UK Tax Highlights: Week Ending 13 January 2026
The first full working week of the new year has brought a number of important developments across the UK tax landscape. With major reforms on the horizon, HMRC continues to focus on digital transformation, while the government has also turned its attention to long-standing administrative issues within the Construction Industry Scheme (CIS).
Below, we highlight the key tax updates from the week ending 13 January 2026, and what they may mean for taxpayers, businesses and advisers.
HMRC Update on Making Tax Digital (MTD) for Income Tax
HMRC has issued a further update on the ongoing testing and preparation for Making Tax Digital (MTD) for Income Tax, which is due to be introduced on a phased basis from 6 April 2026.
MTD for Income Tax represents a significant shift in how self-employed individuals and landlords interact with the tax system. Instead of submitting a single annual Self Assessment tax return, affected taxpayers will be required to:
Keep digital accounting records
Submit quarterly updates of income and expenses to HMRC using MTD-compatible software
Provide an end-of-period statement and a final declaration to confirm their tax position
From April 2026, the new rules will apply to individuals with combined gross income from self-employment and property of more than £50,000. The scope will then widen to those earning over £30,000 from April 2027, and over £20,000 from April 2028.
HMRC continues to actively promote its voluntary testing programme, encouraging taxpayers and agents who meet the criteria to sign up ahead of the mandatory start date. The testing phase allows participants to experience the new system in real time, identify any issues with software or reporting, and adjust their processes gradually rather than facing a steep learning curve at implementation.
HMRC has also issued reminders to those involved in testing to take particular care around the 31 January 2026 Self Assessment payment deadline. During the transition from the existing Self Assessment system to MTD, some taxpayers may notice changes in how their tax liabilities are displayed or allocated. HMRC has stressed the importance of reviewing statements carefully to ensure payments are made correctly and on time.
While MTD for Income Tax is intended to improve accuracy and provide a more up-to-date picture of tax liabilities, it will require a significant change in habits for many taxpayers. Early preparation, appropriate software selection and professional advice will be key to managing the transition smoothly.
Consultation on Changes to the Construction Industry Scheme (CIS)
In addition to the MTD update, HMRC and HM Treasury have launched a consultation on proposed changes to the Construction Industry Scheme (CIS). The consultation opened on 6 January 2026 and forms part of the government’s wider aim to simplify tax administration and improve compliance.
The CIS governs how contractors deduct tax from payments made to subcontractors and has long been recognised as an area of complexity and administrative burden for businesses operating in the construction sector.
The consultation sets out several proposed changes, including:
Reintroducing mandatory nil CIS returns for contractors who do not make any subcontractor payments in a tax month, unless they notify HMRC in advance. This is intended to improve HMRC’s oversight and reduce uncertainty about reporting obligations.
Removing certain payments from the scope of CIS, including payments made to local authorities and other specified public bodies, where the risk of non-compliance is considered low.
Making technical and administrative amendments designed to reduce errors, improve clarity and strengthen HMRC’s ability to tackle fraud and misuse of the scheme.
The consultation is open for responses until 3 February 2026, and any legislative changes arising from it are expected to take effect from 6 April 2026, subject to final decisions.
Construction businesses, contractors and advisers are encouraged to review the proposals carefully and consider responding to the consultation, particularly where the changes may have a practical impact on reporting processes or compliance costs.
What This Means in Practice
These developments underline the direction of travel for the UK tax system: increased digital reporting, earlier engagement with HMRC and a continued focus on improving compliance through system reform.
For taxpayers and advisers:
Those who will fall within the scope of MTD for Income Tax should begin preparing now by reviewing record-keeping processes, engaging with software providers and considering participation in HMRC’s testing programme.
Construction businesses should assess how the proposed CIS changes may affect their monthly reporting obligations and internal controls, and whether they wish to provide feedback during the consultation period.
Staying informed and taking early action will be essential to managing these changes effectively as implementation dates approach.
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