Making Tax Digital for Income Tax (MTD IT) and the Construction Industry Scheme

Making Tax Digital for Income Tax becomes mandatory for many construction contractors from April 2026. If you work under CIS, this change affects how you keep records and report income. This guide explains what’s changing, who’s affected, and how to prepare with confidence ahead of time.

MTD for Income Tax (MTD IT) is moving closer, with mandatory digital reporting beginning in April 2026 for self-employed construction contractors with over £50,000 gross income.

If you work for yourself (whether you’re a builder, electrician, plumber, bricklayer, carpenter, roofer, groundworker or any other construction contractor) MTD IT will affect you. It’s a compliance obligation for you, not the companies you work for.

This article explains what’s changing, how the Construction Industry Scheme (CIS) fits into the picture, and what you should be doing now to prepare.

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What MTD IT actually is

MTD IT is the government's plan to modernise tax reporting. Instead of submitting one Self-Assessment return each January, you will need to:

  • Keep digital records of all your business income and expenses
  • Use HMRC-recognised software (HMRC isn’t providing free software)
  • Send quarterly year-to-date updates of your income and expenses to HMRC
  • Submit a final declaration after the end of the tax year

For many in construction, this means a shift in how you handle bookkeeping and your year-end information.

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Who must join MTD IT from April 2026

Construction industry contractors’ earnings can vary depending on overtime, major projects and the number of firms you work for. Many will cross April’s £50,000 threshold without realising it.

Even if you’re under the threshold now, more contractors will be brought in from 2027 when the threshold drops to £30,000 gross income, so it makes sense to get familiar with the system early.

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How CIS and MTD IT work together

Construction industry contractors often work under the Construction Industry Scheme (CIS), where the companies you provide services to deduct tax from your payments before you’re paid.

A common question being asked is: “If CIS already takes tax off me, why do I need to do MTD IT?”

It’s important to understand that CIS affects how you’re paid; MTD IT affects how you report it. CIS itself isn’t changing but your record-keeping and reporting to HMRC will.

Under MTD IT, you will need to report:

  • The full amount you earned before CIS deductions
  • Your allowable expenses

Factoring in the CIS tax that has been deducted by the organisation(s) you’ve provided services to, HMRC will reduce the tax amount you owe (or increase any refund).  You can check the amount of CIS tax deducted in your HMRC tax dashboard, and at the tax year-end, you can amend this figure if you feel it is incorrect.

To help your quarterly year-to-date updates, you’ll need clear digital records of:

  • Each payment you receive
  • The matching CIS deduction
  • All business expenses (materials, tools, fuel, insurances, etc.)

The totals from these are then submitted via HMRC-recognised software. You can record income and expenses on the go using tools like TaxNav’s app, or import spreadsheet data using our bridging software or templates.

Don’t worry – you won’t currently need to pay tax four times a year (although HMRC is consulting to introduce this from April 2029).  You’ll still complete a single year-end declaration, and your final tax bill is due in January following the tax-year end.

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Why construction contractors should prepare now

Many contractors find it challenging to keep track of expenses, manage CIS statements from multiple firms or fit admin into a busy schedule. MTD IT won’t remove those pressures entirely, but preparing early and choosing simple software makes a real difference.

Getting ready now helps you:

  1. Spread admin across the year – quarterly updates reduce the January rush and encourage clearer, current records.
  2. Track CIS accurately – digital records make it easier to see whether you’re due a refund or need to set aside funds.
  3. Plan ahead – quarterly updates give helpful insight into your business performance and likely tax position.

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You can join the MTD IT pilot now

Although MTD IT doesn’t become mandatory for those above the £50,000 threshold until April 2026, HMRC’s pilot is already open. Joining now lets you:

  • Trydigital record-keeping at your own pace
  • CheckCIS deductions flow correctly
  • Fixany issues early
  • Buildconfidence before the rules take effect

Most contractors who join early find the transition much easier. With TaxNav our software is free to use for the 2025/6 tax year too!

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Get MTD-ready the smart way

The TaxNav team have designed a simple, browser-based option that’s MTD IT-compliant and built with construction workers and CIS subcontractors in mind.  If you're unsure where to start or want to try software that fits the way you work, we can help you prepare for MTD IT the smart way.

Contact us for more information.

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