Making Tax Digital for CIS Subcontractors: £30,000 From April 2027

Making Tax Digital for CIS subcontractors starts for many more construction workers on 6 April 2027. From that date, self-employed subcontractors with qualifying income over £30,000 need to keep digital records, send quarterly updates to HMRC through compatible software, and submit their tax return through that software at the end of the year.

This guide is for sole-trader subcontractors working under the Construction Industry Scheme (CIS). It explains how HMRC decides whether you are in scope, why your gross pay matters more than what lands in your bank account, where CIS deductions fit into MTD, and what happens to your CIS refund. For the general rules that apply to all sole traders, see Making Tax Digital for the self-employed.

When Does Making Tax Digital Start for CIS Subcontractors?

Making Tax Digital (MTD) for CIS subcontractors starts on 6 April 2027 if your qualifying income on your 2025/26 return is over £30,000. CIS workers join in the same phases as every other sole trader, with each start date based on an earlier Self Assessment return.

MTD start date	Qualifying income threshold	Tax return HMRC checks
6 April 2026	Over £50,000	2024/25
6 April 2027	Over £30,000	2025/26
6 April 2028	Over £20,000	2026/27

The key point for most subcontractors right now: the 2025/26 return you are filing by 31 January 2027 is the one HMRC uses to decide whether you join MTD in April 2027. If you haven't filed it yet, our guide to the CIS Self Assessment tax return walks through each step. HMRC estimates around 1,077,000 additional sole traders and landlords will need to join from April 2027.

There is nothing special about CIS in the MTD rules — being in the scheme does not put you in or out of scope. What matters is your income figure, and that is the figure CIS workers most often misjudge.

MTD Qualifying Income for CIS Subcontractors: Gross or Net?

Qualifying income is your total gross income from self-employment and property, before expenses. For a CIS subcontractor, that means your turnover — the full amount you invoice, before CIS deductions are taken off and before you claim any expenses.

This trips up a lot of subcontractors. Contractors deduct 20% (or 30% if you're not registered for CIS) from the labour part of each payment, so the money you receive is noticeably lower than what you earned. MTD looks at the higher, gross figure.

What Counts Towards the £30,000

Included:

Gross CIS income from all contractors — labour plus any materials you invoice for
Any non-CIS self-employed income (for example, private domestic jobs for homeowners)
Rental income from UK or foreign property (your share, if jointly owned)

Not included:

Wages from a PAYE job
Your share of profits from a partnership
Dividends, pensions and savings interest

Example: Gross Pay vs Money Received

Mark is a self-employed bricklayer. His 2025/26 figures:

Item	Amount
Labour invoiced to contractors	£31,000
Materials he supplied and invoiced	£3,000
Gross CIS income (turnover)	£34,000
CIS deducted (20% of £31,000 labour)	£6,200
Money received in his bank account	£27,800
Expenses (materials, van, tools, PPE, phone)	£9,000
Profit	£25,000

Mark's bank receipts (£27,800) and his profit (£25,000) are both under £30,000. But his qualifying income is £34,000, so he needs to use MTD from 6 April 2027.

Example: CIS Income Plus a Rental Property

Sarah earns £26,000 gross as a labour-only plasterer and gets £6,000 a year in rent from a flat she owns. Her qualifying income is £32,000 — over the £30,000 threshold — so MTD applies to both her CIS work and her rental income from April 2027.

Example: PAYE Job Plus CIS Work

Tom works on a PAYE contract earning £25,000 and does weekend CIS work invoicing £18,000 gross. His PAYE wages don't count, so his qualifying income is £18,000. He isn't in scope for April 2027. If his CIS income on his 2026/27 return goes over £20,000, he would join from April 2028.

What MTD Changes for CIS Subcontractors (and What Stays the Same)

MTD changes how often you report to HMRC and how you keep records. It doesn't change how CIS works or how much tax you pay.

