MTD for Income Tax for CIS subcontractors

Self-employed subcontractors in the Construction Industry Scheme (CIS) follow the normal Making Tax Digital (MTD) for Income Tax rules. If your gross pay on the 2025-26 return, before CIS deductions, was over £30,000, you must start on 6 April 2027. You keep digital records, send quarterly updates and set your CIS deductions against your tax in the final declaration.

Do CIS subcontractors have to use MTD for Income Tax?

Yes, if you are a sole trader over the threshold. CIS is a way of collecting tax in advance, not a separate tax, so it does not change whether you are in MTD.

If you trade through a limited company, MTD for Income Tax does not apply to the company. Partners in a trading partnership do not count their profit share, and HMRC has not set a start date for partnerships. The MTD checker gives a quick answer.

Is it gross pay or the amount you receive?

It is gross pay. GOV.UK’s CIS claim back guidance tells sole traders to report total pay before deductions as income. Qualifying income is that turnover before expenses.

Take a plasterer who invoiced £32,500 for labour in 2025-26 and had 20% taken off. They received £26,000 in the bank, but their qualifying income is £32,500, so they join in April 2027. Materials you charge for count in turnover too, even though the contractor does not deduct CIS from them. Our qualifying income guide explains the rules.

How do CIS deductions work?

Contractors take tax from the labour part of your invoice. GOV.UK’s CIS payment guidance sets the rates:

Contractors do not take deductions from VAT, consumable stores, plant hired for the job, manufacturing or prefabricating materials, or materials you paid for directly. They must give you a payment and deduction statement within 14 days of the end of each tax month. Our CIS guide for subcontractors covers registration and gross payment status.

Do CIS deductions go in quarterly updates?

HMRC’s guidance is not fully consistent. The legal quarterly update direction, updated 27 March 2026, lists the categories a self-employment update must contain. It includes turnover and expense lines such as “construction industry, payments to subcontractors”, but there is no category for CIS deductions suffered.

HMRC’s MTD campaign FAQ, by contrast, says subcontractors will “just include any CIS deductions in your quarterly updates”. In practice:

• Record gross income in each update, not the net amount paid into your bank.
• Log each deduction in your software from your monthly statements, if it has a CIS feature.
• Expect deductions to count at the year end. They reduce your tax bill in the final declaration, which is where the CIS credit is given.

Ask your software provider how it handles CIS before you sign up.

How do you get CIS deductions back?

You claim them in your final declaration. GOV.UK says deductions are “advance payments towards your tax”. At the end of the year you report total pay before deductions and total deductions taken. HMRC works out your bill and takes off the deductions.

1. Collect every monthly statement from every contractor for 6 April to 5 April.
2. Check the totals of gross pay and deductions, and raise any wrong statement with the contractor.
3. Submit your final declaration by 31 January after the tax year.
4. Pay any balance by 31 January, or receive a refund if deductions were more than your bill.

Under MTD you file the final declaration through compatible software rather than the old Self Assessment return, but the CIS credit works the same way. See the MTD final declaration guide and CIS refunds.

When are the quarterly updates due?

Subcontractors in MTD send four updates a year, on the same dates as other sole traders. For 2027-28 they are due 7 August 2027, 7 November 2027, 7 February 2028 and 7 May 2028. HMRC’s quarterly updates guidance says you must still send an update for a quarter with no work. See MTD quarterly deadlines.

Which applies to you?

• If you are a sole trader with gross CIS income over £30,000 in 2025-26, you join MTD from 6 April 2027.
• If you have gross payment status, nothing changes for MTD. You still report gross income, but there are no deductions to claim.
• If you work through your own limited company, MTD for Income Tax does not apply. The company reclaims deductions through its payroll.
• If you are also a contractor paying other subcontractors, you keep filing monthly CIS returns as now. HMRC’s FAQ confirms these continue alongside MTD.

What subcontractors should do now

1. Work out gross pay for 2025-26 from your invoices or statements, not your bank receipts.
2. Keep every CIS statement; ask contractors for any that are missing.
3. Choose software with CIS support. See accounting software for CIS.
4. File your 2025-26 return early. It is due by 31 January 2027, and it decides whether you join.

Frequently asked questions

Does the MTD threshold use my CIS income before or after deductions?

Before deductions. Qualifying income is your gross turnover, so a subcontractor paid £26,000 after 20% CIS on £32,500 of invoices has qualifying income of £32,500.

Do CIS subcontractors still get tax refunds under MTD?

Yes. CIS deductions are still set against your tax bill in the final declaration, and HMRC refunds any overpayment.

Do I need to send quarterly updates if I am on gross payment status?

Yes, if your qualifying income is over the threshold. Gross payment status only stops deductions; it does not exempt you from MTD.

Does MTD replace monthly CIS returns?

No. Contractors still file monthly CIS returns. MTD for Income Tax is a separate obligation for sole traders and landlords.

Is a limited company subcontractor in MTD for Income Tax?

No. MTD for Income Tax applies to individuals with self-employment or property income, not to companies.