Making Tax Digital for CIS Subcontractors: What Actually Changes

I know a number of subcontractors, and I've watched people's situations go in very different directions. Some have built their own contracting businesses taking on housing association work, and at that size they've needed a dedicated accountant just to keep on top of it all. Most people I talk to sit somewhere else on that spectrum entirely — a few quietly do cash-in-hand jobs and hope it stays that way, but far more are self-employed people genuinely trying to do things properly on their own, often without an accountant or bookkeeper at all. What comes up again and again isn't defiance, it's anxiety: "I'm not an accountant" is something I hear a lot, right alongside "I just want to get on with my work." Both are completely fair reactions. But banks and payment platforms are tracking transactions more closely every year, and the reporting rules are only getting more detailed, not less. If MTD is something you've been putting off, this is a good time to get ahead of it rather than wait for it to catch up with you.

The misconception that catches subcontractors out

That anxiety usually gets pointed at the wrong worry, though: "I already have tax taken off, so I don't need to do anything extra." This is the single most common assumption that causes problems — and it's wrong. CIS deductions are advance payments toward your eventual tax bill, in the same way PAYE is for an employee. MTD is a reporting obligation layered on top of that: keeping digital records and sending HMRC a running picture of your income and expenses every three months, then a final declaration that reconciles everything — including your CIS deductions — at year end.

In fact, HMRC will pre-populate your end-of-year return with the CIS deduction figures it already holds from contractor reports. That's genuinely useful, but it isn't a substitute for the quarterly updates, and you're still responsible for checking that pre-populated figure against your own records — contractor reporting errors do happen.

Who this applies to — and who it doesn't

• Sole trader subcontractors above the relevant threshold: in scope.
• Limited company subcontractors: not affected by MTD for Income Tax at all. Companies report through Corporation Tax, which runs on its own separate system — and plans for a "Making Tax Digital for Corporation Tax" were officially scrapped, so this isn't coming later either. If you operate through a limited company, this entire guide doesn't apply to you.
• Contractors (the businesses making CIS deductions) aren't directly affected by MTD for Income Tax either, though if a contractor is themselves a sole trader above the threshold, they're in scope in that capacity.

The thresholds (same rollout as everyone else)

Qualifying income here is your gross trade turnover before expenses — not the net amount that actually lands in your bank account after CIS deductions. Don't calculate your threshold based on what you were paid; calculate it based on what you invoiced or earned before the contractor took anything off.

The part that's genuinely different for site-based trades: record-keeping

Desk-based freelancers can mostly reconstruct a quarter from bank statements and a couple of invoicing tools. Construction work makes that harder, for reasons specific to the job:

• Payments come from several contractors on different schedules, not one predictable employer.
• Purchases run through mixed accounts — a card in the van, cash for materials picked up on the way to site, a personal card used because the business one was left at home.
• Travel between sites and vehicle costs are a genuine, trackable expense that's easy to lose if you're not capturing it as it happens.
• CIS deduction statements from each contractor need to be kept and checked — they're the paper trail that reconciles what you were paid against what was deducted.

The practical fix isn't complicated, but it does need to become a habit rather than a year-end scramble: photograph receipts the day you get them, use one card (even a simple digital one) for business spend wherever possible, and log CIS statements as they arrive rather than trying to gather them all in January.

Software: what to actually look for

Not every MTD-compliant platform handles CIS well — this is the one thing worth checking specifically before you choose, rather than assuming any HMRC-recognised tool covers it. Look for a platform that:

• Reconciles CIS deductions automatically against contractor statements, not just generic expense tracking.
• Has a genuinely usable mobile app, since most of your record-keeping happens on-site, not at a desk.
• Handles materials, mileage, and subsistence as distinct expense categories rather than one general "expenses" bucket.

See our full comparison of MTD-ready software, including which platforms handle CIS specifically →

None of this gets simpler with time. Banks and payment platforms already report more transaction detail than they used to, and each phase of the rollout brings quarterly reporting to more people. Sorting your records now, even informally, puts you well ahead of where most people I speak to are starting from.