Area	Before MTD	Under MTD
Record keeping	Paper, spreadsheet or app	Digital records in MTD-compatible software
Reporting during the year	None	Four cumulative quarterly updates
Year-end return	Self Assessment return online	Tax return submitted through your MTD software
CIS deduction rates (20% / 30% / gross)	Unchanged	Unchanged
Contractors' monthly CIS returns (CIS300)	Unchanged	Unchanged
CIS payment statements	Issued monthly by contractors	Still issued monthly by contractors
Tax, Class 4 NI and allowable expenses	Same rules	Same rules
Payment dates	31 January and 31 July	31 January and 31 July

Your contractors keep verifying you, deducting CIS and sending monthly returns to HMRC exactly as before. The changes are all on your side of the paperwork.

Where Do CIS Deductions Go Under Making Tax Digital?

CIS deductions are not entered in your quarterly updates. Quarterly updates only contain totals for each income and expense category — your gross turnover and your business costs, for the tax year so far.

The deductions come in at the end of the year. GOV.UK's guidance lists "Construction Industry Scheme (CIS) — subcontractor deductions" among the information HMRC adds to your tax return, using the figures your contractors reported on their monthly returns. You check those figures before you submit.

This is why your CIS payment statements still matter:

Keep every monthly statement from every contractor.
Add up the deductions for the tax year (6 April to 5 April).
Compare your total with what HMRC shows in your software at year end.
If anything is missing or wrong — a contractor reported late, or not at all — chase the contractor first, then contact HMRC.

Our guide to CIS payment statements explains what each figure on a statement means.

How to Record CIS Income in Your Software

When you record a payment from a contractor, record the gross amount as income — not the net amount that reached your bank. The CIS deduction is tax paid in advance, not a business expense, so it shouldn't reduce your turnover or appear as a cost.

Example: A contractor pays you for £2,000 of labour and deducts 20%. You receive £1,600.

Income recorded in your software: £2,000
CIS deduction: £400 (tax already paid — credited on your tax return)
Expense: none for the deduction itself

Many MTD-compatible packages have a CIS option that splits the gross amount, deduction and net payment for you. It's worth checking this when choosing MTD-compatible software.

CIS Refunds Under Making Tax Digital

Quarterly updates do not trigger a CIS refund. HMRC works out your tax for the year — and any refund — once you submit your tax return through your MTD software, in the same way your Self Assessment return works now.

You can still claim early. You can send a quarterly update any time after its period ends, so for your first MTD year (2027/28):

The tax year ends on 5 April 2028
You can send your fourth quarterly update from 6 April 2028 (the deadline is 7 May 2028)
You can then submit your tax return straight away, rather than waiting for the 31 January 2029 deadline

One thing to check first: contractors have until 19 April to send their last monthly CIS return for the tax year, so the deductions HMRC shows may not be complete until after that. Comparing them with your payment statements before you submit helps avoid an underclaimed refund.

Subcontractors who are usually owed money back may find it worth closing the year promptly. The more expenses you record digitally through the year, the easier the year-end figures are to finalise. For how the refund is calculated, see claiming back CIS deductions; for typical processing times, see our CIS refund timeline guide.

MTD Quarterly Update Deadlines for 2027/28

Each quarterly update is cumulative — it covers the tax year from 6 April up to the end of the quarter. If you use standard (tax year) periods, the dates for your first MTD year are:

Update	Period covered	Deadline
Quarter 1	6 April – 5 July 2027	7 August 2027
Quarter 2	6 April – 5 October 2027	7 November 2027
Quarter 3	6 April 2027 – 5 Jan 2028	7 February 2028
Quarter 4	6 April 2027 – 5 Apr 2028	7 May 2028
Tax return (replaces the annual SA)	Whole of 2027/28	31 January 2029

You need to send an update even in a quarter with no work. Calendar periods (quarters starting 1 April) are also available with the same deadlines, but you need to choose them in your software before your first update — you can't switch later in the tax year. First-quarter walkthroughs are covered in your first MTD quarterly update.

Your 2026/27 return still uses the old system. If you join in April 2027, your 2026/27 income (6 April 2026 to 5 April 2027) is reported on a normal Self Assessment return due by 31 January 2028.

MTD Penalties for Late Quarterly Updates

Late quarterly updates under MTD earn penalty points rather than an immediate fine. Once you reach 4 points, a £200 penalty is charged.

