ISA Consortium

When main contractor work is actually the right choice

After 4 days arguing for shifting toward end client work, here's the honest other side.

Main contractor work is sometimes the right call. Often, even. The trick is choosing it deliberately rather than drifting into it.

When it actually makes sense:

✅ You're in a specialism where main contractor relationships are the natural route to market.
Highways, rail, large-scale civils, certain M&E specialisms. End client work in these areas is rare. The smart play is to be a great supply chain partner, not to fight the structure.

✅ You're newly trading and need predictable flow.
End client work takes years to build the pipeline for. Main contractor work can be won next week. For a 0 to £2M firm, this is often the right starting structure.

✅ You've built a reputation with specific main contractors that drives repeat work at decent margin.
If you're consistently winning at 9% plus from 3 to 4 main contractor relationships, that's a real business. Don't fix what isn't broken.

✅ Your operational capability is built around large, complex, predictable projects.
Your people, processes and systems may genuinely be better-suited to one big job a year than 20 small ones.

Where it goes wrong is when main contractor work becomes the default by accident, not the choice by design.

The questions worth asking once a year:
✅ Did I choose this client mix, or did it choose me?
✅ What's the actual net margin by client type?
✅ If my top main contractor relationship changed hands tomorrow, what happens?
✅ Am I building a business, or am I a subcontracted department of someone else's?

The last one is the hardest. And the most important.

Comment MIX below for the client portfolio review template we use with clients.

Case study: £4M director restructured how she took income. Kept £38K more a year.

A £4M Midlands construction director came to us last year. Profitable business, healthy order book, but felt like she was 'working for HMRC' more than for herself.

Her existing setup was the classic A from yesterday's poll:
• £12K salary
• £85K dividends
• £0 employer pension contributions
• Drawings taken whenever cash 'looked OK'

Her personal tax bill last year: just over £19K. Pension pot: £42K from earlier employment. Net retained wealth growth outside the business: minimal.

After working through her wider circumstances with her tax adviser, we restructured to:
• £12,570 salary (current personal allowance, no income tax, builds NI year)
• £37,700 dividends (within basic rate band)
• £30K employer pension contribution (within annual allowance)
• A planned dividend schedule for the rest of the year, sized to stay just below the higher rate threshold

She paid herself a similar take-home in cash. The difference was where the money went.

Outcome over the following 12 months:
• Personal tax bill down from £19K to roughly £6K
• £30K of pension building tax-efficiently (Corporation Tax deduction for the business)
• A clear annual plan rather than year-end scramble
• Total wealth growth outside the business: roughly £38K more than the previous year, same business performance

Her reflection: 'I'd been working hard. I just wasn't keeping enough of what I was earning.'

This was her specific situation. Yours will be different. But the principle is universal: how you take money out of the business is at least as important as how much the business makes.

If you've never had a proper conversation about director extraction, that's where the gap is.

The salary-dividends-pension stack. And why most owners get the mix wrong.

Every UK company director has three main levers for taking income.

Most owners use one or two well, and the third either badly or not at all.

Lever 1: Salary
Counts as a business expense (reduces Corporation Tax) but triggers NI on both sides.
The sweet spot for most directors is the threshold where you build a state pension qualifying year without triggering excess employer NI.
Below that = no Corporation Tax deduction. Above that = NI starts eating the benefit.

Lever 2: Dividends
Paid from post-tax profit. No NI. But you pay personal dividend tax on amounts above the dividend allowance.
The rates step up as your total income crosses bands. Timing matters: a large dividend taken in one year often triggers higher-rate tax that could have been avoided by spreading.

Lever 3: Pension contributions
This is the lever most construction directors under-use.
Employer pension contributions are a Corporation Tax deduction. They don't trigger NI. They don't appear on your personal tax return. And they build wealth tax-efficiently for retirement or exit.
Annual allowance is currently £60K (with possible carry-forward of unused allowance from the previous 3 years, subject to circumstances).

The mistake most owners make: maxing out salary and dividends, leaving the pension lever almost untouched. The result is more personal tax now and less wealth outside the business at exit.

The right mix depends on:
✅ Your stage of life and exit horizon
✅ Spouse and family circumstances
✅ Whether you need the cash now or can defer it
✅ The wider business growth plan

Reminder: this is general framework, not personal advice. Get proper tax advice on your specific situation.

Send us a message for a strategic conversation about how this fits your business.