Do you need to use MTD for Income Tax?
You must use MTD for Income Tax if you are a sole trader with qualifying income over the relevant threshold. For the 2026-27 tax year, this applies if your qualifying income in 2024-25 was more than 50,000 pounds.
Qualifying income is your total income from self-employment and property before expenses. For a subcontractor, this is the gross amount you invoice for, not the net amount you receive after CIS deductions.
If your qualifying income is 20,000 pounds or less, you are automatically exempt from MTD for Income Tax. You continue to file a Self Assessment tax return as usual.
How CIS deductions fit with quarterly updates
Under MTD, you send four quarterly updates to HMRC each year. These updates are summaries of your income and expenses, not a full tax return.
When you record income in your software, you record the gross amount you invoiced. The CIS deduction taken by the contractor is not an expense. It is a prepayment of your tax.
You do not report the CIS deduction amount in the quarterly update categories. The update shows your gross income and your allowable business expenses.
The actual tax calculation, including the credit for CIS deductions, happens when you submit your annual tax return. The software or HMRC online services will show an estimate of your tax bill after each update.
- Record the gross invoice amount as income.
- Do not list the CIS deduction as an expense.
- Keep records of all CIS deduction statements for your tax return.
Quarterly update deadlines
You must send a quarterly update even if you had no income or expenses in that period. The deadlines are fixed dates based on the end of the period.
You can send updates from the end of the period up to the deadline. If you expect no further transactions, you can send them up to 10 days before the period ends.
| Period ends | Update due by |
|---|---|
| 5 July | 7 August |
| 5 October | 7 November |
| 5 January | 7 February |
| 5 April | 7 May |
For the 2026-27 tax year, there are no penalty points for missing a quarterly update deadline. However, you must still send the updates and keep digital records.
Digital records and CIS statements
You must keep digital records of your income and expenses. A digital record is created and stored in compatible software. You must keep these records for at least 5 years after the 31 January submission deadline for the tax year.
CIS deduction statements are important documents. While you do not need to create a digital record for the deduction itself in the same way as an invoice, you must keep the statements to prove the tax has been deducted.
Once a record has been sent to HMRC in a quarterly update, it must not be changed by hand. You cannot copy and paste or manually adjust values in a spreadsheet after submission.
The final tax return
After the tax year ends, you submit a Self Assessment tax return. This is where you declare your total income and expenses, and where the CIS deductions are credited against your tax liability.
The tax return is due by 31 January following the end of the tax year. Any tax owed is also due by this date.
If you use compatible software, it can help you prepare the tax return using the data from your quarterly updates and your CIS records.
Using software for CIS and MTD
HMRC does not provide software for MTD. You must use compatible software that can create digital records, send quarterly updates and submit the tax return.
TradeKit is MTD ready - recognised by HMRC (reference D4K6ZS). The software helps you keep digital records, send quarterly updates and prepare your tax return, including handling the data needed for CIS credits.