CIS changes from April 2026: what contractors and subcontractors must do now

What changed on 6 April 2026?

The Construction Industry Scheme (CIS) had its biggest shake-up in years at the start of the 2026/27 tax year. The changes were announced at the Autumn Budget on 26 November 2025 and came in through the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2026 and the Finance Act 2026. Some are simplifications; others give HMRC far stronger powers. Here is each change in plain English.

1. Monthly nil returns are back

Since 2015, contractors did not need to file a CIS300 return in a month when they paid no subcontractors. That relief has now gone. If you are registered as a CIS contractor, you must file a monthly return by the 19th of the following month even when you made no payments, unless you have told HMRC in advance that you will be inactive for a period.

This catches many small builders out. A roofer who uses one subcontractor a few times a year is still a registered contractor, so a quiet month now needs a nil return. Late returns trigger automatic penalties, starting at £100 per return.

2. Local authorities and public bodies are outside CIS

Councils and some public bodies sometimes act as subcontractors, for example when a local authority carries out highway works for a developer. Until April 2026 they were treated as having gross payment status under an old concession. A new regulation now takes these payments out of CIS completely, so there is no deduction and nothing to report on your monthly return.

3. New powers to tackle CIS fraud

The biggest change is a new test borrowed from VAT. If HMRC can show that a business knew or should have known that a payment it made or received was connected to tax fraud, it can now:

• remove the business’s gross payment status immediately, with no warning;
• make the business pay the tax that was lost; and
• charge a penalty of up to 30% of that tax, which can also be charged to directors and connected people.

A business that loses gross payment status this way must also wait five years before it can reapply, up from one year. We explain how to protect yourself in our guide to CIS fraud rules and gross payment status.

What has not changed

The deduction rates are the same: 20% for registered subcontractors, 30% for unregistered subcontractors and 0% for those with gross payment status. The gross payment status tests, including the VAT compliance check added in April 2024, are also unchanged. The VAT domestic reverse charge for construction services still applies alongside CIS.

Getting it right matters more than ever. If you are not sure whether you are a contractor, a subcontractor or both, talk to our team and we will tell you exactly what you need to file.