How Making Tax Digital for Income Tax will effect CIS

Making Tax Digital for Income Tax is the new way CIS Subcontractors / Sole Traders will have to report income and expenses to HMRC. MTD will replace the current tax return filing process and there will no longer be the option to file a tax return within the HMRC personal tax account. MTD submissions can only be made to HMRC using a software that works with making tax digital. You will need to digitally record the income and expenses within the software and report them through the software every 3 months. This will mean 4 submissions and then once you have checked for errors you must file a final declaration for the year (this will replace the tax return).

Below you can find out when MTD will start for you and the key changes that you will need to comply with.

· 6th April 2026 if your Gross Income before tax deducted is £50,000 or over

· 6th April 2027 if your Gross Income before tax deducted is £30,000 or over

· 6th April 2028 for all CIS Subcontractors and Self-Employed Individuals

How to report to HMRC and claim a CIS Rebate under MTD

1. Register for MTD with HMRC and buy a software that is compatible with Making Tax Digital

2. Keep digital records of income and a digital breakdown of all expenses during the quarter.

Quarter 1:  6th April to 5th July (Deadline for filing 7th August)

Quarter 2: 6th July to 5thOctober (Deadline for filing 7th November)

Quarter 3: 6th October to 5 January (Deadline for filing 7th February)

Quarter 4: 6th January to 5thApril (Deadline for filing 7th May)

3. Once you have submitted quarter 4 you must file the final declaration for the tax year (this replaces the tax return).

4. CIS Rebates will be paid out in the same way as before providing you have completed the above submissions.

If you need to make any amendments to the final submission (tax return) you will have to contact the making tax digital helpline, and they will assist you.

HMRC’s aim in introducing MTD for income tax is to stop errors in tax reporting which basically means limiting taxpayers from inflating expense claims to get a bigger rebate as the information is reported in real time and compliance checks will easily identify errors.