Do CIS Subcontractors Have to Use Making Tax Digital?

If you’re a CIS subcontractor, you may be wondering whether Making Tax Digital for Income Tax applies to you. The short answer is that being registered under the Construction Industry Scheme (CIS) does not exempt you from Making Tax Digital.

CIS and Making Tax Digital are two different systems. CIS deals with tax deducted from payments made to subcontractors, while Making Tax Digital changes the way qualifying self-employed people keep their business records and report information to HMRC.

Whether you need to use Making Tax Digital will depend mainly on your qualifying income, not on the fact that you work under CIS.

When does Making Tax Digital start for CIS subcontractors?

Making Tax Digital for Income Tax is being introduced in stages. If your qualifying income is over £50,000, you may need to use Making Tax Digital from 6 April 2026. If your qualifying income is over £30,000, you may need to use it from 6 April 2027.

HMRC looks at your qualifying income to determine when the rules apply to you. This is based on your gross income before expenses are deducted, so CIS tax deductions do not simply reduce your income for the purpose of deciding whether you need to join Making Tax Digital.

How do CIS deductions work with Making Tax Digital?

If you work under CIS, a contractor will often deduct 20% tax from your labour payments before paying you. These deductions are payments towards your eventual tax and National Insurance bill.

Making Tax Digital does not replace CIS. You will still need to keep records of your gross income, business expenses and CIS deductions so that the correct figures can be dealt with when your overall tax position is calculated.

This is one reason good digital bookkeeping is particularly useful for CIS subcontractors. Instead of trying to piece everything together at the end of the tax year, your income, expenses and CIS records can be kept organised throughout the year.

What are the quarterly MTD updates for CIS subcontractors?

Under Making Tax Digital, you’ll need to keep digital records of your self-employed income and expenses using compatible software.

During the tax year, your software will send quarterly updates to HMRC containing summary information from your digital records. These updates help HMRC build up a picture of your business income and expenses during the year.

The quarterly updates are not four separate tax returns, and you do not pay your Income Tax four times a year simply because you are using Making Tax Digital. Your final tax position is dealt with after the end of the tax year.

Do I still need to complete a tax return under Making Tax Digital?

Making Tax Digital changes the way you keep records and send information to HMRC, but it does not mean that your year-end tax responsibilities disappear.

After the end of the tax year, you will still need to finalise your tax position and make sure HMRC has the information needed to calculate the tax you owe. Any CIS tax already deducted from your payments will also need to be taken into account.

Keeping your records up to date throughout the year should make this process much easier, because you are not trying to find a year’s worth of invoices, receipts and CIS statements at the last minute.

How can FreeAgent help CIS subcontractors with Making Tax Digital?

FreeAgent is compatible accounting software designed to help self-employed people keep their financial records organised digitally.

By connecting your business bank account to FreeAgent, transactions can be brought into the software automatically. Income and expenses can then be categorised and kept up to date throughout the year, rather than everything being sorted out just before a deadline.

For CIS subcontractors, this can make it much easier to keep track of income, allowable business expenses and CIS deductions, while also keeping the records needed for Making Tax Digital in one place.

Need help getting ready for Making Tax Digital?

If you’re a self-employed builder or tradesperson and you’re unsure what Making Tax Digital means for you, MTD Trade Books can help.

We specialise in straightforward bookkeeping for self-employed builders and tradespeople, including CIS subcontractors. Using FreeAgent, we can help keep your income and expenses organised, maintain your digital records and deal with your Making Tax Digital quarterly updates.

We’re currently offering a limited number of tradespeople 6 months of bookkeeping completely FREE. All we ask in return is some honest feedback on the service while we continue to develop it.

If you’d like to find out whether you qualify for one of the free places, get in touch with MTD Trade Books.