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What the Autumn Budget could mean for GPs finances

What the Autumn Budget could mean for GPs finances

In October 2018, Chancellor Philip Hammond set out his autumn statement. We look at some of the key announcements that may affect GPs, as well as some other recent changes that may impact your personal and business finances.

The lifetime allowance (the maximum that you and/or your employer can contribute towards your pension before incurring a tax charge) will increase in line with the Consumer Price Index (CPI) of 2.4% (for 2019/20) to £1,055,000.

This will be welcome news for medical professionals - 51% of those we surveyed in June 2018 told us they thought they'd need between £40,000-£75,000, per year, to live comfortably in retirement1. 39% told us they planned to retire before the age of 602.

You may be aware that as well as the lifetime allowance, there's also a cap on the amount that can be contributed towards your pension each year. This is known as the annual allowance and for the 2018/19 tax year is £40,000. If you're a member of the NHS Pension Scheme and exceed the annual allowance, you can either:

  • pay the tax charge yourself, directly to HMRC (usually through your tax return)
  • apply for the 'scheme pays' facility to cover the resulting tax charge on your behalf

In October 2018, the NHS Pension Scheme extended the criteria for accepting scheme pays nominations - allowing more members to take advantage of the facility when paying tax charges related to exceeding the annual allowance.

Pensions are an important part of retirement income planning, yet 70% of medical professionals we surveyed in June 2018 were unsure which section(s) of the NHS Pension Scheme they were a member of3.

If you have questions about your retirement plans, including the intricacies of the NHS Pension Scheme, you can arrange a no-obligation review with your local Wesleyan Financial Services Consultant who's specially trained to understand your profession, pay, and pension benefits.

From April 2019 the Personal Allowance (the amount you can earn before paying any income tax) will increase from £11,850 to £12,500.

Additionally, the higher rate tax threshold will increase from its current rate of £46,350 to £50,000 in England.

Both measures will be indexed against inflation from 2021/22. 

The Chancellor pledged a £20.5bn real terms increase for the NHS in England over next five years and funding for mental health services will grow as a share of this overall NHS budget. The aim is to ensure that people with mental illness can return to, and stay in, employment. 

Mental health issues are one of the most common cause of claims against income protection policies among doctors - 36% of all claims made to Wesleyan by doctors on their income protection policy in 2017 resulted from mental health issues.

One of the most important factors when selecting an income protection plan is the experience of your selected provider in handling and paying claims. In 2017, Wesleyan paid out 97.8% of the claims made by our clients for personal income protection benefits, amounting to nearly £26m.

Stamp duty land tax and housing
All first-time buyers of shared ownership properties in England and Northern Ireland (with a value of up to £500,000) will benefit from the removal of stamp duty. This will be applied retrospectively to anybody purchasing such a property since the last budget on 22 November 2017.

£500m was also announced for the Housing Infrastructure Fund, to help build 650,000 homes.

Did you know that your professional status as a GP could be an advantage when it comes to making a mortgage application? Whether you're a trainee, newly qualified, or a seasoned professional, you may be eligible for a 'professional mortgage'. Lenders offering these mortgages may take your professional status into account and potentially offer you a higher loan at a preferential rate.

Qualification criteria may vary between lenders but typically includes factors such as your age, professional qualifications, or registration with an industry body.

If you have mortgage queries, speak to your Wesleyan Financial Services Consultant about how we may be able to help. We:

  • have access to lender exclusive mortgage deals
  • listen to our customers' individual needs, provide expert and impartial advice and help ensure they are guided through the entire process from start to finish
  • do not charge customers for our mortgage services. We get paid by the lender when the mortgage completes

Your mortgage is secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Education and Childcare
The Chancellor announced that 86% of schools are now rated by Ofsted as 'good' or 'outstanding' - up from 66% in 2010.  He confirmed a £400m one-off capital payment for 2018, to help schools update their equipment and facilities. This is worth an average of £10,000 per primary and £50,000 per secondary school.

You should be aware that the Autumn Budget coincided with the deadline for new Childcare voucher entrants. These are being replaced by Tax-Free Childcare which offers working parents, who are eligible to benefit from the scheme, up to £2,000 per child, each year (£4,000 for children with a disability). 

Your Wesleyan Financial Services Consultant can help you to maximise the benefits of any savings you make through the scheme, for example, by putting any additional money you currently spend on childcare into a long-term saving or investment plan for your child's future (such as paying for university fees).

This could be particularly beneficial if you are affected by changes to salary sacrifice arrangement impacting school fee payments, introduced in the April 2017 budget. Salary sacrifice before April 2017 will remain protected for up to a year (for cars, accommodation and school fees, protection will be in place for up to four years). 

If you are in receipt of salary sacrifice benefits make sure you are aware of when any protection will end, and what this will mean for your personal finances in terms of increased outgoings (remember, the higher your tax bracket, the more you currently save under salary sacrifice).

