Last Friday’s not-so-mini budget announced a raft of measures to cut taxes, for companies as well as for individuals.
Alongside the more “headline-grabbing” announcements, there were other changes announced which, although less high profile, will have an impact on the healthcare sector.
So what were the announcements and what do the changes mean for you?
Income Tax and National Insurance
The 1.25% increase in the National Insurance rate brought in earlier this year will be scrapped from 6 November 2022. The planned retention of this increased rate through the introduction of the new “Health and Social Care Levy” due to come in on 6 April 2023 has also been scrapped. The change applies across the board – so the self employed, employed and employers will all pay less.
The additional 1.25% tax on dividend income will remain in place for the rest of the 2022/23 tax year but this will also be scrapped from 6 April 2023.
The basic rate of personal income tax will be reduced from 20% to 19% from 6 April 2023, one year earlier than originally planned, and the 45% additional rate of income tax will be abolished, meaning the top rate of income tax will be 40%.
So what does this all mean? Clearly, people’s post-tax income will increase when all the changes are in place. Where there is an element of choice over when profit is earned or income is taken, such as payment of dividends from a personal company, you should take advice on the timing.
Business Taxes
The planned increase in Corporation Tax from 19% to 25% next March has been cancelled, so all companies will continue to pay tax at 19%.
The Annual Investment Allowance, available for most partnerships as well as companies, will be maintained indefinitely at its current level of £1,000,000 pa and will not now fall back to £200,000 pa as planned from next March. This means that there is not now the same need for any large-spend capital projects to be completed before March.
IR35
Whilst the IR35 rules are being retained, the legislation that was introduced in 2017 for the public sector, and then extended in 2021 to the private sector, will be repealed from 6 April 2023.
This means that if someone (a locum for example) provides their services through a company, or other intermediary, they will again become responsible for ensuring the correct amount of tax and National Insurance is paid. It will no longer be the responsibility of the end-user, such as the GP or dental practice.
Whilst this should see the end of many of the administrative requirements imposed by the 2017 legislation, such as the need for the issuing of Status Determination Statements where there is an intermediary involved, it will still be important to review the employment status of individuals who are contracted with directly. This responsibility will remain with the hirer.
This is a complex area and advice should always be sought if there is any doubt.
Pensions
Alongside the mini-Budget, the Department of Health and Social Care announced plans to change elements of the NHS Pension Scheme, in an effort to help retain doctors, nurses and other senior NHS staff, and increase capacity.
It was announced that by 2023 all NHS trusts will be required to offer “pensions recycling”, meaning employer pension contributions can be offered in cash instead of as an addition to pension funds.
It was also announced that there would be a correcting of NHS pension rules regarding inflation to reduce the risk of high annual pensions savings tax charges, and there was an extension of the existing suspension of the rules around “retire and return”, with a commitment to implementing more permanent retirement flexibilities.
More detail is awaited on these measures.
Stamp Duty Land Tax
From the day of the mini-Budget, with immediate effect, the threshold from which residential property buyers pay stamp duty land tax increased from £125,000 to £250,000, meaning no duty is now payable on purchases of residential property up to £250,000.
The amount on which first-time buyers start paying stamp duty land tax also increases from £300,000 to £425,000 and the amount on which first-time buyers can obtain relief has increased from £500,000 to £625,000.
If you are affected by any of the changes or would like to discuss anything from last week’s announcements, or any other tax matter, please get in touch with your usual BHP contact or call 0333 123 7171.
