What the threshold is measuring
HMRC tests your qualifying income: the total of your self-employment and property turnover before expenses, taken from the tax return you submitted in the previous tax year. Over £50,000 in 2024-25 brings you in from 6 April 2026, over £30,000 in 2025-26 from 6 April 2027, and over £20,000 in 2026-27 from 6 April 2028.
Because it is turnover rather than profit, the materials you buy for a job do not pull you back under the line, and neither does a slow year after a busy one until the following cohort test.
Materials, labour and CIS deductions
The clean split to keep in your head is labour against everything else. Labour is your income. Materials you buy and re-charge are still part of your turnover, with the cost claimed as an expense, so they move the profit without moving you out of scope.
If you are paid under CIS as a subcontractor, the deduction is taken at source from your labour, and it does not reduce your turnover either: it is tax already paid, which is why the statement matters at the end of the year. Our guide on CIS deductions walks through the rates, the statements to keep, and how the money comes back.
What each quarterly update contains
| What it is | Where it goes |
|---|---|
| Labour and invoiced work | Self-employment turnover |
| Materials bought for jobs | Cost of goods, claimed as an expense |
| Subcontractor payments | Subcontractor costs, with CIS handled separately |
| Van, fuel and mileage | Vehicle costs, or the mileage rate if you use it |
| Tools, test equipment, insurance | Other business expenses |
The update is a set of totals for each of those categories, cumulative from 6 April, not a description of each job. HMRC does not receive the individual invoices, so the detail of what you bought stays in your records.
What to do first
- Check which cohort you are in, using your turnover from the relevant year rather than your profit
- Get registered for the scheme properly if you are already in CIS, so the statements match your records
- Decide your accounting period before your first update, because it locks once you have sent one
- Start the records at the beginning of the tax year you are in, from the app you already carry, rather than from a January shoebox