What MTD ITSA Means for Partnerships and CIS Subcontractors?

Many people believe MTD ITSA only affects sole traders and landlords. But if you’re in a partnership or work as a CIS subcontractor, you’ll also need to prepare.

In this post, we’ll cover:

• How Partnerships fit into the MTD ITSA timeline
• What CIS subcontractors need to know
• Income thresholds and when you’re affected
• How Merranti Accounting can support both structures through the transition

 MTD ITSA and Partnerships: The Current Position

HMRC has confirmed that partnerships will not need to join MTD ITSA in 2026 — but they will be brought in later.

As of now:

This applies to:

• General partnerships
• Limited partnerships
• LLPs (Limited Liability Partnerships)

But preparation should begin now — especially for larger firms.

How Will Partnership Reporting Work?

Partnerships will need to:

1. Maintain digital records for all business income and expenses

2. Submit quarterly updates for the partnership as a whole

3. Designate a nominated partner to file on behalf of the firm

4. Continue to provide individual partners with their profit shares for their personal returns

This adds an extra layer of admin, which means planning ahead is crucial.

Example:

Smith & Jones Partnership has:

• Annual turnover: £210,000
• 2 partners: Mark and Louise

➡️ From 2028, the partnership must join MTD ITSA
➡️ Submit quarterly updates for the whole business
➡️ Mark, as nominated partner, submits via MTD software
➡️ At year-end, each partner reports their share via their own return

Merranti can help create workflows that automate this, assign tasks to nominated partners, and generate profit share reports.

CIS Subcontractors and MTD ITSA

If you’re a subcontractor registered under the Construction Industry Scheme (CIS), MTD ITSA does apply to you if your total self-employed income exceeds £50,000.

Even though tax is deducted at source (20% or 30%), you’re still classed as self-employed — and MTD applies.

Common CIS Example:

You earn £4,500/month gross from contracting = £54,000/year.
You’re paid after CIS deductions (~20%), so you take home around £43,000.

But HMRC looks at your gross income (£54,000), not your net take-home.

➡️ You are required to join MTD ITSA from April 2026.

What CIS Subcontractors Must Do Under MTD ITSA

1. Digitally record income and deductions

• Keep track of CIS statements from contractors
• Log each payment and deduction (digital copies encouraged)

log expenses

• Tools, travel, materials, PPE — all allowable expenses must be tracked digitally

Submit quarterly updates

• Report income and expenses every three months (summary only)

File year-end declaration

• Finalise tax position and claim refund (if due)

What About CIS Tax Deductions?

Your final tax bill still considers:

• The CIS tax already deducted at source
• Your expenses
• Any personal allowances

You may be owed a refund at year-end — but this won’t happen automatically unless your final declaration is accurate and complete.

That’s why Merranti checks every quarterly update and final submission to ensure you don’t overpay.

Are CIS Workers Also Self-Employed?

Yes. Being under CIS does not change your legal status — you are self-employed in the eyes of HMRC. Therefore:

• You are subject to MTD ITSA if you earn over £50,000 (gross)
• You will need to keep digital records and submit updates
• You must track income and expenses digitally

How Merranti Helps Partnerships and CIS Clients

Whether you’re in a construction partnership or a subcontractor working alone, we’ve built tools and support systems specifically for your needs.

For Partnerships:

• Quarterly update structure
• Nominated partner dashboard
• Profit share reports
• Final declarations per partner
• Software that links all records to submissions

We’ll get your firm MTD-ready early, so when HMRC announces the start date — you’re already there.

For CIS Subcontractors:

• Digital recording of CIS statements
• Receipt capture via Hubdoc or mobile app
• Quarterly updates handled by us
• Ensure you get your refund at year-end
• Automated deadline reminders
• AI and human support available anytime

We can also integrate your records into Xero Simple Plan (£7/month), giving you visibility over what’s been paid, what’s deductible, and what’s due.

Key Takeaways

• Partnerships won’t be mandated into MTD ITSA until 2028 or later, but should start preparing now
• CIS subcontractors earning over £50,000 must join in 2026
• MTD applies based on gross income, not net take-home pay
• You’ll need to keep digital records, submit quarterly updates, and file an annual final declaration
• Merranti offers full support for both partnerships and CIS clients, including software, training, and filing

Need help getting your construction business or partnership ready for MTD ITSA?
Find More About MTD ITSA Here