April 2026 CIS changes: What construction businesses need to know 

Over a month has passed since the changes to the Construction Industry Scheme (CIS) came into effect on 6 April 2026. 

The reforms around CIS returns and late filing penalties were announced in the Autumn Budget 2025 and were set to improve compliance across the construction sector. 

Contractors who are using subcontractors, even occasionally, need to take note of their requirements so they can ensure they are remaining compliant. 

Mandatory CIS returns are back 

The CIS reforms brought the return of compulsory monthly CIS returns, including nil returns. 

Since April 2026, contractors must either: 

• Submit a CIS return every month, even if no subcontractors have been paid, or 

• Notify HMRC in advance that they will not be paying subcontractors by submitting an inactivity request. 

This reverses the 2015 relaxation of the rules, where nil returns became optional in an effort to reduce administrative burdens. 

HMRC found that many contractors failed to notify them when they became inactive and this led to mounting penalties and a large number of appeals. 

Since then, they decided to restore mandatory filing requirements to encourage compliance and reduce ongoing disputes. 

CIS late filing penalties return 

HMRC has reinstated the full CIS late filing penalty regime and you must ensure you file your monthly CIS returns on the 19th of the month following the tax month. 

 Contractors who miss filing deadlines may now face: 

• £100 fixed penalty for a late return. 

• £200 penalty once the return is two months late. 

• £300 or five per cent of the undeclared liability after six months. 

• A further tax-geared penalty at 12 months, with the amount depending on why the return was late. 

Stricter anti-fraud measures 

The reforms have also introduced tougher anti-fraud rules across construction supply chains. 

HMRC has greater powers where a business knew or should have known that payments were connected to fraud. 

They can now remove gross payment status immediately, recover unpaid tax or charge penalties of up to 30 per cent in these situations. 

Public sector CIS exemption 

There is some welcome news for contractors, as it is now simpler to work with public sector bodies. 

Since 6 April 2026, payments made to local authorities and certain public sector organisations have become fully exempt from CIS under new Regulation 24ZA of The Income Tax (Construction Industry Scheme) Regulations 2005. 

This removes unnecessary deductions and reporting requirements on qualifying public-sector contracts. 

What contractors need to be doing now 

This is our reminder to construction businesses that you need to keep on top of your filing deadlines if you want to avoid a penalty bill in the post. 

You need to be clear on who is responsible for CIS submissions and that your monthly returns are accounted for. 

Our team can help you stay on top of your filing deadlines and keep your construction business compliant. 

For more information on managing CIS penalties, get in touch.