Blog 044 - Making Tax Digital

Making Tax Digital, the future is now and Tax is entering the Matrix

Making Tax Digital (MTD) for Income Tax is edging closer, and from April 2026, it’ll apply to sole traders earning over £50,000 from self-employment or property. That includes many subcontractors working under the Construction Industry Scheme (CIS).

While there’s no need to panic yet, this change will impact how subcontractors manage their accounts and how specialist contractors support them.

MTD Meets CIS

The good news is that MTD doesn’t replace CIS, it simply digitises how income and deductions are recorded. Subcontractors will still receive CIS deduction statements as usual, but they’ll need to record these digitally in HMRC-compatible software.

When submitting quarterly updates, subcontractors will report their gross income (before CIS deductions) and note the tax withheld by their contractors. The annual Final Declaration in January will then reconcile everything, just like a self-assessment return, but digital.

For this to work smoothly, subcontractors will need to keep clean, accurate CIS records throughout the year.

Tools That Make It Easier

Encourage your subcontractors to adopt MTD-ready software that handles CIS automatically. The best options right now are:

• Xero – excellent CIS tracking and MTD compliance.

• QuickBooks – easy to use, ideal for smaller subcontractors.

  
  

These tools handle invoices, deductions, and submissions which (in theory) means less paperwork and fewer headaches, but then again, this is HMRC we are talking about.

Get Ahead of the Deadline

Voluntary sign-up is open now. Subcontractors who switch early will have time to iron out any issues before it’s mandatory in April 2026. Come March 2026, anyone not ready could face penalties for missed or late submissions.

Contractors can help by sharing guidance, recommending accountants familiar with MTD and CIS, and reminding their subbies to keep proper records.

Key Takeaway: MTD won’t change how CIS works, it’ll just make it digital. By encouraging subcontractors to move onto software like Xero or QuickBooks early, specialist contractors can keep their supply chain compliant, efficient, and penalty-free.

If you or your subcontractors need help setting up or understanding what this means for your business, drop me an email.