Mini-Budget round-up
Alec James
Specialist medical accountant Alec James reports on the impact of the ‘mini-Budget’ for Independent Practitioner Today readers and gives some advice for their businesses.
Just 18 days into his new role as Chancellor of Exchequer, Kwasi Kwarteng delivered his first mini-Budget.
With tax cuts across the board, while good news for the taxpayer, one does worry of the impact this may have on the British economy.
Individuals
From 6 April 2023, the basic rate of income tax will reduce from 20% down to 19%. This means an extra £375 in most doctors’ pockets.
Kwarteng originally announced at the Budget that the 45% tax band for earnings over £150,000 would be removed from 6 April 2023, reverting back to 40% being the highest rate of income tax.
Since the Budget, the Government has been receiving backlash for the tax cut. It has since been agreed between the Chancellor and the Prime Minister that the decision would be reversed, meaning that the additional rate of 45% will continue.
There are rumours that the ‘Tapering of Personal Allowance’ will also be dispensed with in the near future, but we will have to wait until the new year to see if this transpires.
Kwasi also announced that the 1.25% Health and Social Care Levy will be abolished and the employee, employer and self-employed National Insurance rates will return to the pre-April 2022 levels. This will take effect soon – from 6 November 2022.
The 1.25% reduction will also be applied to dividend tax rates from 6 April 2023, meaning they will revert back to 7.5%, 32.5% and 38.1%, depending on the tax bracket applicable.
All these reductions will lead to some potential tax planning for those independent practitioners with limited companies.
Unless rates are altered, Scotland will still have five rates of tax with the additional rate remaining at 46%.
There may be some re-alignment of the Scottish rates, as we understand that the reduction in tax for the rest of the UK allows the Treasury to release a higher grant to Scotland.
Companies
The headline announcement for companies was that the proposed increase in corporation tax rate from 1 April 2023 to 25% has now been abandoned. Many of you would have been facing a significant increase in corporation tax before the change.
While corporation tax will now remain at 19% for the foreseeable future, companies still have up to 31 March 2023 to benefit from the ‘super-deduction’ on qualifying capital purchases.
The scheme allows 130% of the cost of the asset to be claimed against profits, ultimately saving 25% tax rather than 19%.
Those with companies may therefore look to accelerate any expenditure to benefit from the scheme.
For those of you that may be considering developing or refurbishing a clinic, the planned reduction in the Annual Investment Allowance, which gives companies 100% tax relief in the year of purchase, has also been cancelled.
The £1m limit will remain for the foreseeable future.
IR35/Off-payroll working
The off-payroll working rules introduced for public sector bodies and the private sector in 2017 and 2021 respectively have been reversed back to the rules that came into existence in 2000.
This means that the determination of whether IR35/off payroll working applies is once again the responsibility of the ‘worker’.
This reform means that there may be new opportunities for your limited companies, as there is likely to be less bureaucratic red tape for the organisations engaging with companies.
Stamp Duty
In England and Northern Ireland, the nil rate band for stamp duty has increased from £125,000 to £250,000 with immediate effect.
This saves up to £2,500 of stamp duty on the purchase of residential properties, whether this is your main home or investment properties.
Scotland and Wales have separate and devolved legislation covering land transaction tax.
NHS Pensions change
Prior to the mini-Budget, the Government published a document called ‘Our Plan for Patients’. The document outlined a plan for the NHS and social care.
As part of the plan, the Government addressed ongoing retention issues for senior members of the NHS and how the ‘Consumer Price Index (CPI) disconnect’ and resulting annual allowance tax charges are contributing to this issue.
It was hoped that Kwasi would make further announcements in the mini-Budget following on from the new Health Secretary Thérèse Coffey’s comment earlier in the week, where she highlighted the impact of CPI and its impact on doctors.
How this will work remains to be seen, but it hopefully will correct the issues caused by significant fluctuations in CPI rates.
Alec James is a partner at Sandison Easson & Co