Making Tax Digital for CIS subcontractors
If you are a CIS subcontractor working as a sole trader, Making Tax Digital (MTD) for Income Tax applies to you in the same way as any other sole trader, and your qualifying income is your pay before CIS deductions. You keep digital records, send quarterly updates from software, and HMRC adds the CIS deductions it holds to your tax return for you to check.
Are CIS subcontractors in MTD?
MTD for Income Tax covers sole traders and landlords registered for Self Assessment whose qualifying income is over the threshold. GOV.UK has no separate rule or exemption for construction work, so a self-employed subcontractor is treated like any other sole trader.
Your start date depends on your qualifying income in an earlier tax year:
- Over £50,000 in 2024 to 2025: you should have started on 6 April 2026
- Over £30,000 in 2025 to 2026: you start on 6 April 2027
- Over £20,000 in 2026 to 2027: you start on 6 April 2028
If you are a partner, see MTD for partnerships, as partnerships are not in MTD for Income Tax yet. If you work through a limited company, the company uses its CIS deductions through its payroll scheme instead, so this guide does not apply.
Is qualifying income before or after CIS deductions?
Before. GOV.UK's guidance for subcontractors says sole traders should put their total pay before deductions on the tax return as income, and show the deductions separately. Qualifying income for MTD is your income before expenses, based on your return, so the 20% your contractors take does not reduce it.
HMRC's qualifying income page does not mention CIS by name, but the two pieces of guidance point the same way.
Example: Dan is a labour-only bricklayer. In 2025 to 2026 contractors pay him £34,000 gross and deduct £6,800, so £27,200 reaches his bank. His qualifying income is £34,000, which is over £30,000, so he needs MTD from 6 April 2027 even though less than £30,000 landed in his account.
If you have gross payment status, contractors pay you in full with no deductions, and you pay all your tax after the year ends.
What about materials?
Contractors do not take CIS deductions from the parts of your invoice that cover VAT, materials you paid for yourself, plant hired for the job, consumable stores, or manufacturing or prefabricating materials. They may ask for receipts, and if you have none they will estimate the materials cost.
The deduction is worked out on the labour part only. Your payment and deduction statement still shows the gross amount paid, including materials, and you record that whole amount as income. The materials you buy are a business expense, and expenses never reduce qualifying income. The materials you buy are a business expense, and expenses never reduce qualifying income.
Example: you invoice £1,000 for a supply and fix job: £600 labour and £400 of materials you bought, and you are not VAT registered. The contractor deducts 20% of £600, which is £120, and pays you £880. You record £1,000 as income and £400 as a materials cost, and your statement shows the £120 deduction.
Records to keep
Each month, a contractor who takes deductions from your pay must give you a payment and deduction statement within 14 days of the end of the tax month. It shows what they paid you, the materials cost left out of the deduction, and the amount deducted.
Keep every statement, because HMRC may ask for evidence of your deductions. If you lose one, ask the contractor for a replacement. If a contractor has gone out of business, GOV.UK explains how to write to HMRC with the details instead.
Under MTD you also create digital records of your income and expenses in software. Each record needs the amount, the date and a category, so for CIS work you record the gross payment as income and your costs in the matching expense categories. See records for sole traders and landlords.
You must still keep original records or copies, such as invoices and bank statements, and keep digital records for at least 5 years after the 31 January deadline for that tax year.
Quarterly updates
Every 3 months your software adds up your digital records and sends HMRC a total for each category. The self-employment categories include turnover and your costs, but there is no box for CIS deductions taken from you, so deductions are not part of your quarterly updates.
If you pay subcontractors yourself, there is a separate expense category for payments to subcontractors.
The deadlines are 7 August, 7 November, 7 February and 7 May. For 2026 to 2027 there are no penalty points for late quarterly updates, but you must send them all before you can submit your tax return. More detail is in MTD quarterly update deadlines.
How CIS deductions reach your tax return
After the year ends you still submit a tax return, through your MTD software, by 31 January. GOV.UK lists CIS subcontractor deductions among the information HMRC will add to your return, alongside items such as PAYE income and pensions.
You must check what HMRC has added before you submit. Compare it with your payment and deduction statements. If a statement looks wrong, GOV.UK says to speak to the contractor. GOV.UK does not give separate steps for fixing a CIS figure in MTD software, so ask your software provider how its product shows these deductions.
Getting your deductions back
CIS deductions are advance payments towards your tax and National Insurance. HMRC takes them off the tax you owe. Anything still owed is due by 31 January, and if you have paid too much you are due a refund.
Under MTD there is one important difference: you cannot claim a refund in a tax return sent through MTD software. GOV.UK says you request it through your HMRC online services account instead, or your agent requests it through their agent services account.
If you stop trading during the year, you may be able to claim back that year's deductions early using form CIS40.
Free MTD software for CIS subcontractors
You need commercial software that can keep digital records, send quarterly updates and submit your tax return. GOV.UK says free products are available for people with simple tax affairs, but they may have limits, such as a cap on the number of transactions.
Use HMRC's software finder to get a list based on your income sources. HMRC does not recommend any product, so check with the provider that it meets your needs, including how it shows CIS deductions on your return. If you prefer spreadsheets, see spreadsheets and bridging software.
Keeping the records with Snapfile
Snapfile lets you send photos of receipts and invoices, PDFs or texts on WhatsApp. It records them, assigns HMRC expense categories, tracks the tax year and quarter, and exports a CSV. It does not submit anything to HMRC, so you still need MTD software for updates and your tax return. It is free during early access, with a Pro plan planned at £9.99 a month.
Common questions
Do CIS subcontractors need Making Tax Digital?
Yes, if you are a sole trader and your qualifying income is over the threshold: £50,000 for 2024 to 2025, £30,000 for 2025 to 2026 or £20,000 for 2026 to 2027. GOV.UK has no special exemption for CIS work.
Is MTD qualifying income before or after the CIS deduction?
Before. Your gross pay counts, so a labour-only subcontractor who receives £30,000 after 20% deductions has gross pay, and qualifying income, of £37,500.
Do I include CIS deductions in my quarterly updates?
No. The quarterly update categories have no field for deductions taken from you. HMRC adds CIS subcontractor deductions to your tax return, and you check them against your statements before you submit.
How do I get my CIS refund under MTD?
You cannot claim a refund in a tax return sent through MTD software. After you submit it, GOV.UK says to request the refund through your HMRC online services account.
Is there free MTD software for CIS subcontractors?
GOV.UK says free products exist for people with simple tax affairs, though they may have limits. Use HMRC's software finder and check with the provider that the product submits your tax return and handles CIS deductions.
Sources: GOV.UK: What you must do as a Construction Industry Scheme (CIS) subcontractor; GOV.UK: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340); GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax; GOV.UK: Work out your qualifying income for Making Tax Digital for Income Tax; GOV.UK: Use Making Tax Digital for Income Tax: Create digital records; GOV.UK: Use Making Tax Digital for Income Tax: Send quarterly updates; GOV.UK: Making Tax Digital for Income Tax: quarterly update direction; GOV.UK: Use Making Tax Digital for Income Tax: Submit your tax return; GOV.UK: Use Making Tax Digital for Income Tax: Help and support; GOV.UK: Choose the right software for Making Tax Digital for Income Tax; GOV.UK: Find software that works with Making Tax Digital for Income Tax. This is general information, not tax advice; check GOV.UK or an accountant for your situation.
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