Making Tax Digital for CIS subcontractors
If you work in construction under the Construction Industry Scheme, Making Tax Digital for Income Tax applies to you as a self-employed person — but CIS adds one twist that catches subcontractors out. The income that decides whether you're in is your grossfigure, before any CIS is deducted. Here's what that means and how the deductions are handled.
You're self-employed, so MTD applies
CIS changes how your tax is collected— contractors take a slice off your payments and pass it to HMRC — but you're still a sole trader running a business. That means the same MTD rules apply: keep digital records and send quarterly updates once your self-employment income is over the threshold, which is phased in highest incomes first (April 2026 (£50k+), then April 2027 (£30k+), then April 2028 (£20k+)).
Your gross income counts — before deductions
This is the part to get right. Qualifying income is your gross turnover — the full value of the work you invoiced — notthe reduced amount that reaches your bank after a contractor deducts CIS. Because the deduction comes off at source, your take-home understates your real turnover, so it's easy to assume you're under the threshold when you're over it. If your gross self-employment income is above the lowest figure (£20,000) for its tax year, you're in.
Where your CIS deductions go
The CIS a contractor withholds is tax already paidon your behalf. Through the year you carry on recording your gross income and your expenses; you don't lose the deductions. They come back in at the final declarationafter the tax year, where they're credited against the tax you owe — which is exactly why so many subcontractors end up due a refund. The exact CIS rates and how to reclaim are on GOV.UK.
Choosing software
For MTD itself, any HMRC-recognised tool that supports self-employment income will do — you don't need anything CIS-specific to comply. It helps to pick software that lets you record CIS deductions clearly so your figures reconcile neatly at year end. See the best software for sole traders or run the finder for the cheapest recognised tool that fits your situation.
Common mistakes to avoid
- Using your after-CIS take-home to check the threshold instead of your gross turnover.
- Treating CIS deductions as money gone — they're tax on account, credited at year end.
- Leaving record-keeping to the deadline, so the quarterly update becomes a scramble.
- Buying more software than a straightforward subcontractor business needs.
Frequently asked questions
- Do CIS subcontractors have to use Making Tax Digital?
- CIS subcontractors are self-employed, so if your self-employment income is over the threshold you'll be mandated like any other sole trader — keeping digital records and filing quarterly updates. The Construction Industry Scheme changes how your tax is collected, not whether MTD applies.
- Is the threshold based on my income before or after CIS deductions?
- Before. Qualifying income is your gross self-employment turnover — what you invoiced — not the amount that lands in your bank after the contractor takes off CIS. Because deductions are taken at source, your gross figure is higher than your take-home, so many subcontractors cross the threshold sooner than they expect.
- How do my CIS deductions fit into MTD?
- The deductions a contractor takes from your payments are tax already paid on account. You keep recording your gross income and expenses through the year; the CIS already deducted is brought in at the final declaration, where it's credited against your bill — which is what often produces a refund.
- What software do CIS subcontractors need?
- Any HMRC-recognised tool that supports self-employment income will do for MTD itself. If you want to track CIS deductions tidily, look for software that lets you record them clearly. The finder shows the cheapest recognised tool that fits.
Keep reading
Thresholds reflect HMRC's announced figures and are kept in step with our recognised-software data. CIS rules are HMRC's. This is general information, not tax advice — confirm your own position with HMRC or a qualified accountant.