MTD ('Making Tax Digital')

The introduction of the Government's flagship MTD tax system started on 1st April 2019 in respect of VAT compliance, but only for businesses with an annual turnover of 85000 and above; VAT registered entities below that threshold must enter MTD from 1st April 2022.

However, aside from VAT, the core thinking behind MTD is that income tax matters will be dealt with online and so in due course all businesses and larger landlords will have to keep and submit digital details of their income and their costs (by expenses type) to HMRC on a quarterly basis.  After several postponements the planned start date for this 'full' income tax related version of MTD is now 1st April 2023.

Please see our 'MTD' page for full details or access it by clicking here.

Sale of Residential Property - New Capital Gains Tax Rules

In respect of a residential property sale/disposal, other than when it is someone's principle private residence, HMRC's disclosure rules change with effect from April 2020.

Previously the related capital gains disclosures were submitted to HMRC as part and parcel of that tax year's Tax Return, and any related capital gains tax (CGT) was then been remitted with usual Self Assessment tax - usually at the end of the January following.  However the new rules will require both the CGT disclosures (to be made online) and any related tax to be paid within 30 days following the completion of the disposal.

Due to the strict timings involved it means that considered estimates may have to be used in respect of certain aspects, not least of which could be an estimate of the applicable tax rate payable (the latter is dependent upon the level of overall taxable income received, which may not become apparent until the tax year in question has finished).  As a result the CGT disclosures will still need to be subsequently entered onto the relevant annual Tax Return; by that time it is assumed that 'actual' figures will be available and so the formally calculated CGT liability will then take precedent over what has already been remitted, the overall liability being adjusted either up or down accordingly.

Penalties will be applied if submissions are made later than the statuary 30 day period and this also applies to late payment of the related tax.

VAT Reverse Charge for the Construction Industry

To help counter fraudulent use of the VAT system the Government intends to introduce new VAT rules for the construction industry known as the Domestic Reverse Charge rules or DRC for short; in this instance 'domestic' refers to the UK, and not residential related works.  Implementation was originally set for 1st October 2019 although subsequent deferrals mean that the new rules will come into force on 1st March 2021.

Once the DRC rules are in place, in simple very terms it will mean that a VAT registered subcontractor will no longer add VAT to their invoice when they issue it to their contractor; should there be further tiers of subcontractors / contractors then the process will repeat up the line until the end user is eventually billed, at which point the appropriate VAT will be charged as normal.

Naturally this will bring a certain amount of complication when it comes to billing, bookkeeping and VAT Return reporting, and so we recommend that our construction industry clients speak to us well before 1st October 2020 so that we can resolve any related questions or queries.

Personal Allowance and Higher Rate Threshold

For 2020/21 the annual Personal Allowance will remain at 12,500.

The next 37,500 of income is taxed at basic rate and so by default a taxpayer will start to pay higher rate tax of 40% once their annual gross income goes above 50,000 (the starting point rate at which additional rate tax of 45% comes into play remains at an assessable income level of 150,000 per annum).


Tax changes mean that basic rate taxpayers will now potentially have to pay personal tax on dividend income above 2,000 per annum, and higher rate taxpayers face an increased tax charge.

1000 Trading Allowance / 1000 Property Income Allowance

In essence the respectively allowance can be claimed against business income or property income in lieu of claiming the actual associated costs.  Should income be less than 1000 then the allowance must be restricted accordingly as it is not allowed to exceed income - i.e. both of these allowances can not be used to create a loss.


Subject to various important conditions, certain trivial reimbursements to employees and directors can now often be ignored from the benefits in kind regime.

4,000 Employment Allowance

For 2020/21 the annual Employment Allowance is set at 4,000, (previously 3,000 p.a.). Therefore, dependent upon certain new conditions, most small employers will be able to recoup the first 4,000 of their Employers' National Insurance Contributions for the tax year in question. However, year to year 'carry over' of any unused allowance will no longer be permitted, and any business paying annual employer's NIC of over 100,000 will no longer qualify for the allowance. 

Worldwide Income

HMRC is clamping down on taxpayers who receive overseas income of any kind that is not subsequently declared on their UK Tax Return.

Recent cross-border agreements mean that previously unobtainable details regarding foreign bank accounts or assets etc are now being made available to HMRC; so much so that counties previously synonymous with financial secrecy, such as Switzerland, have signed up to share data.

A recent HMRC disclosure opportunity was aimed at those who needed to bring their affairs up to date with regards to previously undisclosed foreign income, and HMRC penalties are now likely to be applied to those who did not do so. 

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