UK Construction Regulation Changes & What They Mean for You

Following the Autumn Budget, the UK Government is opening up consultation for the Construction Industry Scheme (CIS). 

The new consultation is aiming to update the CIS in 2026, with a particular focus on the Income Tax (Construction Industry Scheme) Regulations 2005’.

Aiming to simplify the scheme, the government is seeking consultation to ensure it drives efficiency and clarity for construction workers.

Changing legislation

The CIS has a series of rules for construction workers, setting out how payments to subcontractors must be handled by contractors within the construction industry. It is a way of ensuring HM Revenue and Customs (HMRC) can tackle tax evasion in the sector, by creating an advanced payments system for the subcontractor's tax and National Insurance.

Under the scheme, contractors deduct money from a subcontractor's payments, before passing it on directly to HMRC, unless the subcontractor has Gross Payment Status (GPS). 

During the Autumn Budget 2025, the UK government announced there would be a technical consultation on legislative changes, moving to update and simplify the CIS rulings, which will come into effect on 6 April 2026. The main amendments will include:

• the exemption of payments made to local authorities or public bodies from the scope of the CIS
• requiring construction contractors to file a nil return when they have not made any payments to subcontractors in a month - unless they have previously notified HMRC in advance

A consultation to the changes is now open, allowing opinions for final amendments or welcoming queries on clarification or further guidance.

Improving construction efficiency

The CIS had the requirement for nil returns up until 2015, when it was removed, believing this would reduce the administrative burdens for contractors and HMRC workers. However, in the following 10 years, it was concluded that this resulted in an increasing number of incorrect late filing penalties. The new proposal, therefore, is aiming to reinstate this requirement, aiming to increase filing efficiency and reducing errors.

Dominic Curran, Head of Communications, British Property Federation, says: “The latest statistics from the BSR are encouraging. The stock of homes waiting for Gateway 2 sign off has fallen, and the speed of decision-making, and thus average wait times, continues to fall.

“Last year’s intensive pressure on Government from us and the wider industry, and the consequential push of the new management team, seems to be paying off, hopefully making 2026 a year when Regulator delays cease to be a problem.

“At the same time, moves to a single industry regulator are also welcome, and the BPF will be engaging with the consultation on this launched just before Christmas.”

HMRC had created an Extra Statutory Concession, to allow some public bodies to be classed as holding GPS. This meant they could receive contract payments without facing deductions and was created to make administration easier. The new legislation will implement Regulation 24ZA (payments made to public bodies), which will remove this concession and turn it into a formal and legal rule.

As a result, rather than falsely label these bodies as having GPS, the new regulations accept them as being outside of the scope of CIS entirely. This means there will be no deductions on the payments to them, as the scheme does not apply - making it much more simple than using prior descriptors.

Through these changes, there should be less complications, less errors and less time waiting for correct payments to come through, resulting in more efficiency throughout the construction industry.