It has always been part of HMRC’s plan to expand the scope of the making tax digital (MTD) regulations for both small businesses and the self-employed – and the next phase has been confirmed for implementation for April 6th 2026.
HMRC’s published objective is reduce “errors” in handling the “tax gap” – the discrepancy between the tax from self-assessment that they claim is due, but goes unpaid. That amount is, according to HMRC 18.5% – or £5billion!
Under the new plans:
- If you’re a business or sole trader in the construction sector with income over £50,000, you’ll need to comply with MTD rules from April 2026.
- If your income is above £30,000, you’ll need to comply from April 2027.
- From April 2028, the income threshold will reduce to £20,000, bringing around 900,000 more people – into the MTD system.
What is required from the new MTD rules?
- Records will need to be both kept and submitted digitally, and MTD submissions must be made using compatible software – You will no longer be able to use HMRC’s online tax return service.
- In addition to end-of-year final declarations there will be a new requirement for quarterly updates.
- The software used must be approved for use with HMRC’s systems.
The new rules shouldn’t be too much of a challenge for SME contractors—most small businesses are already using MTD-compatible systems, since it’s a requirement for VAT registration.
But what about sole trader sub-contractors?
It’s still very common for tradespeople to drop off a bag full of 12 months’ worth of receipts to their (often stressed) bookkeepers or accountants once a year!
At EEBS, we understand the realities of how things work in the real world. With all of the above in mind, EEBS will keep both clients and sub-contractors informed by delivering regular briefings to sub-contractors over the coming year, ensuring they are fully supported and ready for the administrative change, and we are actively developing solutions to help address the new requirements. If you have any questions, please don’t hesitate to get in touch.
