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Making Tax Digital for plumbers, electricians and builders

Making Tax Digital for Income Tax started in April 2026 for sole traders with turnover over £50,000, and the threshold falls to £30,000 next April. If you work in the trades — often under CIS, with materials on every job — here’s what changes and how to get your records ready.

Based on HMRC guidance on GOV.UK, last checked 26 October 2026 · General information, not tax advice

When MTD applies to you

HMRC looks at your qualifying income: your total self-employment and property income before expenses, from your tax return two years earlier.

Partnerships aren’t in MTD for Income Tax yet. If you trade through a limited company, it doesn’t apply to you either — the company files Corporation Tax instead.

Quarterly updates and deadlines

Each update is a summary of your income and expenses by category for the quarter, sent from MTD-compatible software (or bridging software that links to a spreadsheet). They’re cumulative, so you can correct earlier quarters in the next one.

You still file a final tax return by 31 January after the tax year, and pay your tax the same way as now.

CIS deductions

When you work for a contractor under the Construction Industry Scheme, they deduct tax from the labour part of your invoice — 20% if you’re registered for CIS, 30% if you’re not — and pay it to HMRC. Materials, and VAT, aren’t subject to the deduction. Some subcontractors qualify for gross payment status, with no deductions at all.

The deductions are advance payments towards your income tax and National Insurance. For your records:

• record the gross amount of each invoice as income;
• keep each contractor’s monthly CIS statement and record the deduction separately;
• claim the total in your tax return; if it’s more than your bill, HMRC repays the difference.

A quick check: if a deduction is more than 20% of the labour, ask the contractor whether they’ve verified you as registered.

Materials and job costs

Materials, subcontractor labour, skip and plant hire are allowable expenses in your accounts. Record them against each job too: it’s the only way to see which jobs actually made money and to price the next quote properly. Keep receipts (photos are fine) and supplier invoices.

Tools and equipment you keep are usually claimed as capital allowances; the annual investment allowance covers most purchases in full.

VAT registration

You must register for VAT if your VAT-taxable turnover for the last 12 months goes over £90,000. Check at the end of every month, not just at the tax year end. Register within 30 days of the end of the month you went over; you’re registered from the first day of the second month.

You must also register straight away if you expect to go over £90,000 in the next 30 days alone — for example a single large contract.

Once registered, most work for other VAT-registered CIS contractors falls under the domestic reverse charge: you don’t charge VAT, the contractor accounts for it. Work for homeowners is charged VAT as normal.

What records to keep

• every quote, invoice and payment, with dates;
• CIS payment and deduction statements from each contractor;
• receipts for materials, tools, van costs and other expenses;
• business mileage, if you use the flat rate (see van costs: mileage or actual);
• keep it all for at least 5 years after the 31 January filing deadline.

Official sources

• GOV.UK: Check if you need to use Making Tax Digital for Income Tax
• GOV.UK: What you must do as a CIS subcontractor
• GOV.UK: Register for VAT
• GOV.UK: VAT domestic reverse charge for construction

General information, not tax advice. Check the current guidance on GOV.UK or with your accountant. Last checked 26 October 2026.