If you work as a contractor or subcontractor in Slough’s construction industry — whether you’re based on the Trading Estate, working sites across Langley and Burnham, or subcontracting further afield — the Construction Industry Scheme (CIS) rules changed on 6 April 2026. The deduction rates themselves haven’t moved, but two significant changes affect how contractors and subcontractors operate day to day, and getting them wrong now carries a steeper penalty than before.
The CIS Basics: A Quick Refresher
Under CIS, contractors deduct tax from payments made to subcontractors and pay it directly to HMRC — an advance payment toward the subcontractor’s eventual tax and National Insurance bill. The deduction applies only to the labour element of a payment; genuine materials costs are excluded before the deduction is calculated.
There are three possible deduction rates, and these have not changed in the 2026 reforms:
| Status | Deduction Rate |
|---|---|
| Registered subcontractor | 20% |
| Unregistered subcontractor | 30% |
| Gross Payment Status (GPS) holder | 0% |
Worked example: A subcontractor invoices £2,000 for a job — £1,500 labour and £500 materials. If they’re registered but don’t hold GPS, the contractor deducts 20% of the £1,500 labour element (£300), paying the subcontractor £1,700 and sending £300 to HMRC on their behalf.
What Actually Changed on 6 April 2026
1. Mandatory nil returns for contractors. Before 2015, contractors had to file a monthly return even in months where they made no payments to subcontractors. That requirement was scrapped to reduce admin — but it created a different problem: some contractors ended up with late payment penalties because HMRC had no record confirming there was genuinely nothing to report.
From 6 April 2026, contractors must once again file a nil return for any month with no subcontractor payments, unless they’ve notified HMRC in advance of a period of inactivity. If you’re a contractor who occasionally goes quiet between projects, this is worth diarising — a missed nil return can trigger a penalty even though you owed HMRC nothing.
2. Much tougher penalties for Gross Payment Status fraud. This is the bigger change, and it matters even if you personally have never done anything wrong — because it changes how quickly HMRC can act.
From 6 April 2026, if HMRC believes a business knew, or should reasonably have known, that a payment was connected to tax fraud somewhere in the supply chain, they can:
- Remove Gross Payment Status immediately, with no advance warning
- Assess the business for the associated tax loss
- Impose a penalty of up to 30% — applied either to the business itself or to its individual officers/directors personally
- Bar the business from reapplying for GPS for five years (up from the previous one-year limit)
The practical implication: if you hold GPS and receive payments gross (without deduction), it’s more important than ever to know who you’re actually working for and where the money in the chain is coming from. This isn’t about assuming construction businesses are dishonest — it’s about the cost of getting caught in someone else’s fraud rising sharply, with much less room to recover afterward.
Gross Payment Status: Is It Worth Applying For?
GPS means you receive payments in full, with no deduction taken at source — useful for cash flow, since you’re not waiting for a refund of over-deducted tax at year-end. To qualify, HMRC applies three tests:
- Turnover test: minimum £30,000 net construction turnover (for an individual) in the preceding 12 months
- Compliance test: all tax returns filed on time, all tax paid on time
- Business test: business conducted through a UK bank account
GPS isn’t automatically the right move for everyone. If your income is irregular or you rely on the CIS deductions being taken automatically as a form of forced tax saving, moving to gross payment can mean a larger, less predictable tax bill at Self Assessment time if you haven’t set money aside yourself throughout the year.
Verification Still Comes First
Before making any payment, contractors must verify each subcontractor with HMRC — using their Unique Taxpayer Reference (UTR) and National Insurance number for an individual, or the company registration number for a limited company. This confirms which deduction rate applies (0%, 20%, or 30%) before a single payment goes out. Getting verification wrong, or skipping it, is one of the most common ways contractors end up paying HMRC twice — once via the (incorrect) deduction, and again when HMRC identifies the shortfall later.
How This Connects to Making Tax Digital
If you’re a subcontractor with combined self-employment and property income over £50,000, you’re also now required to comply with Making Tax Digital for Income Tax — quarterly digital submissions rather than one annual return. We’ve covered this in detail in our guide to Making Tax Digital for Slough landlords and sole traders, and the same rules apply to CIS subcontractors who meet the threshold. If CIS deductions and MTD both apply to you, it’s worth reviewing them together rather than as separate compliance tasks — they draw on the same underlying financial records.
Common Mistakes We See From Slough Contractors and Subcontractors
Not tracking materials separately from labour. If your invoices don’t clearly split labour from materials, contractors sometimes deduct CIS tax on the full amount rather than just the labour element — meaning you’re over-taxed unnecessarily until it’s corrected.
Missing the new nil return requirement. Especially relevant for smaller contractors who occasionally have quiet months — this is an easy one to overlook until a penalty notice arrives.
Applying for Gross Payment Status without checking cash flow implications first. GPS sounds appealing on paper, but if you don’t have the discipline to set aside tax throughout the year yourself, it can turn a manageable, gradually-deducted tax position into a large lump sum owed in January.
Not verifying subcontractors properly before paying them. A rushed or skipped verification is one of the most preventable — and most costly — mistakes a contractor can make.
How Direct Assist Accountants Can Help
We work with contractors and subcontractors across Slough’s construction industry — from the Trading Estate to sites across Langley, Burnham, and the wider Berkshire area — handling CIS verification, monthly returns, and Gross Payment Status applications as part of our dedicated Construction Industry Scheme (CIS) service.
If you’re not sure whether the April 2026 changes affect you, or you want a second opinion on whether Gross Payment Status makes sense for your specific situation, get in touch for a free consultation and we’ll walk through it with you.
This article reflects confirmed CIS rules for the 2026/27 tax year following the April 2026 reforms. Rules and thresholds can change; for advice specific to your business, speak to a qualified accountant.