By a staff reporter
Tax and pension changes announced in the Chancellor’s Autumn Statement will bring a boost to thousands of senior doctors’ finances this year – but many on the move will be clobbered.
Stamp duty underwent an immediate overhaul at the beginning of December, meaning that, from now on, each tax band will be used only on the particular portion of the selling price of the property to which it applies – similar to the way income tax is calculated.
Previously, a set tax band was charged against the whole value of a property, meaning substantial hikes in tax between properties costing just a few pounds more.
While critics of the property tax have long argued that the former system was outdated, the sweeping changes will mean that senior doctors buying high-end properties will face higher tax charges.
Houses valued above £937,500 will now incur more stamp duty than before. Most properties valued at less than this threshold will pay less.
Under the new rules, no tax will be paid on the first £125,000 of a property, followed by 2% on the portion up to £250,000, 5% on the portion between £250,000 and £925,000, 10% up to £1.5m and 12% above this figure.
Patrick Convey, technical director at specialist financial planners Cavendish Medical, said: ‘This surprise announcement from the Chancellor is in answer to a proposed mansion tax from opposition parties.
‘Doctors buying property in London and the South-east may be paying significantly more in stamp duty.’
George Osborne announced further good news for ISAs, an increasingly popular investment avenue for doctors. Although the contribution limit will be only marginally increased to £15,240, new rules will allow partners to inherit the ISA of a deceased spouse and keep its tax-free status.
Mr Convey said: ‘As the tax-free status of ISAs can now be preserved after death, they could become as popular as private pension schemes to provide additional income in later life.’
Plans to abolish the death tax due on pensions were also confirmed and will now include those receiving annuity income.
Earlier statements had suggested this rule would only apply to those using income drawdown. Currently, pension pots are taxed at up to 55% on death depending on whether the pension has been drawn on.
But in future, when someone older than 75 dies, their heirs will pay income tax at their marginal rate and no tax charge at all will apply if aged under 75.
The Treasury confirmed that the higher rate income tax threshold would rise to £42,385 next year, a 1.2% increase.
Despite the usual pre-statement speculation, there were no further cuts to tax relief on pension contributions or savings allowances.