MTD for CIS Subcontractors: A Simple Preparation Guide

If you work in the construction industry as a self-employed subcontractor, you are already familiar with the Construction Industry Scheme (CIS). Your contractors deduct tax from your payments and send it to HMRC on your behalf.

With Making Tax Digital (MTD) for Income Tax arriving in April 2026, the way you report your income is changing. Here is what CIS subcontractors need to know.

Do You Need to Comply with MTD?

Yes. As a self-employed individual, MTD applies to you if your total gross income is above the threshold:

• From April 2026: Mandatory if your gross income is over £50,000.
• From April 2027: Mandatory if your gross income is over £30,000.

The Gross Income Trap

For CIS subcontractors, calculating your gross income can be confusing. Your gross income is the total amount you invoiced, before the contractor made the 20% or 30% CIS deduction.

If you only look at the money that actually hit your bank account, you might mistakenly think you are below the £50,000 threshold. You must use the gross figures from your CIS payment and deduction statements.

How MTD Changes Your Tax Reporting

Currently, you likely file a Self Assessment tax return once a year to claim back any overpaid CIS tax or pay any remaining balance.

Under MTD, you must:

1. Keep digital records of your income and expenses.
2. Send quarterly updates to HMRC every three months.
3. Submit a final declaration at the end of the tax year.

How to Handle CIS Deductions in Quarterly Updates

When you submit your quarterly updates, you are only sending a summary of your total income and total expenses.

Crucially, you do not report your CIS deductions in your quarterly updates.

The quarterly updates are just about your business performance (income and expenses). The actual tax you have already paid via CIS deductions is reconciled at the end of the year during your Final Declaration, exactly as it is now.

You Don't Need Expensive Software

Many software companies sell expensive packages tailored for the construction industry. If you have a complex business with employees, these might be useful.

However, if you are a standard subcontractor who currently tracks invoices and expenses on a spreadsheet, you do not need to buy full accounting software.

HMRC allows you to keep your digital records in a spreadsheet. To send your quarterly updates, you simply use bridging software.

Bridging software takes the totals from your spreadsheet and securely sends them to HMRC. It is the cheapest, easiest way to stay compliant without changing how you work.