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If you run a building business as a sole trader or work as a subcontractor under the Construction Industry Scheme (CIS) then important tax changes are coming your way. From 6 April 2026 many sole traders including builders and CIS‑subcontractors will need to use digital records and submit quarterly updates to HM Revenue & Customs (HMRC) under the MTD for Income Tax and Self Assessment (MTD ITSA) rules.
At IBISS & CO our aim is to help builders and CIS subcontractors get ahead of this change. In this blog you’ll learn what you must digitise, why you should act now, which tools to use, and how to set up a simple quarterly workflow. We’ll also share a pack of templates to get you started.
Why You Should Act Now
The deadline may feel far off but the changes are significant. Here is why you should not leave this until the last minute.
From 6 April 2026, if you are a sole trader or landlord with qualifying income (gross income from self‑employment and/or property) over £50,000 you’ll need to use MTD ITSA.
If you also work under CIS or run a construction type business, your records will need to keep pace with both CIS rules and MTD rules.
HMRC is updating its guidance through 2025 and tools are already available. Getting set up early gives you breathing space.
What’s the benefit of acting early
- Build your digital record‑keeping habit now rather than scrambling later.
- Avoid rushed transitions, mistakes or missing data when you are busy on site.
- With good systems in place you will have clearer visibility of your cash flow, profits and tax owed.
IBISS & CO help you pick the right software, get set up and stay compliant. So you focus on building and contracting, not paperwork.
2. What Does MTD ITSA Require?
Let’s break down what the MTD rules expect from you.
Digital records
Under MTD you must keep digital records of your business income and expenses. For example you should record date, amount, category (labour, materials, plant hire etc.). Paper or manual records alone won’t cut it once you must comply.
Quarterly updates
Instead of submitting just one tax return each year you now submit summaries every three months for each trade or business you run. For example, if you are both a sole‑trader builder and you let a property you may need separate updates for each.
Final annual declaration
Even with quarterly updates you still file an annual statement (via compatible software) by 31 January following the tax year end.
When it starts
- 6 April 2026 for those with qualifying income over £50,000.
- Phased lower thresholds later (e.g., over £30,000 from April 2027).
- You can sign up voluntarily earlier if you want to get used to the system.
3. Key Changes for Builders & CIS Subcontractors
If you operate in construction the MTD rules combine with your CIS obligations. Here is what that means.
CIS record keeping
As a contractor or subcontractor under CIS you must keep records of payments, deductions, materials, verification of subcontractors etc. For example: invoices that separate labour and materials, records of payments made, your verification reference numbers.
Construction specific considerations
- If you are a subcontractor you’ll need to include any CIS deductions in your quarterly updates to HMRC under MTD.
- Material costs vs labour costs: under CIS the materials portion may not be subject to deduction, so you’ll want your systems to clearly distinguish those components.
- If you are a contractor, you will still have to file CIS monthly returns (for now) and maintain the CIS specific records. The move to MTD for Income Tax does not replace all CIS requirements.
Poor CIS record keeping can lead to penalties or extra tax liabilities. And when you add on MTD you’ll want strong digital systems to minimise risk.
4. Tools You Need: Software & Apps
Getting the right software now is a key step. Here is what to look for.
MTD compatible: Make sure software can make quarterly updates to HMRC and keep digital records in the approved format.
CIS support: for subcontractors or contractors you need software that can record separate modules for CIS deductions, verification, labour/material splits.
Mobile access / cloud: as a builder or subcontractor you will want something you can update on the go from site, not just in the office.
Bridging software: if you’re using spreadsheets now, some software lets you bridge to MTD compliant formats. But switching fully to cloud software is better long term.
IBISS & CO team offer software reviews help you pick the right package, set it up and train you and your team so you are ready ahead of the deadline.
5. Building Your Quarterly Workflow
Here is a simple workflow you can start now so that when April 2026 rolls around you are in good shape.
- Choose your software and set it up.
- Link your business bank account (and if possible separate business account) to your accounting software.
- Start entering all income and expenses digitally from today do not wait. Include labour fees, materials, plant hire, subcontractor payments, CIS deductions.
- At the end of each quarter (eg 6 Apr‑5 Jul, 6 Jul‑5 Oct, etc) generate a summary of income and expenses from your software.
- Submit the quarterly update to HMRC via the software by the deadline (7 Aug, 7 Nov, 7 Feb, 7 May) or aligned calendar quarter if you elect that.
- Use the ongoing summaries to monitor your profit, tax owed and cash flow. This helps you avoid big surprises at year end.
- At the year end (31 Jan following tax year) submit the annual declaration via your software.
- Keep your digital records organised and backed up. For CIS, make sure you keep all required records (verification, invoices, statements) for at least the required period (often 3‑6 years).
Tips for builders/subcontractors
Use a mobile app or photo scan receipts while on site so you do not lose them.
Label expenses clearly (e.g., materials – bricks, labour – subcontractor andy).
Distinguish between labour and materials especially under CIS.
If you engage subcontractors, keep their UTRs, verification reference numbers and track any deductions.
Review your figures monthly even if you only need to submit quarterly that helps keep the system manageable.
Preparing with IBISS & CO
At IBISS & CO,. we specialise in working with sole trader builders and CIS subcontractors. Here is how we help you.
Software selection & setup
We will review your business and help you choose the right accounting software package for you.
Workflow design
Together we will map your business process site jobs, invoices, materials, subcontractor payments into your digital system so nothing falls through the cracks.
Training & ongoing support
We train you and your team on how to use the system, update it regularly and stay on top of your tax obligations.
Compliance reviews
Our team check your records at intervals to make sure you are capturing everything you need for both CIS and MTD.
Quarterly check
Ahead of each quarterly update we’ll review your figures with you to spot any surprises and ensure you submit on time.
Commonly Asked Questions
Yes. If you are a subcontractor under CIS & you meet the relevant income thresholds, then MTD for ITSA will apply to you.
The MTD for ITSA rules apply to individuals sole traders or landlords who receive income from self employment and/or property and whose qualifying income exceeds certain thresholds. According to experts, there are no special exemptions just because you are under CIS.
Note: Being under CIS does not in itself trigger MTD, it’s your income level and type of income that determine it.
So, in short. If you are a CIS subcontractor, yes MTD can apply. But you must check whether your income meets the criteria and you must prepare accordingly.
As a subcontractor you do not submit the CIS monthly return. That is the contractor responsibility. But you must ensure your own income is reported in your Self Assessment (if required) and that you keep all required records.
Final Thoughts
If you are in the construction industry as a sole trader builder or a subcontractor under CIS the move to digital record keeping and quarterly updates is not optional if you meet the thresholds. It is a big change but it also offers an opportunity: better insight into your business, less last minute stress and fewer surprises at tax time.
Start now. Choose the right software. Set up your workflow. Use the templates. And partner with IBISS & CO so you are ready for April 2026 and beyond.
If you did like us to help you get started or review your current systems simply get in touch.
