MTD 2026: What Sole Trader Contractors Need to Do Before April

If you're a contractor or subcontractor working under CIS, the next big change to hit the construction industry isn’t a new regulation on-site — it’s Making Tax Digital (MTD).

From April 2026, many sole traders, subcontractors and landlords will be required to keep digital records and submit quarterly digital updates to HMRC. And while that might sound like a mountain of extra admin, the reality is simple:

👉 Those who prepare now will find MTD easy.👉 Those who leave it until the last minute… won’t.

At Eden Bookkeeping Solutions, we work with CIS and trades clients every day, so here’s a clear, no-jargon guide on what contractors need to do before the rules go live.

What Exactly Is Making Tax Digital (MTD)?

MTD is HMRC’s plan to move away from annual tax returns and into a fully digital, real-time system.

From April 2026:

• Sole traders earning over £50,000 must follow MTD rules

• Quarterly updates must be submitted using MTD-compatible software

• Paper records and spreadsheets will no longer meet HMRC standards

  
  

Contractors are one of the groups most affected because income is often split between jobs, subcontractors, materials, CIS deductions and retentions — meaning digital accuracy becomes essential.

Who in Construction Must Comply from April 2026?

You must join MTD ITSA from April 2026 if:

• You’re a sole trader with £50,000+ turnover

• You’re a landlord (including those with rental income on the side)

• You submit a Self Assessment tax return

• Your records are currently on paper, Excel, or incomplete

  
  

Limited companies already file digitally under MTD for VAT and aren’t part of this rollout — but subcontractors and sole traders are directly affected.

What Contractors Need to Do Before April 2026

1️⃣ Make Sure You’re Using MTD-Compatible Software

This is the biggest priority.

You’ll need software that can:

• Record all income and expenses

• Connect your bank feed

• Produce accurate quarterly submissions

• Track CIS deductions

• Generate real-time financial reports

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Xero is the top choice for CIS-heavy trades businesses because it:✔ Calculates CIS automatically✔ Produces contractor statements✔ Includes receipt capture (Hubdoc)✔ Is fully MTD-ready

2️⃣ Go Paperless — Digital Records Will Be Mandatory

Paper receipts, handwritten invoices and Excel spreadsheets will not meet MTD standards.

Digital records must include:

• Income from each job

• CIS deductions

• Subcontractor payments

• Materials and expenses

• VAT (if registered)

  
  

This is the perfect time to start taking photos of receipts, storing invoices digitally and ditching the folder full of paperwork.

3️⃣ Connect Your Bank Feeds and Keep Transactions Up to Date

Bank feeds import your transactions straight into your bookkeeping software.

This means:

• Less manual entry

• No missing payments

• No duplicated transactions

• Faster CIS and VAT reconciliation

• 
  

Under MTD, every transaction must be recorded accurately — a bank feed makes this easy.

4️⃣ Get Into a Monthly Bookkeeping Routine

MTD means quarterly submissions, not one tax return a year.

A monthly routine will keep you ahead:

• Reconcile the bank feed

• Upload receipts

• Match invoices and payments

• Check unpaid invoices

• Review CIS statements

  
  

This saves stress and spreads the workload evenly rather than panicking at quarter-end.

5️⃣ Make Sure Your CIS Records Are Accurate

CIS can be messy if not kept up to date.

Before MTD starts, ensure:

• You’re recording the correct CIS deductions each month

• Subcontractor verification is done properly

• Materials are broken out correctly

• CIS suffered is recorded (if subcontractor)

• CIS deducted is tracked (if contractor)

  
  

Mistakes will be much harder to correct once digital submissions become mandatory.

6️⃣ Check Whether You Need to Separate Business and Personal Transactions

If your business and personal money are mixed in one account, it will make MTD extremely difficult.

It’s time to:✔ Open a dedicated business account✔ Keep all business spending separate✔ Avoid personal purchases from your business account

This is the simplest way to stay compliant — and makes bookkeeping 10x easier.

7️⃣ Work With a Bookkeeper Who Understands MTD and CIS

MTD for contractors isn’t just about software — it’s about processes.

A specialist bookkeeper will help you:

• Get your system MTD-ready

• Avoid compliance risks

• Keep CIS deductions correct

• Understand your numbers

• Submit quarterly updates on time

  
  

At Eden Bookkeeping Solutions, we’re already preparing clients for the change so the transition is smooth (and stress-free).

Why Preparing Early Makes Life Easier

By preparing now, you’ll:

• Avoid the April rush

• Spread the cost of setup

• Reduce admin stress

• Have cleaner, more accurate records

• Gain clearer insight into profit and cash flow

  
  

Contractors who embrace digital now will be miles ahead when MTD becomes compulsory.