Summer Budget 2015 - What It All Means For Doctors

Welcome to our summary of the main changes being introduced by the Summer Budget 2015 and how these may impact doctors in Bristol. Look out over the next few  weeks for more detailed analysis of some of the more important points.

 Income Tax

- From April 2016 the personal allowance (the amount of your income before you start paying tax) will increase to £11,000 and then on to £11,200 in 2017-18.  The basic rate tax limit will increase to £32,000 for 2016-17 and to £32,400 for 2017-18. As a result of this it means that the higher rate tax threshold will increase to £43,000 and to £43,600 respectively. 

The higher rate tax threshold is important for many doctors. Above the threshold you pay 40% income tax therefore it is important to be mindful of this limit and to arrange your financial plans accordingly.

- There will be a new £5,000 tax-free dividend allowance from April 2016 however beyond this, dividend tax rates will now be set at 7.5% for basic rate tax payers, 32.5% for higher rate tax payers and 38.1% for additional rate tax payers. This is important news for any doctors with share portfolios paying dividend income and also any doctors with Limited Companies for private fee work - a fresh analysis maybe required on which arrangement is most tax efficient.

- Finance costs will be restricted on buy-to-let residential properties to the basic rate of income tax from April 2017. This of course is bad news for any higher rate tax paying doctors with buy-to-let properties or are considering this as an investment option.

Inheritance Tax

- A new 'main residence nil rate band' will be introduced from April 2017 to protect the family home from inheritance tax. It will gradually increase to a maximum of £175,000 by 2020-21. Therefore combined with the existing nil rate band set at £325,000 in effect for the married couple this means an inheritance tax nil rate band of £1m.

So for doctors who are appraising their inheritance tax position this is good news. Also many of the doctors we speaok to down-size when they hit retirement to release liquid retirement funds. Special rules will apply to those that downsize in order to protect the new rules.

Corporation Tax

- The corporation tax rate (the amount of tax paid by companies) will fall to 19% for Financial Year beginning 1st April 2017 and to 18% for the Financial Year beginning 1st April 2020. This is good news for doctors who have set-up Limited Companies for their private fee work as you will be paying even less tax on the company profits .

Savings and Investments

 - A tax free personal savings allowance of £5,000 for savings income will be introduced from 6th April 2016. This means that the first £5,000 of doctors' savings income will be tax free.

- From Autumn 2015 a 'Help to Buy ISA' will become available to help first time home buyers save for their first home. The Government will pay £50 for every £200 saved subject to a maximum of £3,000 which will be paid at the time the property is bought. Therefore for any doctors with children looking to save for their first home (and indeed junior doctors looking to get on the property ladder) this could be an extremely effective way to save for a deposit.

Pensions

- The Lifetime Allowance for pensions will be reduced to £1m from 6th April 2016 and then it will be increased by CPI from 6th April 2018. Transitional Protection will be available to protect pensions already in excess of £1m. More and more doctors with significant NHS Pension benefits (and/or personal pensions) are falling into the Lifetime Allowance trap. Careful financial planning is necessary in the lead up to taking your NHS Pension benefits or cystallising personal pensions.

- The Annual Allowance for those doctors with adjusted earnings in excess of £150,000 will be tapered down to a minimum of £10,000. Any doctor earning in excess of £150,000 needs to seek financial advice on how best to arrange their financial affairs most tax efficiently.

Domicile and Residence

- From April 2017, any doctor who has been resident in the UK for more than 15 of the past 20 years will be deemed UK domiciled for all tax purposes. This means that any doctor who has been resident for more than 15 of the past 20 years will be deemed to be domiciled in the UK for ALL tax purposes. 

Childcare

From September 2017, working families with 3 and 4 year olds will receive 30 hours of free childcare - an increase from the 15 hours they are currently offered.

 

For a complimentary appraisal of your financial situation and how the latest changes affect you then please get in touch on richard.higgs@wealthwestmedical.co.uk or telephone 0117 966 5699.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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