Following the appointment of Jeremy Hunt as the fourth chancellor in nearly as many months, there comes an almost universal reversal of all the tax changes announced in the 'mini-budget' of less than 3 weeks ago. There have been so many changes it is not surprising that few can keep up. Many of these will impact owner-managed businesses run by doctors, particularly surrounding decisions on profit extraction.
The main headlines are:
The additional rate of income tax at 45% will remain meaning that for additional rate taxpayers the differential between dividends and bonuses has disappeared. This will open up some effective remuneration strategies for those looking to make pension contributions for spouses, if such reward is commercially justifiable.
Corporation tax will rise to 25% with effect from 1st April 2023 as previously planned, thus reducing assessable profits may make commercial sense.
The basic rate of Income Tax will stay at 20% for the foreseeable future with any planned reductions scrapped, albeit that this rate remains effective on dividends for other shareholders within the family company.
The cut to the dividend tax rates will no longer apply, but...
The National Insurance increase will be removed, and the off-patrolling legislation known as IR35 will remain in place.
Now may be the time for some doctors to review for what purposes they use their companies, for example are they able to exploit research and development opportunities in their field of specialty and claim super-deductions using larger salaries underpinning claims.
As announced last month, the good news is that for those purchasing properties in England and Northern Ireland, stamp duty land tax thresholds at the lower levels are being raised from £125,000 to £250,000 before SDLT is charged, so second homes also attract a slightly lower level. Those doctors helping their children onto the property ladder will also benefit as first-time buyers in England and NI only start to pay SDLT at £425,000 on properties with values of up to £625,000.
Whilst doctors may not be as happy from a personal tax perspective about this reversal, at least we have a firm basis from which to plan the jam for tomorrow rather than for today.
