MTD ('Making Tax Digital')

The introduction of the Government's flagship MTD tax system started on 1st April 2019 in respect of VAT compliance.

However, aside from VAT, the core thinking behind MTD is that in due course all businesses and larger landlords will have to keep and submit digital details to HMRC of their income and their costs (by expenses type) on a quarterly basis, albeit this 'full' version of MTD is not likely to be implemented until April 2021 at the earliest.

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

VAT Reverse Charge for the Construction Industry

In order to help restrict fraudulent use of the VAT system it is the Government's intention to introduce new VAT rules for the construction industry with effect from 1st October 2020, known as the Domestic Reverse Charge rules or DRC for short - 'domestic' in this instance being the UK rather than residential related works (the DRC was to be introduced on 1st October 2019 although its introduction has since been deferred by 12 months).

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 2019/20 the annual Personal Allowance is £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.  However, there is no longer any P11D exemption for employees earning under £8,500 per annum in respect of HMRC reporting.

£3,000 Employment Allowance

The annual Employment Allowance for remains at £3,000 for 2019/20.  Dependent upon certain conditions, most small employers will be able to recoup the first £3,000 of their Employers' National Insurance Contributions within the tax year in question.

Worldwide Disclosure; do you receive any income from overseas?

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 are now being made available to HMRC; so much so that counties previously synonymous with banking secrecy, such as Switzerland, have signed up to share data.

Because it is recognised that some taxpayers may be unwittingly failing to declare overseas income HMRC has been urging those people to ‘come clean’ and bring their affairs up to date via various disclosure facilities. Therefore if you have any foreign bank accounts or income producing assets, please click on this link in order to read HMRC’s standard letter about overseas disclosure.

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