The first Making Tax Digital (MTD) quarterly update deadline – 7 August 2026 – is fast approaching and around 864,000 self-employed people, including many construction subcontractors, will need to submit their first digital update to HMRC.
Making Tax Digital represents one of the biggest changes to Self Assessment in recent years. If you’re affected, now is the time to understand what the changes mean and make sure you’re prepared. Read on to find out more about the new reporting requirements and some practical steps you can take before the deadline.
What is Making Tax Digital?
Making Tax Digital is a government initiative designed to modernise the tax system for many self-employed people and landlords. Rather than completing just one Self Assessment tax return each year, those within scope are now also required to submit quarterly summaries of their business income and expenses using software that is compatible with HMRC’s systems.
The government says Making Tax Digital is intended to make it easier for people to get their tax right while helping to reduce errors that contribute to an estimated £5 billion tax gap in Self Assessment tax revenue.
Who is affected?
Making Tax Digital is being introduced in stages. Currently, it applies to self-employed individuals and landlords with qualifying income of more than £50,000, based on their 2024/25 tax returns.
The scope will then widen over the coming years:
- From April 2027: qualifying income above £30,000
- From April 2028: qualifying income above £20,000
For many construction subcontractors working under the Construction Industry Scheme (CIS), these changes may now be highly relevant.
Key dates to remember
Those within scope will need to submit four quarterly updates each year with deadlines of 7 August, 7 November, 7 February and 7 May.
It’s important to remember that these quarterly updates do not replace the annual tax return process. A final declaration will still need to be completed by the usual 31 January deadline.
What happens if you don’t comply?
HMRC has introduced a transition period during the first year (2026–27), meaning there are no penalties for missing a quarterly update. However, those affected will still need to keep digital records and submit their quarterly updates before being able to complete their annual tax return.
From the following tax year onwards, HMRC intends to operate a points-based penalty system for missed submissions, with £200 penalties applying once a four-point threshold has been reached.
Keeping accurate digital records and submitting updates on time will help subcontractors avoid unnecessary complications as the new system becomes established.
Different ways to prepare
There are a number of ways to prepare for Making Tax Digital, so it’s worth taking time to understand the options and choose an approach that’s appropriate for your business.
One of the best places to start is HMRC’s own guidance, including its free webinars explaining how Making Tax Digital works and what businesses need to do.
When it comes to software, there are broadly two approaches available:
- Some may benefit from bank-linked accounting software, which automatically imports transactions and can be particularly useful where there are higher volumes of income and expenditure.
- Others with simpler record-keeping may prefer bridging software, allowing information already recorded in spreadsheets to be submitted digitally without moving to a full accounting package.
Construction subcontractors should also consider whether any software they choose supports Construction Industry Scheme (CIS) deductions and reporting, as this can make ongoing administration much simpler.
The Federation of Master Builders (FMB) has also produced a practical checklist specifically for builders and construction businesses preparing for Making Tax Digital. It includes useful reminders such as:
- Check whether Making Tax Digital applies to you
- Register with HMRC if required
- Choose software that suits your business
- Keep digital records up to date
- Familiarise yourself with the reporting deadlines
- Seek professional advice if you’re unsure about your obligations
Preparing now can save problems later
Making Tax Digital represents a significant change for many self-employed construction professionals, but understanding the new requirements, keeping your records up to date and choosing software that’s appropriate for your business can all help make the transition much smoother.
If you’re unsure how the changes affect your own circumstances, seek advice from your accountant or refer to HMRC’s official guidance before making any major decisions.
How are you preparing for Making Tax Digital? We’d love to hear your thoughts and experiences. Join the conversation by commenting on our Facebook or LinkedIn pages.
04.08.2026
Feature image: Magnific
Please note: This blog is intended as general information only and is based on guidance available at the time of publication. Making Tax Digital requirements may change, so always refer to the latest information published by HMRC or seek advice from a qualified accountant if you’re unsure how the rules apply to your own circumstances.
