Making Tax Digital for CIS Subcontractors

Making Tax Digital for CIS Subcontractors: What You Need to Know Before April 2026

If you work in the construction industry as a subcontractor, Making Tax Digital (MTD) is about to change the way you report your income to HMRC — and the clock is ticking. From April 2026, self-employed CIS subcontractors earning above certain thresholds will be legally required to keep digital records and file quarterly updates rather than a single annual Self Assessment return.

At JML Accountancy, we work with tradespeople and construction professionals across Surrey and Hampshire, and we want to make sure you understand exactly what’s coming, when it applies to you, and what steps you need to take now to stay on the right side of HMRC.

What Making Tax Digital Means If You Work Under CIS

Making Tax Digital is a HMRC initiative designed to modernise the UK tax system by moving it away from paper-based and manual processes towards fully digital record-keeping and reporting. The programme has been rolling out in stages: VAT-registered businesses were the first to be brought into MTD, and now the focus is turning to Income Tax Self Assessment (ITSA). For anyone who needs help understanding how this could affect them, head over to our MTD ITSA Guide.

For CIS subcontractors, this is the phase that matters most.

How Does MTD Affect CIS Subcontractors?

Under the current system, many CIS subcontractors submit a single Self Assessment return once a year. While your contractor already deducts tax from your payments each month and submits CIS returns digitally, MTD for ITSA adds a new layer of reporting that falls directly on you.

From April 2026, if you are a sole trader working under the Construction Industry Scheme and your qualifying gross income exceeds the relevant threshold, you will be required to:

• Keep digital records of all income, expenses, and CIS deductions as they occur
• Submit quarterly updates to HMRC using MTD-compatible software
• File a final declaration at the end of the tax year to confirm your figures, claim reliefs, and settle your tax bill

This means you will be reporting to HMRC at least five times per year, rather than once.

When Does MTD Apply to You? The Income Thresholds

HMRC is introducing the requirement in phases based on gross qualifying income. Note that your qualifying income is based on your gross earnings — the full amount your contractor pays before any CIS deduction is applied. If you invoice £55,000 but receive £44,000 after deductions, your qualifying income is £55,000.

April 2026 — MTD for ITSA becomes mandatory for sole traders with qualifying income above £50,000 per year.

April 2027 — The threshold reduces to £30,000 per year, bringing a much larger group of subcontractors into scope.

April 2028 — The threshold is expected to fall further to £20,000 per year, though this final figure is subject to confirmation by HMRC.

If your income currently sits below the threshold, you will continue filing an annual Self Assessment return as normal — for now. Given the direction of travel, it is sensible for all self-employed CIS workers to start preparing, regardless of where your income sits today.

The Quarterly Deadlines You Need to Know

Once you are in scope for MTD, you will need to submit quarterly updates to HMRC by the following deadlines each year:

• 7 August — covering the period April to June
• 7 November — covering the period July to September
• 7 February — covering the period October to December
• 7 May — covering the period January to March

At the end of the tax year, you then submit a final declaration — similar to the current Self Assessment process — where you confirm your full income and expenses, claim any allowances and reliefs, and reconcile your CIS deductions against your actual tax liability. This is the point at which any overpaid tax is refunded to you, exactly as it works today.

What about Penalties

HMRC has confirmed a grace period for the first year. During the 2026/27 tax year, penalty points are not expected to be issued for late quarterly submissions. This gives subcontractors some breathing room as they adjust to the new system.
However, this grace period only applies to the submissions themselves. If you owe tax and miss a payment deadline, penalties and interest will apply from day one — so getting your figures right and paying on time remains just as important as ever.
From the 2027/28 tax year, the full points-based penalty system is expected to come into force. Each missed quarterly submission earns a penalty point, and once you accumulate four points, a £200 fixed penalty is triggered.

What Digital Records Do You Need to Keep?

MTD does not change the allowable expenses you can claim — it changes how frequently you report them and the tools HMRC expects you to use. Under the new rules, you will need to maintain digital records that include:

• All income from construction work, including your full gross invoice amounts
• CIS deduction statements received from your contractors
• Invoices that clearly separate labour and materials (an important distinction under CIS rules)
• Receipts and records for all business expenses
• Any other relevant financial documents such as bank statements

Simple spreadsheets can be used, but only if they are digitally linked to HMRC through approved bridging software. In practice, most subcontractors find it far easier to use a dedicated cloud accounting package that handles the connection automatically.

Does MTD Apply If You Trade Through a Limited Company?

No. MTD for ITSA applies specifically to self-employed sole traders and landlords. If you operate your construction business through a limited company, your company pays Corporation Tax rather than Income Tax, and the MTD ITSA rules do not apply to you directly.
Plans for MTD for Corporation Tax were officially scrapped in July 2025, so limited company directors can continue with their existing annual filing process for the foreseeable future.

How JML Accountancy Can Help CIS Subcontractors in Surrey and Hampshire

Preparing for Making Tax Digital does not have to be stressful, but it does require action well before the April 2026 deadline. At JML Accountancy, we have been supporting self-employed tradespeople and construction workers across Godalming, Guildford, Farnborough, Petersfield, Farnham and the wider Surrey and Hampshire area for over 25 years.
We provide local help with every aspect of the MTD transition, including:

• Checking your threshold status — we will review your income to confirm when MTD applies to you and give you a clear timeline for preparation.
• Software setup and guidance — we will recommend and help you set up MTD-compatible accounting software that suits the way you work, whether you are on site every day or splitting time between jobs across the county.
• Digital record-keeping support — we will show you how to record income and expenses correctly from the outset, including how to handle the labour and materials split that matters so much under CIS.
• Quarterly update management — rather than leaving you to manage four submission deadlines each year on your own, we can handle the quarterly updates on your behalf so you can focus on the work.
• CIS deduction reconciliation — we ensure your CIS deductions are correctly accounted for at the year-end declaration, so you receive the full tax refund you are entitled to without delay.

Act Now — Don’t Leave It Until 2026

With the April 2026 deadline approaching, the time to prepare is now. Subcontractors who wait until the last minute risk scrambling to find compatible software, rushing to get their records in order, and potentially missing early quarterly deadlines without the safety net of the grace period.
Getting ahead of MTD is straightforward with the right support. Whether you are already using an accountant and want a second opinion, or you have never worked with one before, JML Accountancy is here to help.

Get in touch with our team today for a no-obligation conversation about how Making Tax Digital will affect your CIS work and what we can do to make the transition as smooth as possible.

📞 Call us on: 01483 418863

🌐 Visit our Making Tax Digital page