How to price building work without losing money
The short answer
To price building work, cost labour, materials, plant, subcontractors and preliminaries separately, then add overhead recovery and profit as two more lines. Cost labour per productive hour, not per paid hour: for 2026 to 2027, employer National Insurance is 15% on pay above £5,000 a year (HMRC) and workers get 5.6 weeks' paid holiday (gov.uk). Price every variation in writing before the work starts.
A practical method for pricing UK building jobs: the seven price lines, a true labour rate, overhead and profit, variations and a worked price build-up.
This guide is for UK builders and small building firms who are busy but not keeping enough of what they invoice. The guide shows how to price building work line by line, so every quote covers the full cost of the job before profit is added.
Being busy does not protect a firm that prices below cost. Construction had more company insolvencies than any other industry in England and Wales in the 12 months to August 2026: 3,866 cases, 17% of those where the industry was recorded, according to the Insolvency Service.
Pricing decides what you keep from each job. Enquiries decide how many jobs you get to price, and good builders website design helps clients with a realistic budget find you.
How do you price building work?
You price building work by costing five things separately (labour, materials, plant, subcontractors and preliminaries) and then adding overhead recovery and profit as two more lines. Each line is worked out on its own and only added together at the end.
- Labour: hours at their full cost per productive hour, including your own time on the tools.
- Materials: quantities from the drawings or a site measure, plus a waste allowance.
- Plant and equipment: hire charges, or a day rate for kit you own.
- Subcontractors: written quotes from each trade.
- Preliminaries: the cost of running the site at all.
- Overhead recovery: the job's share of your yearly fixed costs.
- Profit: what the business keeps after every cost is paid.
The most common pricing mistake is blending these lines into one "cost plus a bit" figure. Overhead recovery pays for the van, the insurance and the accountant. Profit is what is left once those are paid.
Separate lines also show, when a client asks for a discount, whether there is room to move or whether a lower price means working for nothing.
How do you work out a labour rate for building work?
A labour rate for building work is the full yearly cost of a worker divided by their productive hours on site, not their hourly wage. Illustration: an employee paid £18 an hour costs about £30 per productive hour once employer costs and non-productive time are counted.
| Cost line (illustration) | Figure | How it is worked out |
|---|---|---|
| Gross pay | £37,440 | £18 × 40 hours × 52 weeks, holiday pay included |
| Employer National Insurance | £4,866 | 15% of pay above £5,000 a year (HMRC, 2026 to 2027) |
| Workplace pension | £936 | 3% employer minimum on qualifying earnings above £6,240 |
| PPE, training, cards, tools, insurance share | £3,000 | Illustration allowance |
| Total yearly cost | £46,242 | Sum of the four cost lines |
| Productive hours | 1,550 | 2,080 paid hours, less 224 hours of statutory holiday, less 306 hours of sickness, travel, yard time and weather (illustration allowance) |
| Cost per productive hour | £29.83 | £46,242 ÷ 1,550 |
Replace the illustration allowances with your own figures; the National Insurance, pension and holiday lines follow the 2026 to 2027 UK rules.
Pricing that worker at £22 an hour feels like a mark-up on £18, but loses about £8 on every productive hour. A working owner who prices their own hours at nothing gives away a wage.
What are preliminaries in building work?
Preliminaries are the costs of running a building job rather than doing the work itself, and builders miss them because none of them appear on a materials list or a subcontractor's quote. A preliminaries checklist for a domestic job:
- Skips, waste removal and waste transfer paperwork
- Welfare: toilet, hand washing, somewhere to eat and change
- Scaffolding, towers and other access equipment
- Temporary protection and dust control
- Deliveries, parking and travel
- Your own time visiting, ordering and coordinating
- Building control charges and structural calculations
- Site set-up, security and the final clean
Preliminaries vary with the length of the programme and the access on site, so price them from real quotes rather than a percentage. Building control approval comes from your council's building control department or a private registered building control approver (gov.uk), so ask the one you use for its charge.
Builders pricing new homes should check one more line: from 1 October 2026, gov.uk says building control applications for certain residential buildings may be subject to the Building Safety Levy. A builder who absorbs preliminaries instead of pricing them pays for them out of profit on every job.
How much overhead and profit should a builder add?
A builder should add overhead recovery first, worked out as yearly fixed costs divided by expected turnover, and then add profit as a separate percentage. There is no official "right" margin for building work, so both figures should come from your own accounts.
Overhead recovery covers costs that exist whether or not you have a job on: the van, insurance, accountant, phone, software, yard and admin wages. Illustration: fixed costs of £60,000 a year across an expected turnover of £500,000 give an overhead recovery of 12% on every job.
Profit pays for the slow months, the mistakes and the next van. Tendered commercial and subcontract work is usually priced more tightly than domestic work because more firms bid against the same drawings. The guide on how to win subcontractor work covers getting onto tender lists.
Decision rule: if a job's mark-up is smaller than your overhead recovery percentage, the job loses money even when the price looks healthy. A builder pricing at cost plus 10% with a 12% overhead recovery is paying to do the work.
What does a building price look like line by line?
Illustration: a domestic building job with £44,800 of direct costs should be priced at about £57,700 before VAT once 12% overhead recovery and 15% profit are added. The figures show the method, not a guide price.
| Price line | How it is worked out | Illustration |
|---|---|---|
| Labour | 620 productive hours × £30 | £18,600 |
| Materials | £12,000 take-off plus 10% waste | £13,200 |
| Plant and equipment | Digger, mixer and breaker hire | £1,500 |
| Subcontractors | Written quotes: electrician, plasterer, roofer | £6,500 |
| Preliminaries | Skips, scaffold, welfare, building control, clean | £5,000 |
| Direct cost | Sum of the five direct lines | £44,800 |
| Overhead recovery | 12% of direct cost | £5,376 |
| Profit | 15% of direct cost plus overhead | £7,526 |
| Price before VAT | Direct cost plus overhead plus profit | £57,702 |
| Price including VAT | Plus 20% VAT, if VAT-registered | £69,242 |
Priced at cost plus 10%, the same job comes to £49,280. That price is £896 short of covering the job's share of overheads, before any profit at all.
