15th May 2026
For years, many CIS contractors, subcontractors and self-employed workers have managed their tax through one annual Self-Assessment tax return. That process has now changed.
Making Tax Digital (MTD) for Income Tax is now live, and HMRC is moving towards more regular digital reporting. If you are working as a contractor or subcontractor, it is important to understand what this means, whether you need to register for MTD, and what action you should be taking now.
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax (MTD for IT) is HMRC’s system for moving income tax reporting to a digital, in-year process.
In simple terms, it means:
- Keeping digital records of income and expenses
- Sending quarterly updates to HMRC using software
- Submitting a year-end tax return at the end of the tax year
It does not remove tax returns entirely, but it changes how and when information is reported.
Who needs to follow MTD rules?
MTD will apply to sole traders and landlords once their qualifying income (as reported on their Self-Assessment tax return) exceeds HMRC thresholds.
The rollout is staged:
- From April 2026 - income over £50,000
- From April 2027 - income over £30,000
- From April 2028 - income over £20,000
For many contractors and subcontractors, particularly those operating under CIS, this will apply based on trading income reported to HMRC through Self-Assessment.
You may need to register with HMRC for MTD
If you are within scope or preparing to enter the regime, you will need to register for Making Tax Digital with HMRC if you have not already done so.
This registration links your tax affairs to MTD-compatible software and confirms your participation in the new reporting system.
Quarterly updates explained
Under MTD, you will submit updates to HMRC every three months using compatible software.
These updates summarise your income and expenses for the period and help HMRC build a real-time view of your tax position.
They are not separate tax bills, but they do replace the “once-a-year catch-up” approach with ongoing reporting.
At the end of the tax year, you will still complete a tax return, confirming all income, reliefs and tax due.
You will still need to file your 2025/26 Self-Assessment tax return
MTD does not immediately replace Self-Assessment.
For most contractors and subcontractors, the 2025/26 Self-Assessment tax return (due 31st January 2027) will still be required.
For many, this will be the last traditional, standalone annual Self-Assessment tax return.
Why you need to act now
MTD is not coming; it is already live. That means preparation is no longer optional or future-focused.
The most important step now is getting set up correctly and ensuring you have the right tools in place.
You should:
- Get MTD-compatible software in place as soon as possible
- Register with HMRC for MTD if required
- Start moving records into a digital system
- Build the habit of keeping income and expenses up to date
Waiting will only make the transition harder. The businesses that adapt early will find quarterly reporting far easier to manage when it becomes mandatory for them.
Quarterly submission deadlines
Once within MTD, updates are expected to be submitted quarterly, aligned to the tax year:
- 7th August
- 7th November
- 7th February
- 7th May
These updates must be completed through MTD-compatible software.
Missing deadlines may result in penalties once the system is fully enforced, so staying organised will be essential.
Final thoughts
Making Tax Digital is already changing how contractors and subcontractors report income. The shift is happening now, not in the distant future.
The key takeaway is simple: get registered if required, get software in place, and start preparing immediately. This will ensure you are compliant, organised, and ready for quarterly reporting as the system expands.
About Coconut
From tax return to MTD, Coconut has you covered.
✅ Built specifically for the self-employed, freelancers, landlords and CIS Subcontractors
✅ MTD for Income Tax ready
✅ Track income and expenses with ease
✅ Capture receipts on the go
✅ Send invoices and see how much tax you owe
✅ No accounting jargon – just a simple, powerful app
Whether you're managing your finances solo or working with an accountant, Coconut takes the stress out of tax and helps you stay compliant.
MTD is here, and Coconut keeps it simple - Start your 14-day free trial today
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Article by Coconut