26th June 2026 | Hudson Contract
Making Tax Digital (MTD) is now live and the first quarterly returns are due from hundreds of thousands of sole traders and small landlords within weeks - with construction’s army of subcontractors among those most exposed.
The new regime has landed hard-working sole traders with extra red tape and whipped up a “Wild West” of conflicting advice from those claiming to be experts on how to deal with the biggest shake-up to self-assessment in a generation.
Hudson Contract, the biggest payer of subcontractors in the UK construction industry and the market leader in CIS compliance, has researched the options, and recommends the specialist accountancy firm Grenfell James which provides the best low-cost, comprehensive and user-friendly solution.
What’s changed?
Sole traders and landlords who earned more than £50,000 during the 2024-25 tax year must now use HMRC-compatible software to report income and expenses every three months. The first quarterly update is due on 7th August.
Updates are cumulative, building on the previous quarter’s figures rather than starting fresh each time:
| Quarterly update period | Filing deadline |
| 6 April – 5 July | 7 August |
| 6 April – 5 October | 7 November |
| 6 April – 5 January | 7 February |
| 6 April – 5 April | 7 May |
HMRC estimates that 864,000 people fall into scope this year. The threshold drops to £30,000 from April 2027 and to £20,000 from 2028 – a shift that will pull the majority of construction subbies into MTD as it phases in.
Within three years, HMRC estimates 2.9 million taxpayers to be filing under the new system. Missed quarterly updates will trigger points-based penalties, with a separate, escalating regime for late payments.
What do those affected need to do
Any subcontractors who earned more than £50,000 last year must create, maintain and correct digital records of their self-employment and property income and expenses, then submit a quarterly summary to HMRC. These aren’t tax returns – just simple updates to keep HMRC informed as the year progresses.
They will still need to file a full tax return and pay any tax due by 31st January the following year, or claim back overpaid CIS deductions exactly as before.
Don’t let your subbies jump from the frying pan into the fire
Hudson’s Ian Anfield says subcontractors shouldn’t let the changes unsettle their existing setup: “While these changes might seem alarming to subbies, at the end of the day they should view MTD as an extra job that needs doing. The way they work, are taxed and paid, and the arrangements they have in place for their tax returns can remain the same.
“Subbies don’t need to change their accountant, set up limited companies or change their bank accounts. They just need access to an app to keep a record of income and expenses that can produce and submit a report every three months, and basic support to get started.
“Grenfell James, a forward-thinking multi-office accountancy practice, has set up a simple solution with a leading tech firm. The app is proving popular with Hudson subbies due to its low cost at £10 per month, its simplicity and the fact that existing arrangements can stay in place.
“The option of setting up limited companies to avoid MTD is probably the most expensive and causes IR35 problems for clients, and ‘free’ tools attached to bank accounts (which come with monthly fees) are proving inflexible as cash payments cannot be accounted for.”
Getting compliant
Self-employed subbies or CIS operatives who believe they may be caught by MTD should contact Grenfell James direct on MTDitsa@gjassociates.co.uk and copy in Hudson at MTD@hudsoncontract.co.uk
The set-up is simple and it is important to get started now to avoid complications later.
The bigger picture
The government said Making Tax Digital is designed to “make it easier for everyone to get their tax right”, and to help close a £5 billion tax gap in self-assessment tax revenue.
The MTD programme began with VAT-registered businesses in 2019, and it hasn’t gone smoothly. A 2023 National Audit Office report criticised HMRC for failing to demonstrate the programme offers good value for money, and said the department had significantly underestimated the cost of the changeover for businesses. The watchdog called on HMRC to demonstrate the programme is actually improving services and cutting red tape.
In May, HMRC awarded a 10-year, £175m contract to British tech firm Quantexa to deploy AI tools that combine HMRC’s own data with external sources to spot fraud and fix errors more quickly.
Sole traders aren’t the only ones under the spotlight. A recently closed HMRC consultation looked at requiring close companies – those controlled by five or fewer shareholders – to report more detailed data on payments to directors and shareholders, including loans, dividends and drawings.