Keep a build-up in the same format with every quote, so a variation or a cheaper specification shows exactly which lines change.
How should builders handle quotes, estimates and variations?
Builders should give a written quote wherever the job can be priced properly, and price every variation in writing before doing the extra work. Citizens Advice tells homeowners in England that "a quote is a fixed price" while an estimate "is just a rough guess", and to get written quotes from at least three traders.
Citizens Advice also says a trader cannot charge more than the quoted price unless the homeowner asked for extra work, agreed to pay more after being told extra work was needed, or the price contained a genuine mistake. Rising material costs are not on that list. On long jobs, fix supplier prices in writing, keep the quote's validity period short, or name the materials whose price can be adjusted.
A simple variations process:
- Write the change down, even a £200 one, in a text or email.
- Price the change with the same lines as the original quote, including extra programme time.
- Get the client's agreement in writing before the work starts.
- Keep a variations log and add it to each stage invoice.
Use an estimate only where the scope cannot be known until work starts, such as opening up an old floor, and say in writing how the final figure will be worked out.
Should builders publish prices on their website?
Builders should publish typical price ranges on their website but not fixed prices, because a range filters out enquiries with the wrong budget without committing you to a number before a survey.
Illustration: a builder whose last ten single-storey rear extensions came in between £48,000 and £75,000 could publish "Single-storey rear extensions: typically £48,000–£75,000, depending on size and specification". A homeowner with a £25,000 budget sees the gap before booking a visit, and one with a realistic budget arrives expecting the price.
Base each range on your own finished jobs, not national averages, and update the ranges when costs change. A separate page per service is the natural home for a range; the guide on how to create a website for a construction company covers which pages to build. Fewer wasted site visits also helps with how to get more construction leads worth pricing.
What UK rules change the price of building work?
Employer National Insurance, the National Living Wage, statutory holiday, workplace pensions, VAT and the Construction Industry Scheme (CIS) all change the price of building work in the UK. The figures for 2026 to 2027 come from gov.uk and HMRC.
| UK rule | 2026 to 2027 figure | Effect on a building price |
|---|---|---|
| Employer National Insurance | 15% on pay above £5,000 a year | Adds to every employed hour |
| Employment Allowance | Up to £10,500 off the employer National Insurance bill | Reduces labour cost for eligible employers |
| National Living Wage (21 and over) | £12.71 an hour from 1 April 2026 | Legal minimum for employee pay |
| Statutory holiday | 5.6 weeks (28 days for a five-day week) | Paid hours with no productive work |
| Workplace pension | 3% employer minimum on qualifying earnings | Adds to every employed hour |
| VAT | 20% standard rate; registration above £90,000 taxable turnover | Quotes should say whether VAT is included |
| CIS deductions | 20% registered subcontractors, 30% unregistered | Changes cash flow, not the price |
| VAT domestic reverse charge | In force since 1 March 2021 | Customer accounts for VAT on most business-to-business building services reported under CIS |
A builder who works for homeowners and main contractors needs two quote formats: homeowners see the full price including any VAT, while a subcontract price to a VAT-registered main contractor usually falls under the reverse charge. CIS deductions count as advance payments towards the subcontractor's tax and National Insurance (HMRC), so plan cash flow for them rather than adding them to the price.
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Frequently asked questions
How do builders work out a price for a job?
Builders work out a price by adding five direct costs (labour, materials, plant, subcontractors and preliminaries) and then adding overhead recovery and profit as separate lines. Labour should be costed per productive hour, materials should include a waste allowance, and subcontract work should come from written quotes. Separate lines show where a price is thin before the client sees it.
What is a good profit margin for a builder in the UK?
There is no official good profit margin for a UK builder, because the right figure depends on your overheads, risk and market. Set overhead recovery first from your yearly fixed costs, then add profit on top as its own percentage. Tendered work is usually priced more tightly than domestic work, so know your minimum acceptable margin for each type of job.
How much should a builder charge per hour?
A builder should charge at least the full cost of each productive hour plus overhead and profit, not just the wage. In this guide's illustration, an employee paid £18 an hour costs about £30 per productive hour after 15% employer National Insurance, a 3% pension contribution, 28 days' holiday and non-productive time. Replace the illustration figures with your own.
Can a builder charge more than the quote?
A builder cannot charge more than a quote unless the client asked for extra work, agreed to pay more after being told extra work was needed, or the quote contained a genuine mistake, according to Citizens Advice guidance for England. Rising material costs are not on that list, so long jobs need fixed supplier prices or a named adjustment clause.
Should builders charge for quotes?
Builders can charge for quotes as long as the client knows before the visit, and Citizens Advice tells homeowners that "some traders charge for quotes" and to ask first. Charging for a detailed quote on a large job, and deducting the fee if the client goes ahead, covers the hours a full take-off takes.
Sources
- Insolvency Service: Company Insolvency Statistics, August 2026
- HMRC: Rates and thresholds for employers 2026 to 2027
- gov.uk: Holiday entitlement
- gov.uk: Workplace pension contributions
- The Pensions Regulator: Earnings thresholds
- gov.uk: Building regulations approval
- Citizens Advice: Before you get work done on your home
- gov.uk: VAT rates
- gov.uk: VAT thresholds
- HMRC: VAT domestic reverse charge for building and construction services
- gov.uk: What you must do as a CIS subcontractor
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