What changed in CIS in 2026?

From 6 April 2026: new CIS fraud rules with a 5-year gross status ban, compulsory nil returns for contractors, and public bodies taken out of CIS. HMRC error letters followed in October, and Making Tax Digital began for higher earners.

The deduction rates did not change: 20% if you are registered, 30% if not. Everything below comes from legislation or GOV.UK pages with a date on them, checked on 16 October 2026.

The changes at a glance

The fraud measures

The Finance Act 2026 received Royal Assent on 18 March 2026, and its CIS changes have effect from 6 April 2026. They target businesses that pay, or deal with, people they know or should know are deliberately not deducting or paying over CIS or PAYE.

• Liability for the tax. A business that makes a payment under a construction contract, knowing or when it should have known that another party to that contract, or to another contract for the same work, was deliberately not deducting or paying over CIS or PAYE, can be made to pay HMRC 20% of that payment.
• False credit for deductions. A business that claims credit in a return for CIS deductions it knew or should have known had not been taken, or would deliberately not be paid over, can be made to pay that amount.
• Penalty. On top of either, a penalty of up to 30% of the amount. For a company, HMRC can make an officer, such as a director, pay part or all of the penalty.
• Gross payment status. HMRC can cancel it at any time where either rule applies. After an immediate cancellation, the business cannot reapply for 5 years, up from 1 year. Other cancellations keep a 1-year bar.

HMRC's policy paper says the measures should not affect compliant businesses that do proper checks on who they deal with.

Nil returns are back

The requirement to file a nil return was removed in 2015. SI 2026/289, made on 12 March 2026, brings it back from 6 April 2026. A contractor whose business includes construction work, and who has paid subcontractors before, must send a return saying no payments were made for any tax month with no payments, within 14 days of the end of that month. The exception is where the contractor told HMRC, at least 14 days before the tax month started, that it would make no payments. The same regulations take payments to local authorities and certain public bodies out of CIS.

HMRC's October letters

In Agent Update 147, published on 17 September 2026, HMRC said that in October 2026 it would write to CIS contractors whose monthly returns showed errors. The three main problems it named were using the wrong deduction rate, not recording materials separately, and figures that did not match payroll, invoice or accounting records. Both of the first two can mean too much CIS is taken from a subcontractor.

Making Tax Digital for subcontractors

Making Tax Digital for Income Tax (MTD) started on 6 April 2026 for sole traders and landlords whose qualifying income in 2024-25 was over £50,000. It starts on 6 April 2027 for those over £30,000 in 2025-26, and on 6 April 2028 for those over £20,000 in 2026-27. Qualifying income is turnover before expenses, so it is your CIS pay before deductions, not what reaches your bank.

Once you are in MTD, HMRC adds your CIS deductions to your MTD tax return, and any refund is requested separately through HMRC online services.

What this means for you

If you are a sole-trader subcontractor paid under deduction, the fraud rules mostly matter through your contractors, who now have more reason to check who they pay and how. If you hold gross payment status, or are working towards it, the stakes are higher, because losing the status now means a 5-year wait.

The October letters may lead some contractors to correct their rates or materials figures. If your statements change, check them against your invoices. And if your turnover is over £30,000, MTD is the change that touches you most directly.

Steps to take now

1. Check every monthly payment and deduction statement against your invoice: rate, gross pay, materials and deduction.
2. If the rate is 30% when you are registered, check the contractor has the exact name and UTR you registered with, as a failed verification can mean the higher rate.
3. If you hold gross payment status, keep records of the checks you make on anyone you pay or work alongside.
4. Add up your 2025-26 turnover before expenses to see whether MTD starts for you on 6 April 2027. The free MTD check shows your date.
5. Keep all your 2026-27 statements together, so your CIS deductions can be checked at the year end.

The trades section has more on CIS and MTD.