Important CIS Reforms From April 2026: The Return of Mandatory Monthly Nil Returns

Following the government’s announcements at the Autumn Budget 2025, significant changes are coming to the Construction Industry Scheme (CIS). Standardising compliance and tightening anti-fraud measures, HMRC is set to implement major reforms starting April 2026.

For contractors across the UK construction sector, the most critical shift is the legal reinstatement of mandatory monthly nil returns.

Here is everything you need to know about the upcoming changes, why they are being introduced, and how to ensure your business stays compliant to avoid severe penalties.

What is Changing in April 2026?

From April 2026, contractors will once again be legally obligated to file a CIS return every single month. Crucially, this includes filing “nil returns” for any months in which no subcontractors were used or paid.

If you do not plan to use subcontractors for a specific period, you have an alternative option: you must formally inform HMRC in advance by submitting an inactivity request.

If you neither file a return (whether standard or nil) nor submit an advance inactivity request, you will face immediate and escalating penalties.

Why is HMRC Reversing the Rules?

To understand this change, it helps to look at the history of CIS reporting:

• The 2015 Deregulation: In 2015, the government removed the mandatory nil return requirement to reduce the administrative burden on small businesses. Contractors were simply expected to voluntarily inform HMRC of periods of inactivity.
• The Penalty Pitfall: In practice, many contractors forgot to notify HMRC when they weren’t using subcontractors. This triggered automatic, escalating late-filing penalties.
• The Bureaucratic Backlog: Contractors then had to appeal these penalties, and HMRC had to manually cancel them. This process became incredibly burdensome, costly, and time-consuming for both businesses and HMRC staff.
• The Temporary Solution: To mitigate the chaos, HMRC temporarily suspended the full penalty regime, capping late-filing penalties at the initial £100 fixed fee.

From April 2026, HMRC is correcting this system. By bringing back the compulsory nil return, there will be absolute clarity: penalties will only be issued to those who genuinely fail to comply with clear filing or notification boundaries.

The Reinstated CIS Late-Filing Penalty Regime

With the nil-filing requirement legally back in place, HMRC will reinstate its full, uncapped late-filing penalty regime. If you miss a deadline after April 2026, the financial consequences will escalate quickly:

• Missed Deadline: An immediate first fixed penalty of £100.
• 2 Months Late: A second fixed penalty of £200.
• 6 Months Late: A tax-geared penalty of a minimum of £300 or 5% of the tax liability that should have been shown on the return (whichever is higher).
• 12 Months Late: A further tax-geared penalty, the amount of which will be determined by the severity and reason behind the late return (e.g., whether it was deliberate concealment).

Who Will Be Affected?

Thankfully, for the majority of organised businesses, these changes will cause minimal disruption. If you already utilise a professional payroll provider, file your returns on time, or proactively notify HMRC of inactive periods, you will be completely unaffected.

Filing a nil return is designed to be a quick and straightforward process, and HMRC has stated its commitment to working alongside contractors to keep the administrative transition as smooth as possible.

Broader CIS Reforms: Anti-Fraud Measures

The return of mandatory nil returns is just one part of a wider package of CIS reforms introduced in the Autumn Budget 2025.

The April 2026 updates will also introduce rigorous anti-fraud measures. These are specifically targeted at supply chain fraud, penalising businesses that knew, or should have known, that they were engaging with fraudulent operations or illicit sub-contracting networks. Maintaining clean, verifiable digital records of all subcontractor compliance will become more vital than ever.

How to Prepare for April 2026

To ensure your construction business doesn’t fall foul of the reinstated penalty regime, we recommend taking the following steps now:

1. Review your subcontractor patterns: Identify months where your subcontractor usage fluctuates or drops to zero.
2. Establish a clear notification workflow: Ensure you have a system in place to submit advance inactivity requests to HMRC if you know a period of dormancy is coming.
3. Automate your CIS compliance: The easiest way to eliminate the risk of £100, £200, or tax-geared penalties is to hand your compliance over to the experts.

Let Hewitt’s Payroll Handle Your CIS Compliance

At Hewitt’s Payroll, we specialise in keeping contractors compliant, accurate, and ahead of changing legislation. As April 2026 approaches, we will fully manage your monthly CIS obligations, ensuring standard returns, nil returns, and inactivity requests are filed correctly and on time, every time.

Protect your business from avoidable HMRC penalties. Contact the team at Hewitt’s Payroll today to discuss how we can streamline your CIS and payroll processes.