The latest Budget is over but how exactly does the much trumpeted “End of Austerity” affect the purses of hard working doctors and dentists?
Whilst this might have appeared to be a giveaway budget the truth is less generous than the headlines.
Yes, the Chancellor brought forward the increase in the personal allowance to £12,500 applicable from next April.
He also – at last – increased the rate at which you start to pay higher rate tax to £50,000. In theory this would mean £860 extra in the pocket of a higher rate taxpayer earning £100,000.
Two good reasons to be cheerful?
Yes, for basic rate payers but not the ‘yes’ it initially appeared to be for higher rate taxpayers. When you read the small print, it transpires that National Insurance increases will offset some of the perceived benefit to higher rate tax payers.
In fact, the net effect leaves the higher rate taxpayer earning £100,000 only £566 better off.
Nothing new in this type of ‘he giveth (visibly) – he taketh (stealthily)’ approach – it’s how all chancellors work. Still, small mercies and all that…
However, a real reason for cheer lies in what he didn’t take away.
A pension reprieve?
There had been pre-budget rumours that the pension Annual Allowance (currently £40,000 but tapered down for high earners) would be reduced further – thankfully that didn’t happen.
I say thankfully because many doctors and dentists who are in the NHS Pension Scheme are already affected by this limit due to the complex manner by which the value of each year’s pension input is calculated.
A further reduction would have resulted in more annual head scratching and poring over figures – trying to establish correct inputs and what, if any, unused relief could be brought forward to offset excess contributions. And, inevitably, more tax penalties!
ISA allowances remain at £20,000 although there’s a small increase in the not particularly popular Junior ISA.
As far as the big picture is concerned, the Chancellor promised £100 billion of spending commitments.
Included in that is a pledge of over £20 billion for the NHS which, according to the Institute for Fiscal Studies, would mean that, within 5 years, spending on the NHS will be double year 2000 levels and account for 38% of all public spending!
Of course, much of this spending for the NHS had already been promised and one is always left with the feeling that the Government are double counting their gifts.
Sort of like a miserly uncle who in November promises you a teddy bear (or perhaps a cuddly chicken?) for your upcoming Christmas present – but then it doesn’t materialise until the next Christmas.
Even though you’re still grateful, you’re left with a slightly peeved sense that you’ve been had!
Anyway, doctors and dentists may be thankful for a little increase in the tax allowances, retention of pension reliefs at the current level, and extra spending on the NHS, but don’t count your chickens yet. Remember these gifts are for next year!
The Chancellor may have chosen to ignore Brexit but there it was, a great big grey elephant hunkered down on the back benches.
Philip Hammond’s generosity is based upon an unexpected windfall of £12 billion, due largely to an upgrade in forecasts from the Office for Budget Responsibility.
If, however, we bump out of the EU without a deal, the forecasts will all have to be changed and an Emergency Budget would be inevitable.
And then that big grey elephant may be trumpeting a very different tune and go stomping all over these Autumn chickens!
This article is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at the 5th November 2018. You are recommended to seek competent professional advice before taking any action.