Simon Shaw, Head of Property and Construction, Duncan & Toplis
Expanding a business is an exciting milestone that signifies business success and the opportunity to continue your upward trajectory – and it’s something that many construction companies have in the pipeline.
The first quarter of 2025 saw a growth in new construction orders of approximately 27% (£2,447 million) compared to the first quarter of 2024, according to the Office for National Statistics. This is likely a result of new infrastructure and private industrial work, presenting construction businesses with a huge opportunity to scale up.
But with this opportunity there also comes risks, so construction businesses must know their options, do their due diligence and plan carefully to ensure their expansion is built on a solid foundation.
Creating a robust growth plan
There are many ways in which you can expand a construction business. You might simply want to scale up your current operations, or perhaps you’re considering branching out into a new area – if you currently focus on residential, you could add commercial projects into the mix, or vice versa.
But whatever form your expansion takes, planning is key. Without a robust growth plan, the risk vs. reward balance will be heavily weighed down by risks, and the chances of successfully scaling up will be slim.
For example, if you’re expanding into a new area of construction, you’ll need to carefully plan how you will win work in this new area. You might currently win your work from individual customers, but if you have ambitious growth plans, consider taking this up a notch and signing up for tender portals, so you can pitch for much larger contracts.
Your growth plan should also incorporate a fi nancial management plan. You should consider cashfl ow management as part of this – including budgeting and forecasting. All construction businesses experience seasonal peaks and troughs, so planning ahead can help you manage fi nances across the year and ensure you have reserves for the quieter periods, helping you achieve year-round growth.
Tax considerations
Tax effi ciency is a critical element of any expansion strategy, as business growth can change your tax requirements and liabilities.
For example, if your growth plan involves acquiring another construction company, you should understand the implications of the assets, shares and liabilities being transferred to your business. If the other company has tax losses, then there are specifi c rules governing whether these are carried forward after the business is sold, and these can often be limited or forfeited. You should also consider acquisition costs such as VAT on transactions, tax-deductibility of transaction costs, transfer taxes and any capital duty that is due.
A rise in profi ts may mean you’re subject to higher corporation tax rates. Having a reliable tax adviser can make this part of business growth much easier, as they can help you to navigate the complexities of VAT, corporation tax rate tiers and eligibility criteria for Marginal Relief.
Additional payroll pressures
Growing your construction business is likely going to result in the need for a bigger team – from bricklayers to project managers.
This will increase your responsibilities from a payroll perspective, including salaries, tax deductions, pension contributions and compliance with employment laws. Making errors in these areas can be extremely costly for your business if you’re hit with fines from HMRC, which can have a knock-on effect on your growth prospects.
And there are even further payroll considerations following the 2025 Autumn Budget. From 1 April this year, the National Minimum Wage for workers aged 21 and over will rise by 4.1% – from £12.21 an hour to £12.71 an hour. This represents an increase of around £900 a year for a full-time employee, so construction businesses will need to ensure they have the reserves to fund this increase and that payroll systems are updated to reflect the change come April.
Pension-related changes announced in the Budget will also be felt by some employers in the construction sector. National Insurance relief on salary sacrifice pension contributions will be capped at £2,000 per year from April 2029, meaning contributions above that level will attract employer and employee National Insurance.
To reduce payroll pressures and reduce the risk of errors, automated payroll systems can be implemented to help with efficiency, accuracy and compliance –
giving you more time to focus on scaling the business. Alternatively, there’s the option to outsource your payroll function entirely, leaving it to the experts to ensure your team is paid accurately and on time.
Expanding your construction business is a significant undertaking, but one that can be a transformative step forward if done correctly. By carefully evaluating your finances, tax liabilities and possible business structures, you can mitigate all the risks and increase the chances of scale-up success.
Duncan & Toplis provides accounting and business services specifically designed to support construction and property businesses, including strategic financial planning, tax services and payroll. To find out more, visit www.duncantoplis.co.uk.