At Budget 2026, the government said that people who are required to join MTD from April 2027 will not receive penalty points for late quarterly updates during 2027/28. Penalties for a late tax return and for late payment of tax still apply in that year, and all four quarterly updates still need to be sent before you can submit your tax return.

How to Get Ready for MTD as a CIS Subcontractor

Check your 2025/26 qualifying income. Add your gross CIS income (from your payment statements, before deductions) to any other self-employed and rental income.
File your 2025/26 Self Assessment return by 31 January 2027. HMRC uses it to confirm whether you need to join — see our step-by-step guide to CIS Self Assessment.
Choose MTD-compatible software. HMRC publishes a list of compatible products, including some free products for people with simple tax affairs (these may have usage limits). Look for one that handles CIS deductions.
Start digital records early. Recording each payment and expense from now on means a practice run before April 2027. Our guide to keeping records as a subcontractor covers what to keep.
Sign up on GOV.UK. You need to be registered for Self Assessment and to have submitted a tax return in the last two years. An agent can sign up on your behalf.
Diarise the deadlines — four quarterly updates plus the 31 January tax return.

Which CIS Subcontractors Don't Need to Use MTD?

You don't need to use MTD for Income Tax if:

Your qualifying income is at or below the threshold for the relevant year
You trade through a limited company — companies are outside MTD for Income Tax (see sole trader vs limited company)
You work only through a partnership — partnerships are expected to join in the future, but no start date has been set
HMRC confirms you're exempt, for example because you are digitally excluded (unable to use digital tools due to age, disability, location or another reason). You apply for an exemption through GOV.UK

Gross payment status doesn't exempt you. A subcontractor paid without deductions still joins MTD if their qualifying income is over the threshold.

If your income drops: you can opt out once your qualifying income has been below the threshold for three consecutive years. You still file a Self Assessment return after opting out.

Frequently Asked Questions

Does Making Tax Digital apply to CIS subcontractors?

Yes, if you're a self-employed sole trader and your qualifying income is over the threshold. From 6 April 2027, that's over £30,000 on your 2025/26 return. The CIS itself doesn't change — MTD changes how you keep records and report your income.

Is the MTD threshold based on my income before or after CIS deductions?

Before. Qualifying income is your gross turnover — the full amount you invoice, before CIS is deducted and before expenses. A subcontractor who receives £27,000 after deductions may have gross income well over £30,000.

Do I include CIS deductions in my MTD quarterly updates?

No. Quarterly updates contain income and expense category totals only. HMRC adds the CIS deductions reported by your contractors to your tax return at year end, and you check them against your payment statements before you submit.

Will MTD delay my CIS refund?

Not necessarily. Your refund is still worked out when you submit your tax return. You can send your fourth quarterly update and your tax return soon after the tax year ends on 5 April, so subcontractors who close the year promptly can still claim early.

Does gross payment status exempt me from MTD?

No. Gross payment status only changes whether contractors deduct CIS. If your qualifying income is over the threshold, you still need to use MTD for Income Tax.

I'm a limited company subcontractor — does MTD for Income Tax apply?

No. MTD for Income Tax covers sole traders and landlords. A limited company pays Corporation Tax and reclaims CIS deductions through its payroll (Employer Payment Summary) instead. As a director, your own Self Assessment for salary and dividends isn't brought into MTD because those aren't self-employment or property income. MTD would only apply if you also have your own sole-trader or rental income over the threshold.

This guide is for informational purposes only and does not constitute tax, legal, or financial advice. Tax rules change frequently. Always verify current requirements on GOV.UK or consult a qualified accountant for your specific situation.

Official Sources

Find out if and when you need to use Making Tax Digital for Income Tax - GOV.UK
Work out your qualifying income for Making Tax Digital for Income Tax - GOV.UK
Use Making Tax Digital for Income Tax: send quarterly updates - GOV.UK
Use Making Tax Digital for Income Tax: submit your tax return - GOV.UK
Use Making Tax Digital for Income Tax: if your circumstances change - GOV.UK
Sole traders and landlords earning more than £30,000 urged to act now - HMRC press release, 5 October 2026
Budget 2026: Overview of tax legislation and rates - GOV.UK
What you must do as a CIS subcontractor - GOV.UK