HMRC has clarified its rules as many taxpayers need to start using a new system. The new digital system is gradually expanding over the coming years.
The issue came to light after a customer asked the tax authority a question over social media about Making Tax Digital. This is a new programme where sole traders and landlords are required to submit quarterly reports to HMRC about their dealings.
The taxpayer asked: “Is the yearly self assessment for CIS workers changing in any way? Do we have to submit any three months? If yes is there a specific link where we can get updates?”
CIS (Construction Industry Scheme) is a programme where a contractor deducts an amount from a subcontractor’s payment and passes it on to HMRC, as an advance payment of the subcontractor’s tax and National Insurance.
HMRC initially responded saying simply: “If you meet the qualifying income threshold you’ll need to start using Making Tax Digital.”
The rules state that if you had qualifying income of more than £50,000 a year in the 2024/2025 tax year, you need to start using Making Tax Digital from April 6, 2026, with the start of the new tax year. This is gradually expanding to more people.
From April 2027, anyone with income over £30,000 in 2025/2026 will need to be signed up. The Government is also planning to bring in legislation so that from April 2028, it will extend to anyone earning over £20,000 in 2026/2027.
The taxpayer asked a more specific question about how the qualifying income would work in their case. They said that over the past year, they had mostly worked on a PAYE basis, and only from the middle of January had started to work through the CIS system.
They asked: “Surely with the CIS part I haven’t broke the threshold of the £50,000 to qualify for Making Tax Digital. However I think overall between PAYE and CIS I may overtake that threshold, will I then qualify Making Tax Digital?”
HMRC responded to spell out the rules. The group said: “PAYE income doesn’t count towards your qualifying income”. The authority shared some further guidance: “If you didn’t do any CIS work in 2024/25, you won’t need to start using Making Tax Digital from this April.
“You need to work out how much CIS income you’ve had from January to 5 April 2026. If the annual equivalent amount is over £30,000, you’ll need to start using MTD from 6 April 2027.”