Tax has never been far from the headlines in recent months so, as we start the new tax year, what are the main points to consider?
Capital Gains Tax rates – increasing but still much lower than income tax rates
Since the 2024 Autumn Budget, the main rate of Capital Gains Tax (CGT) has been 24%, or 18% if the gain falls within the basic rate tax band. These rates are now aligned with those that apply to gains on residential properties, but are still much lower than the higher rates of income tax at 40% and 45%.
The Business Asset Disposal Relief (BADR) rate of CGT applies to gains on the disposal of qualifying business assets. Examples include gains on disposal of a share in the GP practice premises when leaving the partnership and gains on the winding up or sale of a dental or medical consultancy company.
The rate of BADR increased from 10% to 14% on 6 April 2025. This is, however, still significantly below the main rate of CGT, so it is always worth securing wherever possible. BADR is subject to a £1m lifetime allowance and requires you to sell the business asset within three years of cessation. The qualifying conditions can be complex, so professional advice should be taken to maximise this valuable relief.
The BADR rate is due to increase again to 18% in April 2026, so the timing of disposals could be key.
Inheritance Tax – changes on the way
This has been the big headline-grabber since the proposed changes were announced in the Autumn 2024 Budget. We are still waiting for draft legislation, but the main proposals are:
- 100% Business Property Relief (BPR) and Agricultural Property Relief (APR) restricted to the first £1m of qualifying assets from 6 April 2026, with a 50% relief above this. BPR applies to trading assets, such as shares held in dental and medical consultancy limited companies and the value of a share in GP or dental premises.
- Pensions to be within the scope of IHT from 6 April 2027. It is unclear to what extent this will impact those with a Defined Benefit pension, such as the NHS pension. We are waiting for further details following the current period of consultation.
Further changes to IHT cannot be ruled out as this appears to be a tax which is in the Chancellor’s sights, so now may be a good time to review Wills, assess the likely IHT position and consider how this will be funded whilst ensuring that beneficiaries receive the legacies as intended.
Making Tax Digital for Income Tax – delayed but now starting next year
It has been ten years since Making Tax Digital for Income Tax (MTD for ITSA) was first announced. After many delays and postponements, it is now coming in from April 2026, bringing with it the requirement for digital record-keeping and quarterly submissions to HMRC
It will initially only affect those with self-employed income and/or rents of more than £50,000. From April 2027, this will reduce to £30,000, and the Spring Statement confirmed that, from April 2028, the threshold will reduce again to £20,000.
Amongst others, this is likely to affect GP locums, sole principal dental practices, dental expense sharers, dental associates, hospital consultants with private income, and GP partners who do out-of-hours or locum work at other practices.
A date has not yet been set for when partnerships will need to comply with Making Tax Digital, but the intention is that they will be affected in the future.
The requirement to comply with MTD for ITSA from 6 April 2026 will be determined by the figures submitted on the 2025 tax returns, so early completion and submission of these returns will maximise the time available to make the necessary arrangements before compliance becomes mandatory.
Personal companies – is it time to review how cash is extracted?
Director shareholders of personal companies may wish to review how they withdraw profits from their companies. In many cases, the optimum position has been to take a small salary and the balance via dividend, and this may still be the case. However, with recent changes to the dividend allowance and tax rates, National Insurance rates and thresholds, the increased Employment Allowance and Corporation Tax rates, a review of how much cash you take out of the company, and how, may be worthwhile. It should be noted that the Employment Allowance is not available where 50% or more of the employer’s income comes from the NHS.
Whilst the Chancellor’s Spring Statement at the end of March brought little in the way of tax announcements, the reinforced commitment to balancing the books alongside downgraded short-term growth forecasts did raise the prospect of further tax rises in the Autumn. Now may be a good time for taxpayers to review their overall tax position before the next Budget.
If you wish to discuss any aspect of your tax affairs, please contact your usual BHP healthcare contact.
