company. A sole trader pays Income Tax and Class 4 National Insurance on profits through Self Assessment; a limited company pays corporation tax and you draw salary and dividends. Where you work through an agency for one client, the off-payroll rules and CIS can both come into it.
4. Watch the construction scheme deductions. Under the Construction Industry Scheme a contractor deducts from your payments on account of your tax before you see them, at the rate that matches your registration status. That is a cash-flow question as much as a tax one, and it is settled through your return rather than being final.
5. Compare a rate against employment properly. An employed tradesperson gets holiday, sick pay, an employer pension contribution and no unbilled quoting time. Price those in before concluding that a day rate is generous: the honest comparison is annual net against annual net, not rate against wage.

Common questions

What is a normal plumber day rate?

It varies by region, by whether the work is domestic or commercial, and by whether the price includes materials and a call-out. Rather than take a national figure, price your own: billable days, costs, the tax on the profit, and what you need to be left with.

Should I charge a day rate or by the hour?

Hourly suits short jobs and call-outs, day rates suit full-day work, and a fixed price suits a defined job you can estimate confidently. Mixing them for one customer without saying which applies is where disputes start.

Does IR35 affect tradespeople?

It can, where you work through your own limited company for a single client that directs your work like an employee. Contracting directly as a sole trader falls outside the off-payroll rules, although employment status for tax still applies through the ordinary tests.

How do CIS deductions affect my take-home?

They are deductions on account of tax taken before you are paid, not a final tax. They are set against what you owe when you file, and a registered subcontractor has less taken than an unregistered one, which is worth sorting out before it costs you cash flow.

Take-home pay by jurisdiction

• Take-home pay in United Kingdom