2017 Spring Budget - What It All Means For Doctors

 

The 2017 Budget introduced a number of changes in legislation and this month we summarise the key aspects of the Budget that are likely to have a significant impact on doctors' finances. Please let us know if you would like a financial review to help plan around the changes.

Income Tax

For the 2017/18 tax year, the income tax personal allowance (the amount doctors have to earn before they start paying income tax) will be £11,500. The higher rate threshold (the amount of income over which doctors start paying the 40% higher rate of tax) will be £45,000.  Additional rate tax applies to taxable income over £150,000.

 

Dividend allowance

The tax free dividend allowance remains £5,000 for the 2017/18 tax year but will reduce to £2,000 from 6th April 2018. This means that any doctor who receives dividends of £5,000 or over will pay between £225 and £1,143 of additional tax per year, depending on the doctor's tax status. 

It is also worth noting that if an investment fund contains less than 60% of its investments in fixed interest, the entire income from the fund will be taxed as dividend income even if a proportion of it is made up from interest. Income from savings and interest is generally taxed at a higher rate (20% for basic, 40% for higher rate and 45% for additional rate taxpayers) than dividend income (7.5% for basic, 32.5% for higher rate and 38.1% for additional rate taxpayers).

 

Capital Gains Tax

The annual capital gains tax exemption will increase from £11,100 to £11,300 from 6 April 2017. The rates of capital gains tax for investments other than residential property remain unchanged at 10% for basic rate tax-paying doctors and 20% for higher and additional rate tax-paying doctors.

The annual capital gains exemption is on a ‘use it or lose it basis’, and therefore all doctors should ensure that their investments benefit from the exemption each year to maximise tax efficiency. One way to do this is to rebalance your portfolio annually, which will also crystallise any losses that can be offset against capital gains for tax purposes.

 

ISAs

There were no new announcements regarding ISAs in the recent Budget; however, measures that were announced in the previous budget are confirmed to be introduced this April.

The annual ISA allowance is set to increase from £15,240 to £20,000, which is particularly attractive to higher/additional rate tax-paying doctors. A couple who can currently invest a combined maximum of £30,480 per annum will be able to invest a combined total of £40,000 per annum into their ISAs from 6 April 2017.  The annual allowance for the Junior ISA and Child Trust Fund will also increase from £4,080 to £4,128.

The Lifetime ISA will be available from 6 April 2017 for doctors aged between 18 and 40. The annual allowance is £4,000, and the government will award a bonus of 25% of the funds invested if used to either buy a first home or for income in retirement from the age of 60.

 

Pensions

The money purchase annual allowance (MPAA) will reduce from £10,000 to £4,000 on 6 April 2017.  The MPAA is the amount that a doctor is able to contribute into their money purchase pension after flexibly accessing pension benefits. Therefore, if you are a doctor currently receiving income from a flexi-access pension, the maximum amount that you will be able to contribute into your pension from 6 April 2017 will be £4,000.

 

NHS

The recent Budget announced that £2 billion of new funding over three years would be distributed to social care, with £1 billion being invested during the 2017/18 tax year. Philip Hammond claimed that this would ease the pressure on NHS staff, enabling them to maintain a first rate service for patients. Additional support for struggling local authorities will also be given to reduce delayed transfers of care and help them to work more efficiently with the NHS. The government will publish a ‘green paper’ this year to summarise and confirm its plans for social funding.  Hammond claimed that this is part of a ‘Five Year Forward View’, and will announce  a multi-year package of capital funding to support the ‘Sustainability and Transformation Plans’ of the NHS, in the autumn budget.

The Budget also revealed that £100 million will be invested to support 100 triage systems and onsite GP facilities at A&E departments in England in order to reduce waiting times for patients. This capital is expected to be available by next winter. The Chancellor has claimed, ‘experience has shown that onsite GP triage in A&E departments, can have a significant and positive impact on A&E waiting times'.

However the Spring Budget has attracted criticism from BMA council chair, Dr Mark Porter, who believes the proposed amount to be spent on the NHS is insufficient to maintain a high level service and restore confidence in its financial situation. Dr Mark Porter states, ‘This Budget does nothing to address the gaping hole in NHS finances. There is a £30bn gap to fill and we should be increasing the UK’s health spending by at least £10.3bn to match that of other leading European economies’.

 

Please note that tax rules can change and the value of any benefits depends on individual circumstances.  If you believe that, as a result of the Spring Budget, your financial circumstances warrant financial planning advice, then please do get in touch to arrange an introductory meeting with Richard Higgs. He can be contacted on 0117 966 5699, emailed on richard.higgs@wealthwestmedical.co.uk or through the website at www.wealthwestmedical.co.uk.

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