Autumn Budget 2017 – Key Points for Doctors
At each Budget, anything can change in the world of tax – tax rates, thresholds, allowances or exemptions. As the UK budget is in deficit, with more going out than coming in, in the lead up to the Autumn Budget announcement speculation was rife over what might be targeted to increase tax revenues.
Reducing pension tax relief and further reducing the pension Lifetime Allowance and Annual Allowance were mooted. This would have been big news for doctors, many of whom currently receive higher or additional rate tax relief on their pension contributions and are already bumping up against the Lifetime and Annual Allowances as they currently stand.
No news is generally good news
In the end, the Budget was a bit of a non-event from a financial planning perspective. On balance it was a ‘giveaway’ Budget that didn’t look to raise taxes, with personal tax rates and rules left largely unchanged apart from small increases in tax allowances largely in line with inflation.
On this occasion, no news is generally good news for doctors. Pension tax relief stays, the Lifetime Allowance is increasing in line with CPI (a measure of inflation) from next year but is otherwise unchanged, and the Annual Allowance has been left alone.
Lifetime Allowance and Annual Allowance still an issue
Whilst it is welcome that the Lifetime Allowance and Annual Allowance haven’t been further reduced, many doctors will still be affected by the tax charges that apply on exceeding these limits.
Doctors with a 1995 Scheme NHS Pension of £43,478.26 or more will be affected by the Lifetime Allowance at its current level of £1,000,000. Some doctors with lower NHS Pension benefits will also be caught if they have additional pension savings through AVCs, Added Pension or other pension arrangements outside of the NHS as these count towards the Lifetime Allowance too.
Doctors most likely to be affected by the Annual Allowance for pension contributions are those with taxable income of £150,000 or more, as higher earners are subject to a reduction in the standard Annual Allowance of £40,000 to as little as £10,000 depending on earnings. Also, those who receive a pay award or promotion may exceed the allowance due to the increased salary and corresponding increase in the value of NHS Pension benefits that year.
If you think you might be affected by the Lifetime and/or Annual Allowance please contact us for financial advice.
Other key points
Other key points from the Budget are summarised below:
If you would like to discuss anything in this update with a financial adviser please contact Richard Higgs CFP FPFS on 0117 966 5699 or email@example.com.