Savings for children
The Junior ISA annual subscription limit will also increase in line with the Consumer Price index (CPI) to £4,368, in the 2019/20 tax year.

The annual subscription limit for Child Trust Funds will increase in line with the CPI to £4,368 per annum, for 2019/20.

NS&I will also allow individuals other than parents and grandparents to gift Premium Bonds for children.

Savings for adults
Subscription limits for ISAs will remain unchanged at £20,000 per annum.

The minimum contribution limit for National Savings and Investments accounts (NS&I) will be reduced to £25.

Your business finances

Employers face potentially higher-wage bills from April 2019, when the National Living Wage increases by 4.9%, to £8.21 per hour.

From April 2019, the National Living Wage paid to workers 25 or over will increase roughly in line with inflation from £7.83 to £8.21. The National Minimum Wage will also increase from April 2019 from:

  • £7.38 to £7.70 per hour for 21 to 24 year olds
  • £5.90 to £6.15 per hour for 18 to 20 year olds
  • £4.20 to £4.35 per hour for 16 to 17 year olds
  • £3.70 to £3.90 per hour for apprentices

Class 1A or 1B National Insurance contributions paid by employers, based on their employees benefits, may also increase as a result.

The employer contribution to apprenticeship training has been cut from a 10% contribution to 5% to encourage businesses to take on apprentices for the first time or increase their intake. This is likely to only apply to new starters. 

Practice owners should take note of these changes as part of assessing how rising wage bills will impact their future finances and planned investments.

Corporation tax
Those trading as a limited company will welcome the further reduction to corporation tax rates, which will fall from the current rate of 19% to 17% from 1 April 2020. This is an additional 1% cut on top of the previously announced reduction to 18%.

Employment allowance
Access to the employment allowance (EA) will be restricted to employers with a National Insurance Contributions (NICs) bill below £100,000 in the previous tax year. The EA allows employers to claim back class 1 NICs of up to £3,000 each year. The restriction will be introduced from April 2020 to ensure the EA is targeted to support smaller employers.

According to the Government, more than 99% of micro-employers and 93% of small employers will still be eligible for the EA, based on HM Revenue and Customs analysis of real-time information data from 2017-18 and the Autumn Budget 2018 Office for Budget Responsibility forecast.

Class 2 national insurance contributions
Class 2 NICs are paid by the self-employed (earning over £6,205 per year), or by those working abroad who wish to fill any gaps in their NICs record.

They were due to be abolished as part of the National Insurance Contributions (NICS) Bill, in the current parliament. As part of the Autumn Budget the Chancellor confirmed that the measures in the Bill will now be implemented in 2020.

You can check your national insurance record online, free of charge. Any gaps in contributions may affect your entitlement to the full flat rate State Pension (worth £8,546.20 in the 2018/19 tax year).

Self-employed workers
Chancellor Philip Hammond announced an extension of the 'off payroll' (known as IR35) for individuals operating as personal service companies from the public sector to the private sector.

From April 2020, self-employed workers who effectively work as employees will be taxed as employees in medium to large organisations. The government estimates that one in three self-employed workers who operate in this way should be paying more tax and this could have a significant impact on some workers' earnings.

Tax can be a significant cost to your practice, putting pressure on your cash flow and taking over your banking lines and overdrafts. By paying for your tax liabilities up front, you are losing the ability to utilise this working capital in other, important areas of your practice.

Wesleyan Bank offers an unsecured loan over 6 or 12 months to fund your tax liability allowing you to retain cash in your business. We have many years of experience working with medical professionals so you can be assured that we have the expertise and knowledge required to effectively support your practice.

Capital investment and support
If your GP practice is planning to invest in assets then the temporary two-year increase in Annual Investment Allowance, from £200,000 to £1 million from January 2019 could be useful.

Those looking to invest in qualifying expenditure could benefit from faster tax relief as it allows a business to deduct the total amount of qualifying capital expenditure from its taxable profits in a given tax year. Most assets purchased for business use qualify, including IT investments, specialist equipment, furniture and cabinetry and flooring and lighting.

Those investments that cannot be claimed against the Annual Investment Allowance, may be able to obtain relief via the 'Main Rate Pool' or the 'Special Rate Pool'. The Budget reduced the percentage you can claim tax relief per year on assets that fall into the 'Special Rate Pool', from 8% per year to 6% per year, essentially making the relief process longer. Assets that tend to fall into this pool will be long-life assets.

Funding though an unsecured loan facility can assist businesses to spread the cost of refurbishments, practice relocations, as well as specialist equipment and technology over a period of one to five years to help preserve cash flow and vital working capital. If you'd like to speak to one of the Wesleyan Bank team to find out more about how we can support your business in its upcoming investments and objectives complete a contact form

1 Twitter poll of UK medical professionals, 941 responses, June 2018.
2 Twitter poll of UK medical professionals, 616 responses, June 2018.
3 Twitter poll of UK medical professionals, 608 responses, June 2018.

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