Tax changes for tradespeople: what's different in 2026?
29 October 2026Posted by:
Viveka Alvestrand
Content Marketing Manager, Trade Direct Insurance
Changes to Construction Industry Scheme (CIS) reporting, business mileage, National Insurance and company van tax are now in effect. Here's what tradespeople need to know for 2026/27, along with an existing VAT rule that's easy to overlook.
Tax changes for tradespeople: what's different in 2026?
Several tax changes came into effect in April, but what they mean for your business may depend on how you work.
A month without subcontractor payments, a quieter trading year or a company van available for private use can all mean different tax rules apply.
Here's what's changed for 2026/27, including a mileage increase backdated to April.
CIS: nil returns are compulsory again
If you're registered as a contractor under CIS, there's an important change to monthly reporting.
From 6 April 2026, HMRC reinstated the requirement for mainstream contractors to submit nil returns when they haven't made any subcontractor payments.
That means a month without subcontractor work doesn't automatically mean a month without CIS reporting.
If you haven't paid any subcontractors, you'll generally need to submit a nil return or request a period of inactivity.
An inactivity request can apply when a contractor doesn't expect to make subcontractor payments for a period. HMRC's guidance explains the conditions and reporting requirements.
The usual deadline for monthly CIS returns remains the 19th of the month following the relevant tax month. Late returns can attract penalties, starting at £100.
This is particularly relevant if you bring in subcontractors for particular jobs rather than using them throughout the year. The reporting requirement can still apply between those jobs.
HMRC guidance: Filing monthly CIS returns
Business mileage: a higher rate backdated to April
If you use your own car or van for business journeys, mileage rates affect how much you can claim or be paid tax-free for those trips.
The approved mileage rate for cars and vans has increased for the first time in several years.
For the 2026/27 tax year, the rates are:
55p per mile for the first 10,000 eligible business miles, up from 45p.
25p per mile for business mileage above 10,000 miles, unchanged.
Although the increase was announced in June, the new rates apply to eligible business journeys made from 6 April 2026.
Who can use the new rates?
The approved mileage allowance applies to employees using their own cars or vans for business journeys.
If you're self-employed and eligible to use simplified expenses, you can also use the new mileage rates.
Under the simplified method, mileage replaces the actual running costs of that vehicle, including fuel, servicing, repairs and insurance. There are restrictions on using this method if you've already claimed certain vehicle costs or capital allowances.
So, the higher mileage rate won't automatically change how vehicle expenses are calculated for everyone.
HMRC guidance: Mileage rates and allowances and simplified vehicle expenses.
National Insurance: a change for lower-profit years
The main Class 4 National Insurance rates for self-employed people haven't changed in 2026/27.
They remain at:
6% on profits above £12,570 up to £50,270.
2% on profits above £50,270.
The change is to Class 2 National Insurance.
The small profits threshold has increased from £6,845 to £7,105. If your annual profits are at or above the new threshold, Class 2 contributions are generally treated as paid without a separate payment.
For profits below £7,105, voluntary Class 2 contributions may be available. The weekly rate has increased from £3.50 to £3.65.
Why does the threshold matter?
Class 2 contributions can count towards your National Insurance record, which may affect your entitlement to certain benefits, including the State Pension. This is determined by your contribution history and circumstances.
This is most relevant if your self-employed profits fall below the threshold in 2026/27, even if you've earned more in previous years.
HMRC guidance: National Insurance rates and allowances
Company vans: private use benefit charges have risen
The figures used to calculate tax on company-provided vans increased on 6 April 2026.
For 2026/27, the annual figures are:
| Taxable benefit | 2025/26 | 2026/27 |
| Company van benefit | £4,020 | £4,170 |
| Van fuel benefit | £769 | £798 |
These figures aren't the amount of tax automatically payable. They're the values used to calculate taxable benefits where the charge applies.
The van benefit charge can apply when an employer provides a van that's available for private use. If private fuel is also provided, a separate fuel benefit charge may apply.
However, not every journey outside a job counts as taxable private use. Ordinary commuting and limited incidental private use can be treated differently where HMRC's conditions are met.
The rules also differ from those for a self-employed sole trader using their own van.
For company directors and employees, the rules depend on how the van is provided and used, not just how many miles are driven for work.
HMRC guidance: Van benefit and fuel benefit charges for 2026/27
VAT: the £90,000 threshold hasn't changed
The VAT registration threshold remains at £90,000 for 2026/27.
What matters is how the threshold is calculated. It's based on taxable turnover over a rolling 12-month period, rather than your accounting year or annual profit.
If work is picking up and your taxable turnover is increasing, you could reach the registration threshold before your accounting year ends.
There's also a separate rule requiring registration if you expect taxable turnover to exceed £90,000 in the next 30 days alone.
HMRC guidance: When to register for VAT
Which changes could still affect you this year?
Not every change applies to every trade business.
The CIS rules affect registered contractors, including those who use subcontractors occasionally. The mileage increase applies where the relevant mileage method is used. National Insurance changes may matter in a lower-profit year, while company van tax depends on how the vehicle is provided and used.
The VAT threshold hasn't changed, but increased turnover can still bring an existing registration requirement into play.
Some of these changes only become relevant in specific circumstances, such as taking on subcontractors, having a quieter year or using a company van privately. That makes it worth reviewing the rules before those situations arise, rather than waiting until a tax return or HMRC deadline brings them to your attention.
The HMRC links above provide further information about the rules, including eligibility, exceptions and reporting requirements.
What about Making Tax Digital?
Making Tax Digital for Income Tax is another upcoming change that many self-employed tradespeople will need to prepare for, with start dates based on qualifying income.
We've covered who's affected, the deadlines and what quarterly reporting involves in a separate blog.
Disclaimer: This article is based on publicly available information and was correct to the best of our knowledge at the time of publication in October 2026. It is intended for general information only and does not constitute tax or financial advice. Tax rules and requirements can change, and Trade Direct Insurance cannot accept responsibility for any decisions made or actions taken based on the information provided. Always check the latest guidance on GOV.UK or speak to a qualified tax professional about your individual circumstances.
About the Author
Viveka Alvestrand
Content Marketing Manager, Trade Direct Insurance
Viveka Alvestrand is an experienced content and digital marketing professional with a background in editorial strategy, brand storytelling and multi-channel communications.
Trade Direct is authorised and regulated by the Financial Conduct Authority. The company is a leading UK independent broker providing a wide range of policies to tradesmen and construction workers.
This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such or regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. You should not act upon information in this bulletin nor determine not to act, without first seeking specific legal and/or specialist advice. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to fullest extent permitted by law.