The tax system is gradually expanding
HMRC has provided clarity on its rules as many taxpayers must begin using a new framework. A new digital system is being rolled out progressively in the years ahead.
The matter emerged following a question posed to the revenue department over social media regarding Making Tax Digital. This initiative requires self-employed people and landlords to file quarterly returns to HMRC detailing their financial activities. 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’s initial reply stated simply: “If you meet the qualifying income threshold you’ll need to start using Making Tax Digital.”
The regulations specify that people with qualifying earnings exceeding £50,000 annually during the 2024/2025 financial year must commence using Making Tax Digital from April 6, 2026, as the new tax year starts. This requirement is being extended gradually to more people. From April 2027, those with earnings above £30,000 in 2025/2026 will be required to register.
The Government is also preparing legislation ensuring that from April 2028, the scheme will include anyone generating more than £20,000 in 2026/2027. The taxpayer posed a more detailed question regarding how qualifying income would apply to their particular circumstances.
They explained that throughout the previous year, they had predominantly been employed on a PAYE basis, only beginning to operate through the CIS system from mid-January.
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 stepped in to clarify the rules. The authority said: “PAYE income doesn’t count towards your qualifying income”.
Further guidance was also provided by the group: “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.” Further details regarding what constitutes qualifying income can be found on the Government website.
