If you are a subcontractor working under the Construction Industry Scheme (CIS), important tax reporting changes are coming.
The UK government is introducing Making Tax Digital for Income Tax, which will significantly change how self-employed individuals report their earnings to HM Revenue & Customs.
From April 2026, CIS subcontractors will be required to follow the new digital reporting system.
Here is everything you need to know.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is part of HMRC’s plan to modernise the UK tax system.
Instead of submitting one annual Self-Assessment tax return, self-employed individuals will need to:
- Keep digital records of income and expenses
- Send quarterly updates to HMRC using an approved software
- Submit a final declaration at the end of the tax year
The aim is to reduce tax errors and help businesses stay on top of their tax affairs throughout the year.
To know in detail about MTD ITSA, read this blog : Making Tax Digital (MTD) for income tax self-assessment
When Will MTD Apply to CIS Workers?
The new rules will apply based on gross income (before expenses).
From April 2026 : Self-employed subcontractors earning £50,000 or more
From April 2027 : Self-employed subcontractors earning £30,000 or more
From April 2028 : Self-employed subcontractors earning £20,000 or more
Under the new regime of reporting income and expenses under MTD, many subcontractors working under CIS will fall into these thresholds.
Use Our free Calculator to Find Out When MTD ITSA Becomes Mandatory for You.
How MTD Will Change Tax Reporting
Digital Record Keeping
CIS subcontractors must keep digital records of:
- Payments received from contractors
- CIS tax deductions
- Business expenses
Quarterly Updates to HMRC
Instead of filing one tax return per year, you will send four updates during the year followed by a final declaration.
Typical reporting periods may be:
- April – June
- July – September
- October – December
- January – March
These updates provide HMRC with a summary of your income and expenses.
End-of-Year Final Declaration
After the tax year ends, you will need to submit a final declaration confirming your figures and making any adjustments if necessary. If you have other sources of income, such as employment, dividends, or interest income, these will also be reported as part of the Final Declaration.
Our FAQs will answer most of your questions about MTD for ITSA.
What Happens to CIS Deductions?
CIS deductions will continue to work as they do now.
Contractors will still deduct 20% tax at source for registered CIS subcontractors or 30% tax at source for non registered CIS subcontractors and report it to HMRC .
These deductions will count as tax already paid when your final tax liability is calculated.
Benefits of MTD for CIS Subcontractors
Although the system will be different, there are several benefits:
✔ Better visibility of your tax position
✔ More organised records
✔ Reduced risk of tax return errors
✔ Easier financial management
Making Tax Digital does not have to be
MAKING TAX DIFFICULT
We are Here to Help YOU!
As accountants for hundreds of CIS workers, we understand how busy your week can get. That’s why at GM Accountants & Tax Consultants, we offer flexible meetings, including telephone consultations and Sunday appointments, to fully understand your needs.
If you choose us as your accountant, we can help you register for Making Tax Digital for free. Let us make the process simple and stress-free for you.
Our team of qualified accountants helps sole traders and landlords across the UK with MTD, from exemption checks to software setup and ongoing compliance, at competitive and affordable prices. Please feel free to contact us for expert advice. Feel free to get in touch for expert guidance, email us at admin@gmtaxconsultants.co.uk or call us on 020 3773 4123.
Disclaimer:
The information provided in this blog is for general informational purposes only and does not constitute professional accounting or tax advice. As individual circumstances may vary, readers are advised to contact us directly for advice tailored to their specific financial or tax situation.
