Update: On the 17th October 2022, Chancellor of the Exchequer Jeremy Hunt brought forward a number of measures from his planned Medium-Term Fiscal Plan on 31 October. This has affected previous measures announced in the mini-budget on the 23rd September 2022.
All eyes were on Kwasi Kwarteng and his ‘mini-budget’ in his new role as chancellor, but what were the key announcements from last week, and how could they affect GPs’ practices and personal finances?
Alec Collie, Head of Medical at Wesleyan Financial Services, said: “It is painfully evident on the front line that GP practices have been hit hard by inflation. Costs have increased dramatically, yet funding has not kept pace. It means that practices are experiencing a huge squeeze in budgets and a dip in the value of their income in real and inflationary terms. Long-term, this isn’t sustainable.”
In this short article, we take a look at some of the government’s recent announcements - including the mini-budget and changes to National Insurance - and how they could affect you and your business.
Impact on GP practices
Energy bill relief scheme
Introduced to reduce costs for small businesses, the energy bill relief scheme will mean that GP practices will be eligible for a cap on their practice’s energy costs.
In response to this scheme, Alec Collie shared that: “GP practices will have welcomed measures announced to support with factors such as energy costs, but more support is needed, be it rebates, tax relief or simply additional funding. People might not think of GP practices as being small businesses, but they will soon notice if practices need to drastically adapt how they operate just to keep a lid on rising costs.”
For practice owners, it’s important to note that - unlike the energy cap for consumers, which has been set for 24 months - this business cap will only apply for a six-month period (beginning from 1st October 2022).
Although a rise had been planned, Corporation Tax - which is based on companies’ annual profits - will now stay at 19%, rather than rising to 25% in April 2023.
For GP practice owners, the reversal of this planned rise will result in a 6% saving on profits, which will likely be well-received in the face of rising operational costs and ongoing challenges, including recruitment and retention of practice staff.
Impact on GPs’ personal finances
National Insurance and Income Tax
The 1.25% National Insurance increase that was announced in April 2022 - and had a big impact on GPs and their practices - will be reversed from 6th November 2022, as confirmed last Thursday ahead of the mini-budget.
The government are estimating that this change will result in almost 28 million people keeping an extra £330 of their money (on average) next year - as GPs are typically higher earners, this figure is expected to rise for those in the profession.
Linda Wallace, Director of Wesleyan Financial Services, said: “The reverse of the national insurance increase will be a relief for many, but further support will be needed to stop people struggling this winter.
“We know that many people are dipping into savings and pensions to cover their living expenses, but this should be done with proper long-term consideration as it can have a significant impact on future retirement plans.”
Cuts to income tax were also announced, with the basic rate being changed to 19% from April 2023. The additional tax rate of 45% has now been scrapped, which means that only the 40% rate will be applicable for incomes greater than £150,000 per year, which will have a direct impact on many GPs*.
* UPDATED 3rd October - This measure was subsequently scrapped by Chancellor Kwasi Kwarteng.
Energy Price Guarantee
While this had already been announced in the weeks before the mini-budget, Kwarteng reiterated the new £60bn energy package for UK households. Coming into effect from 1st October 2022, the energy price guarantee means that energy prices for average UK households are expected to go no higher than £2,500 per year for the next two years.
Prior to these measures being introduced, average energy bills across the UK were predicted to be above £6,600 by April 2023, so the introduction of this cap may help to reduce GPs’ personal energy bills - for practices, the energy bill relief scheme (discussed earlier in this article) should also provide some financial relief.
While these measures will likely ease some energy pressures as we head into the colder months, it’s important to note that this cap is being enforced as a limit on the average energy bill, so it may be that some homeowners could end up paying more or less, depending on their home’s energy usage.
Changes have been announced to stamp duty, meaning that from now on, no stamp duty will be paid on the first £250,000 of a property.
In addition, for first-time buyers, the threshold will rise to £425,000 (from £250,000) and they will also now be able to claim relief on properties valued up to £625,000 (up from £500,000), which may help GPs who are looking to purchase in more expensive regions of the UK.
As stamp duty is only applicable to people who are buying property in England and Northern Ireland, future announcements are expected for those looking to buy in Wales and Scotland.
If you’d like some further clarity on how these changes could affect you and your finances - both business and personal - you can book a no-obligation financial review with a Specialist Financial Adviser from Wesleyan Financial Services.
Bear in mind that the value of investments can go down as well as up and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change in future.