Making Tax Digital
Making Tax Digital for CIS subcontractors
For Making Tax Digital, a subcontractor’s income counts before the CIS deduction is taken off. The deduction is tax paid in advance, not an expense.
The gross counts
Under the Construction Industry Scheme (CIS), a contractor deducts 20% from what they pay you, or 30% if you are not registered, and passes it to HMRC. That deduction is an advance payment towards your tax and National Insurance. It is not a business expense.
Making Tax Digital (MTD) for Income Tax is tested on qualifying income: your self-employment and property income before expenses. For a subcontractor, that is the full amount you invoice, before the CIS deduction. The money that reaches your bank is smaller, and it is the wrong number to check.
Worked example
Scroll across the table to read every column.
| Amount | |
|---|---|
| Invoiced for labour | £54,000 |
| CIS deducted (20%) | −£10,800 |
| Paid to you | £43,200 |
The bank shows £43,200, under £50,000. Qualifying income is £54,000, over it. Contractors don’t deduct CIS from materials you supply, but materials you charge for are still part of your income.
The thresholds
- From 6 April 2026: qualifying income over £50,000
- From 6 April 2027: over £30,000
- From 6 April 2028: over £20,000
Rental income is added to your building income. Each start date is tested on an earlier tax return: see MTD thresholds and start dates.
What your records need to show
Record each invoice at its full amount and the CIS deduction separately, using the monthly payment and deduction statements from each contractor. HMRC’s guidance says that if you only know an amount after deductions, you should find out the full figure and record it. The deductions are then set against your tax bill at the year end.
Quarterly updates are due 7 August, 7 November, 7 February and 7 May. See how quarterly updates work.
We keep CIS records and job costs for builders and trades. See construction bookkeeping and our guide to job costs and cost to complete.
What to do next
- Gather the payment and deduction statements for the tax year from every contractor.
- Total the gross amounts invoiced, plus any work for private customers.
- Add any rental income and compare with the threshold for the coming April.
- If you are in, start digital records from 6 April with gross income and CIS deductions shown separately.
About Andrew
Andrew Ramsell runs the accounting and finance work for sole traders, landlords and limited companies, including their Making Tax Digital updates, and builds the software that takes recurring work off their hands. He is an AAT-qualified accountant.
Sources
HMRC guidance on GOV.UK, checked 10 October 2026:
Common questions
Does the CIS deduction reduce my income for MTD?
No. It is tax paid in advance. Qualifying income is your income before expenses and before the deduction.
I have gross payment status. What changes?
Nothing for MTD. No deduction is taken, so what you invoice and what you receive are the same.
I work through a limited company. Does this apply?
No. MTD for Income Tax applies to sole traders and landlords. A company’s CIS deductions are handled through its payroll and Corporation Tax.
Do materials count towards the threshold?
Yes, if you charge for them. They are part of your income, even though CIS is not deducted from them.
Talk to Andrew
The first conversation is free. Email andrew@ingoodorder.co.uk with roughly what you invoice each year and how your records are kept now.
Want it set up for you? MTD-ready in a week is a fixed-fee setup.
Opens a short enquiry form. Nothing is sent until you press Send enquiry.
Prefer email? Write to andrew@ingoodorder.co.uk.
Know another subcontractor who’d benefit? Introduce them and I’ll pay you £50 when they sign up.