From 6 April 2026, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) becomes mandatory for self-employed CIS subcontractors with annual gross income over £50,000. This means quarterly digital tax reporting instead of one annual tax return, and you'll need MTD-compatible software to stay compliant.

What Is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's plan to move the UK tax system from paper and annual returns to digital records and regular reporting. MTD has already been in place for VAT-registered businesses since 2019. Now it's coming for Income Tax.

For CIS subcontractors, this is the biggest change to how you do your taxes in a generation.

Does MTD Apply to Me?

MTD for ITSA is rolling out in phases based on your gross income (that's your turnover, not your profit):

Important for construction workers: HMRC looks at your gross income — that's the total before expenses and CIS deductions, not what lands in your bank. If your contractor paid you £50,000+ gross in 2024/25, you're in the first wave.

Since the average CIS subcontractor in London earns around £50,000, a significant number of construction workers will be affected from day one.

What's Actually Changing?

Before MTD (How It Works Now)

• Keep records however you like (paper, spreadsheets, shoebox of receipts)
• File one Self Assessment tax return per year by 31 January
• Pay any tax owed by 31 January

After MTD (From April 2026)

• Keep digital records using HMRC-approved software
• Submit quarterly updates to HMRC (every 3 months)
• Submit a Final Declaration at year end (replaces the old Self Assessment return)
• Pay tax owed based on the same deadlines as before

Quarterly Update Deadlines

For the tax year starting 6 April 2026:

Each quarterly update is a summary of your income and expenses for that period. It doesn't change when you pay tax — it just means HMRC sees your numbers more often. For the full list of Self Assessment and MTD filing dates, see our CIS tax return deadlines guide.

What Software Do I Need?

You'll need MTD-compatible software that can connect to HMRC's systems and submit your quarterly updates digitally. Spreadsheets alone won't be enough (though some approved software does pull data from spreadsheets via "bridging software").

Options for CIS subcontractors include:

• FreeAgent — Popular with sole traders, handles CIS
• Xero — Widely used, good CIS features
• QuickBooks Self-Employed — Budget-friendly option
• Sage — Established, CIS-ready
• Untied — Designed for self-employed, mobile-first
• GigTrack / Hardhat — Purpose-built for CIS construction workers (coming soon)

For a detailed comparison, see our guide to the best MTD software for construction workers. When choosing software, look for:

• HMRC MTD for ITSA recognition
• CIS deduction tracking
• Receipt/photo capture for expenses
• Mileage tracking
• Quarterly update submission built in
• Mobile app (you need something that works on site, not just at a desk)

How to Prepare — A Practical Checklist

Now (February 2026)

• Check your gross income for 2024/25 — is it over £50,000?
• If yes, you must be MTD-ready by 6 April 2026
• Choose your MTD-compatible software
• Set up the software and start entering your income and expenses digitally
• Make sure you have your Government Gateway login details

By April 2026

• Sign up for MTD for ITSA through HMRC's online service
• Connect your chosen software to HMRC
• Start recording all income and expenses digitally from 6 April

Ongoing (From April 2026)

• Log expenses as you go — don't let them pile up
• Submit quarterly updates by the deadlines above
• Photograph receipts and keep digital copies
• Submit your Final Declaration by 31 January 2028

What Happens If I Don't Comply?

HMRC has introduced a new points-based penalty system for late submissions:

• Each late quarterly update earns you a penalty point
• When you reach the threshold (currently 4 points), you get a £200 penalty
• Further late submissions after that also carry a £200 penalty each
• Points expire after 24 months of on-time filing

Grace period: For the first 12 months (April 2026 - April 2027), HMRC has said it will not apply penalty points for late quarterly updates. But late Final Declarations can still attract penalties. Don't treat this as a free pass — use it to get your process right.

Late payment penalties also apply:

• Up to 15 days late: no penalty
• 16-30 days late: 2% of outstanding tax
• 31+ days late: additional 2% plus daily interest

How Does MTD Affect My CIS Refund?

Your CIS refund process essentially stays the same — it's just delivered through different plumbing. Under MTD:

• You'll still record CIS deductions from your contractor statements
• You'll still claim allowable expenses
• Your software will calculate your tax position quarterly
• Your Final Declaration triggers any refund due

The upside? If you're keeping digital records all year, your tax position should be clearer and your refund claim more accurate. No more January panic trying to find 12 months of receipts.

What About Limited Companies?

MTD for ITSA applies to sole traders and partnerships — not limited companies (which fall under Corporation Tax). If you operate through a limited company, MTD for Corporation Tax is expected later (no confirmed date yet).

However, if you're a company director with personal self-employment or rental income over £50,000, MTD for ITSA still applies to that personal income.

Common Questions

Will MTD cost me money?

You'll need to pay for MTD-compatible software (typically £10-£30/month). Some free options exist but may have limitations. Think of it as an investment — good software often finds expenses you'd otherwise miss, paying for itself through a bigger refund.

Can my accountant handle MTD for me?

Yes. Your accountant can submit quarterly updates on your behalf using agent software. But you'll still need to keep digital records and provide them with your income and expense data regularly — not once a year in a carrier bag.

I'm not very tech-savvy. Will I cope?

MTD software is designed to be simple. Most apps let you photograph receipts, auto-categorise expenses, and track mileage with GPS. If you can use a smartphone, you can handle MTD. Start early so you're comfortable before the first deadline.

What if my income drops below £50,000 next year?

Once you're in MTD, you generally stay in it even if your income drops. However, there are exemption processes for specific circumstances. Check with HMRC if your situation changes significantly.

Does this affect how contractors deduct CIS?

No. The 20% CIS deduction process stays the same. MTD changes how you report your income and expenses to HMRC, not how your contractor pays you.

The best way to prepare for MTD is to start tracking your income and expenses digitally now. Our CIS tax refund calculator can show you what you're owed — and getting familiar with your numbers is the first step toward MTD readiness.

→ Calculate My CIS Refund

Related Guides

• CIS Tax Return Deadlines — Every Self Assessment and MTD filing date you need to know
• Best MTD Software for Construction Workers — Practical comparison of MTD-compatible apps for CIS subcontractors
• CIS Expenses You Can Claim — Complete list of allowable expenses to track in your MTD software

Last updated: October 2025. Based on HMRC guidance current as of February 2026. MTD rules may be updated — check GOV.UK for the latest information.