National Insurance (NI) Contribution rate change
Perhaps the biggest change within the Budget which will affect most Doctors – employed and self-employed – will be the changes to the NI rates.
For employed individuals from 6 April 2024 on the main rate of employee NI payable will reduce from 10% to 8%. For those falling within this bracket of income, this will equate to a small increase in net pay at the end of each month.
For self-employed individuals and GP partners, from April 2024 the main rate of class 4 NI payable will reduce from 9% to 6%.
For those who are both employed and self-employed, the annual maxima calculation will be adjusted accordingly to ensure you do not pay too much NI. This position will be reconciled via your tax return at the end of the year.
Whilst there has been further comments regarding the potential to abolish of class 2 NI, this has not yet been implemented. This may save around £180 per year for self-employed doctors/locums.
High income child benefit charge
From April 2024, the high income child benefit charge threshold will increase from £50,000 to £60,000 with the full amount of the child benefit being repaid for earners over £80,000 per tax year, gross.
This charge is currently applied to the highest earner in the household and only considers their income level when applying the charge. There will be a consultation as to whether this charge should be considered against total household earnings instead and we anticipate this by April 2026.
Furnished Holiday Lets
The Furnished Holiday let regime has previously provided favourable tax treatment on sale – and capital allowances throughout ownership for those who meet the relevant qualifying conditions. This will be abolished from April 2025 such that furnished holiday lets will be treated as ‘normal’ rental properties instead moving forwards.
This may mean balancing charges (or allowances) are due on fixtures and fittings in 2025/26 as a transitional adjustment and we are awaiting further guidance on this area.
It also means that FHLs will thereafter no longer be able to claim 100% of finance costs as a deductible expense and will instead need to claim these costs as a basic rate tax deduction. This may increase gross taxable income for personal allowance tapering or high income child benefit charge purposes – or annual allowance threshold restrictions.
Having said this, the higher rate of Capital Gains Tax for the sale of residential property (not just FHLs) has reduced from 28% to 24%. (Please note this tax will still be payable and reportable to HMRC within 60 days of completion.)
Pension Annual Allowance limits
There were no changes to this position within the Spring Budget but the relevant rates have been reiterated here for ease.
The headline annual allowance (AA) is £60,000.
Individuals who have ‘threshold income’ for the tax year of over £200k may have their AA restricted. It will be reduced by £1 for every £2 of ‘adjusted income’ over £260k – to a minimum of £10,000.
No changes to the lifetime allowance (LA) position which currently attracts no tax charge based on the capital value of pension pots.
Non-UK domiciled individuals
Whilst this does not affect a large proportion of our clients in the healthcare industry, the changes implemented in this area were significant. If you feel this will affect you, please do get in touch for specific tax advice.
From 6 April 2025, the current remittance basis regime will be abolished for income tax and capital gains tax purposes, and replaced by a simpler route which will be based on tax residency. Broadly, ‘domicile’ has historically related to where your ‘home’ country is although the legislation and case law around this has been far more complex. The Government will therefore introduce several transitional rules for those claiming the remittance basis, including:
- An option to rebase the value of capital assets to 5 April 2019
- A temporary 50% exemption for the taxation of foreign income for the first year of the new regime (ie 2025/26)
- A 2-year Temporary Repatriation Facility to bring previously accrued foreign income and gains into the UK at a rate of 12%
The Government will also reform Overseas Workday relief for employment duties carried out overseas.
The UK IHT regime for non-UK domiciled individuals currently will not change however a consultation will be launched with a view to bringing this in line with the changes noted above from 6 April 2025.
NHS Spending
Whilst not necessarily directly related to your personal tax position as a Doctor, further NHS funding was announced as part of the Budget which will be seen over the next few years:
- A 1% increase in public sector spending.
- A £3.4 billion fully funded NHS productivity plan focussed on digital transformation to help fund productivity growth by 2030, including:
o Expanding the use of AI for quicker cancer diagnosis
o An improved NHS app to allow patients to confirm and modify appointments
o A new app for NHS staff to allow for easier e-rostering
o A plan for all hospitals to use the electronic patient record
- £2.5 billion in additional funding to support reducing waiting times
- £45 million of new investment in life sciences, including funding for research into cancer, dementia and epilepsy