Healthcare: Budget 2020 update
In a Budget very much overshadowed by the developing Coronavirus situation, there was a raft of measures announced aimed at easing the pressure on businesses and individuals. One of the main Budget measures that will affect Healthcare professionals was the change to the allowance available for pensions savings, announced in recognition of the effect that the pensions rules were having on the provision of NHS services. However, the Budget was also notable for not including many of the predicted changes, such as a removal of higher rate tax relief on pensions, abolition of Entrepreneurs’ Relief and wholescale Inheritance Tax changes. From our long experience of working with healthcare professionals, we have highlighted below the main changes which will impact the sector.
Many Healthcare professionals will see a significant reduction to, or even elimination of, their annual pensions savings tax charge from 6 April 2020.
Entrepreneurs’ Relief should still be available for the sale of most GP premises.
The Chancellor announced a £90,000 increase to the income levels at which the pensions annual allowance taper is applied. He expects this to take 98% of consultants and 96% of GPs out of the taper.
Since 6 April 2016, the standard £40,000 annual allowance has been reduced where a taxpayer’s threshold income exceeded £110,000 and their adjusted income exceeded £150,000.
The threshold income is broadly net income before tax (excluding pension contributions).
The adjusted income is broadly net income plus pension accrual.
Previously, where adjusted income exceeded £210,000, the annual allowance tapered to £10,000, which has resulted in significant Pensions Savings Tax Charges being incurred by many Healthcare professionals.
The impact of this on healthcare professionals was recognised in the Chancellor’s speech and from 6 April 2020 these levels increase by £90,000 each, so that only those with threshold income in excess of £200,000 and adjusted income in excess of £240,000 will see a tapering of the £40,000 annual allowance.
The minimum tapered annual allowance does however reduce from £10,000 to £4,000, but this will only affect those with adjusted income over £312,000.
The lifetime allowance will increase in line with inflation to £1,073,100.
Capital Gains Tax
The 10% Entrepreneurs’ Relief rate of Capital Gains Tax (CGT) has been retained but the lifetime allowance reduces from £10 million to £1 million as of Budget day.
As previously announced, the Private Residence Relief is restricted from 6 April 2020 with the final 18 months exemption reduced to 9 months for sales after that date. Lettings Relief will also be effectively abolished unless certain circumstances apply.
For sales of UK residential property completing on or after 6 April 2020, there is a new 30 day limit to report and pay any Capital Gains Tax due.
The Employment Allowance, which can in some circumstances be set against the Employer’s National Insurance liability, increases from £3,000 to £4,000 from April 2020.
The level at which employees start to pay National Insurance increases from £8,632 pa to £9,500 pa from 6 April 2020. However, this now moves away from the level at which employers start to pay National Insurance, which will be £8,788 pa for 2020/21.
In a response to the Coronavirus outbreak, statutory sick pay (SSP) will be paid from day one for those who are unable to work because they are self-isolating in line with Government advice. The Chancellor further announced that Businesses with fewer than 250 employees will have the cost of SSP for any employee off work due to coronavirus for up to 14 days refunded by the Government in full.
As previously announced, the rate of Corporation Tax remains at 19%, rather than falling to 17% as originally planned.
There is no change to dividend tax.
Businesses that incur qualifying expenditure on the construction, renovation or conversion of non-residential structures and buildings may claim Structures and Buildings Allowances (SBA).
The rate increases from 2% to 3% from 6 April 2020.
The Chancellor announced an extra £6bn of new funding in this Parliament to support the NHS, in addition to the previously £34bn to be spread over five years.
He said that the new funds will deliver 50,000 more nurses, 50 million more GP surgery appointments and work starting on 40 new hospitals.
In response to the Coronavirus outbreak, the Chancellor announced that a £5bn emergency response fund has been set aside to support the NHS and other public services.