CIS, VAT and MTD in 2026: what changed, and the dates fixed for 2027

Making Tax Digital for Income Tax became mandatory for the self-employed with income over £50,000. It is a different regime from Making Tax Digital for VAT, which has applied to VAT-registered businesses since 2019 and is about the VAT return. MTD for Income Tax is about the self-employment pages of a Self Assessment return, and it applies on turnover, whether or not the business is VAT registered.

That last point is why it lands on CIS subcontractors first and hardest. A labour-only subcontractor turning over £60,000 is below the VAT threshold, has never kept a digital record of anything, and is squarely inside the first band. The contractor deducting from them is unaffected by this change in their capacity as a contractor; the subcontractor being deducted from is the one with a new quarterly obligation.

The obligation is two things: digital records of income and expenses, and a quarterly update to HMRC built from them. The update is a set of totals, one per box of the self-employment pages, for a three-month period. The standard periods follow the tax year, 6 April to 5 July and so on round to 5 April, and a business can elect calendar quarters instead. The deadlines do not move with the election.

A quarterly update is only as good as the categorisation underneath it. A transaction with no category cannot go into any total at all.

Nothing about the monthly cycle moved. A CIS tax month runs from the 6th to the 5th. The CIS300 covering every payment made in it is due by the 19th of the month in which it ends, and so are the payment and deduction statements to every subcontractor deducted from. Deductions go to HMRC with PAYE by the 19th by post, or cleared by the 22nd electronically. A month with no payments is a nil return and is still due. One day late is a £100 penalty, per return.

What does change every year is which 22nds fall on a weekend or a bank holiday, because on those the money has to have reached HMRC by the last working day before. In 2026/27 two do: 22 August 2026 is a Saturday, so the July-to-August deductions clear by Friday 21 August, and 22 November 2026 is a Sunday, so the October-to-November deductions clear by Friday 20 November.

The VAT domestic reverse charge for building and construction services has applied since 1 March 2021 and the conditions are what they were. It bites when the work is within the scope of CIS, the supply is standard-rated or reduced-rated, both parties are VAT registered, the customer is registered for CIS as a contractor, and the customer has not told you in writing that they are an end user or an intermediary supplier. If any one of those is false, VAT is charged the normal way.

The default is still the part firms get wrong. Silence from the customer means the reverse charge applies, not that VAT is charged. The invoice still has to state the rate and the statutory wording, and on the VAT return the net value of reverse-charge sales goes in box 6 with nothing in box 1.

Since 6 April 2024, VAT compliance has been part of the compliance test for CIS gross payment status. HMRC looks at whether every VAT return was filed and every VAT liability paid on time in the twelve months before an application or a review, alongside self assessment or corporation tax, PAYE and CIS returns as a contractor.

The tolerance is narrow. Broadly, one VAT return or payment more than 28 days late, or three separate instances of being even a day late in a twelve-month period, is enough to fail. The same change gave HMRC the power to remove gross status immediately where it suspects VAT, corporation tax, income tax or PAYE fraud, without the usual notice. Two years on, a late VAT return remains the most common way a subcontractor goes from being paid gross to having 20% withheld at source.

File every VAT return on time even when you cannot pay in full. Filing and agreeing time to pay is treated far better than not filing.

• 6 April 2027. Tax year 2027/28 begins, and the MTD for Income Tax threshold falls to £30,000. A self-employed subcontractor between £30,000 and £50,000 who has watched the first year from outside is inside from this date.
• 7 May 2027. The Q4 update for 2026/27, covering 6 January to 5 April 2027, is due.
• 19 May 2027. The CIS300 for tax month 1 of 2027/28, 6 April to 5 May 2027, is due, with the statements.
• April 2028. The threshold falls again, to £20,000.

NoteAnything beyond that is announcement rather than statute. A change announced at a Budget is not a rule until the instrument is made, and none is stated here until it is.

1. 01Work out which threshold you are inside, on turnover and not on profit, and which April it reaches you.
2. 02Decide the basis, cash or accruals, once, with your accountant, because every quarterly total depends on it.
3. 03Categorise every transaction against the self-employment boxes as it happens rather than in the week the update is due. An uncategorised receipt in March is a missing figure in May.
4. 04Keep the CIS statements from every contractor. The deductions on them are what the update and the year-end return reconcile against.
5. 05File every VAT return on time if you are registered, because the gross status test now reads them.

On CIS, what it has always recorded. Subcontractors are verified with HMRC, the deduction is taken on the labour element at the rate verification produces, the tax period is derived from the payment date so a payment on the 3rd falls into the right month automatically, a payment and deduction statement is produced per subcontractor per tax month, and the CIS300 is recorded with both statutory declarations and locked to its period. It does not file the return; you file through HMRC’s own service and record the reference.

On the reverse charge, a flag on the customer record that puts nil VAT and the section 55A wording on every invoice raised for them, payment applications and retention releases included.

On MTD for Income Tax, the record a quarterly update is built from. Every invoice, expense and purchase order carries a category matching HMRC’s own box names, the accounting basis is recorded once for the business, and a readiness report names what a quarterly update is still short of, transaction by transaction, with the fix for each. The transaction list and the totals per box export as CSV for whoever prepares the update.

NoteEstimark does not file. There is no HMRC submission in it, no MTD credentials, and nothing that sends anything to HMRC under either regime. The VAT return and the quarterly update are prepared and sent from your accounting software, and the CIS300 through HMRC’s own service. See CIS compliance in Estimark and the reverse charge in Estimark.