Medical News
Autumn 2022

It had already been announced that the income tax personal allowance (£12,570) and higher (40%) rate threshold (£50,270*) would be frozen until 5 April 2026, instead of increasing each year in line with inflation.

The Chancellor has now announced that these freezes will continue until 5 April 2028.

As earnings increase, this will result in more higher rate taxpayers and is often referred to as ‘fiscal drag’ because it will raise more tax without actually increasing income tax rates.

The income level at which point the ‘additional’ 45% rate of income tax starts to apply will be reduced from £150,000 to £125,140* from 6 April 2023.

The new £125,140 threshold ties in with the £12,570 personal allowance being gradually withdrawn for those with income in excess of £100,000. For these individuals, once their income exceeds £125,140, they will no longer be entitled to a personal allowance and, from April 2023, will move straight into 45% income tax.

*It should be noted that, for Scottish taxpayers, income tax rates and thresholds are, for certain income types, separately set by the Scottish government.

For all individuals, the first £2,000 of dividend income is taxed at 0%.

The government has now decided that this 'dividend allowance’ of £2,000 will be reduced to £1,000 in the 2023/24 tax year and then again to just £500 in the 2024/25 tax year.

It should be remembered that the income tax rates applied to dividend income outside of the allowance have only recently been increased to 8.75%, 33.75% and 39.35% (for dividend income falling into basic rate, higher rate and additional rate bands respectively).

Combined, these measures will mean that those reliant on dividend income will pay more tax.

If you are a director/shareholder, please contact us to discuss the best strategy for extracting profits from your company from 6 April 2023.

One of the few changes announced on 23 September that has not been reversed concerns Stamp Duty Land Tax (SDLT) in England and Northern Ireland. The starting threshold was increased from £125,000 to £250,000 (and, for First Time Buyers, from £300,000 to £425,000) from 23 September 2022.

However, it has now been announced that these are to be temporary changes and, from 1 April 2025, the thresholds will return to their original rates.

The Department of Health and Social Care (DHSC) has recently announced changes to contributions into the NHS Pension scheme, following a public consultation held in October 2021.

From 1 October 2022, contribution percentage rates changed and pensionable pay tiers used to determine the rate at which contributions into a pension are made have been updated. The value of pension benefits will be unaffected.

The contribution rates are to be brought in over two phases, with the first commencement on 1 October 2022 and a further change planned in 2023.

The method to assess which tier an individual pensionable pay falls in is also changing. Previously it has been determined on a member’s full-time equivalent pay. However, it will now be assessed on their actual annual rate of pay. For NHS members who work on a part time basis, it may mean that contributions are less as their contribution rate will be based on how much they are paid each year rather than their whole-time equivalent figure.

Please see the new rates and tiers below:-

New Pensionable salary tiers from 1 October 2022	Contribution rates from 1 October 2022 (based on actual annual pensionable pay):	Future planned contribution rates (based on actual annual pensionable pay):
Up to £13,231	5.1%	5.2%
£13,232 to £16,831	5.7%	6.5%
£16,832 to £22,878	6.1%	6.5%
£22,879 to £23,948	6.8%	6.5%
£23,949 to £28,223	7.7%	8.3%
£28,224 to £29,179	8.8%	8.3%
£29,180 to £43,805	9.8%	9.8%
£43,806 to £49,245	10%	10.7%
£49,246 to £56,163	11.6%	10.7%
£56,164 to £72,030	12.5%	12.5%
£72,031 and above	13.5%	12.5%

There can be significant costs involved to practise in medicine. Mandatory licence registration fees along with relevant insurance and continuing CPD development can be expensive annual costs.

It can be easy to forget to claim expenditure, which may qualify for tax relief which may include:-

• Membership fees and annual subscriptions to a professional body
• Professional Indemnity insurance
• Subscriptions to trade journals/publications
• Courses and conferences

Whether tax relief can be claimed on the above will be dependent on a doctor’s employment status (whether employed or self-employed).

Here, we provide a brief summary as to what must be considered before claiming.

Self-employment expenses

In order to qualify as a deduction, the general rule of thumb is that an expense can be claimed against profits if it relates to revenue expenditure and has been incurred “wholly and exclusively” for the purposes of the business.

No deduction can be given where an expense has been incurred for business and non-business purposes whereby it has a “duality of purpose”.

Employment expenses

For doctors who are employed, the rules are more restrictive. You can only claim tax relief on expenses incurred “wholly, exclusively and necessary” in the performance of your duties of employment. In other words, you are contractually obliged to incur the expense.

The definition means that professional membership such as General Medical Council (GMC) and British Medical Association (BMA) will qualify. However, in order to claim, the professional membership must also belong to those included on the HMRC Approved professional bodies list which can be accessed by clicking the following link:-

Approved professional organisations and learned societies (list 3) - GOV.UK (www.gov.uk)

Training whilst employed

HM Revenue & Customs will only accept a training expenses claim (exams and resits, courses, study materials etc) if you were employed on a training contract where training was an intrinsic contractual duty of the employment and:-

• The expenses must be incurred by each and every employee in the same role as you,
• It is necessary for you to incur and pay these expenses personally
• The expenses must be incurred and paid
• The expenses are incurred wholly, exclusively and necessary as part of the duties of the employment

HMRC may request additional evidence, when processing a claim such a proof of payment or a copy of your employment contract to confirm the training post.

Tax relief available

Basic-rate taxpayers will be eligible to claim tax relief of 20% and increases to 40% for higher-rate taxpayers. Further National Insurance contributions savings are also available to those self-employed.

Tax relief is claimed in the tax year that qualifying expenditure has been paid. For those who are self-employed, the relevant expense can be deducted as an expense against any self-employment income received during the tax year.

If you are employed and your professional expenses claim is for the current tax year and is less than £2,500, you are able to receive tax relief on work related expenses via an adjustment to your PAYE coding notice.

Where expenses paid during a tax year exceed £2,500, the individual will be required to prepare and submit a Self-Assessment Tax Return to claim the relevant expenditure.

You must claim within 4 years at the end of the tax year that you paid for the expense and you must retain records should HMRC inquire.

If your claim is for the previous tax years, HMRC will either adjust your PAYE tax code or process a tax refund.

A claim can be made using the online services accessible below:-

Claim tax relief for your job expenses: Overview - GOV.UK (www.gov.uk)

Tax legislation behind this can be complex and therefore should you require assistance, please do contact your Humphrey & Co representative.