Medical News
Spring 2023

On 15 March 2023, Jeremy Hunt, Chancellor of the Exchequer, revealed his first Spring Budget. There was a focus on managing inflation and government debt, encouraging those who have left their jobs to return to the workforce, and increasing business investment.

Here are some of the key measures announced in the Spring Budget that will affect businesses and individuals across the UK:

• The Main rate of corporation tax, paid by companies on taxable profits over £250,000 has been confirmed to increase from 19% to 25%. Companies with profits below £50,000 will pay at 19% and companies with profits between £50,000 and £250,000 will pay at an effective marginal rate that is between 19% and 25% from 1 April 2023.
• The Annual Investment Allowance (AIA), giving 100% tax relief to unincorporated businesses and companies investing in qualifying plant and machinery, is now permanently set at £1million. The super-deduction, which gives enhanced 130% relief for new qualifying plant and machinery acquired by companies, will end on 31 March 2023.
• From 1 April, companies can fully deduct investment in new qualifying plant and machinery to lower their taxable profits. In addition, a 50% first year allowance will be available for assets qualifying for the special rate pool such as integral features.
• From 6 April 2023, the Company Share Option Plan (CSOP) employee share options limit will increase from £30,000 to £60,000. Additionally, restrictions on the types of shares eligible for CSOP options will be lifted.
• The Government is increasing the availability of the Seed Enterprise Investment Scheme for start-up companies. The amount of investment that companies will be able to raise under the scheme will increase from £150,000 to £250,000. The gross asset limit will be increased from £200,000 to £350,000 and the investment must be made within 3 years (increased from 2 years) of trade commencing. In a bid to support these changes, the annual investor limit will be doubled to £200,000. The changes take effect from 6th April 2023.
• The Energy Price Guarantee which caps how much suppliers can charge per unit of energy used will stay in place until June 2023.
• 30 hours of free childcare to be provided for one and two-year-olds to help parents in England return to work will be rolled out in stages from April 2024. The new scheme will eventually cover all children from the age of nine months.

BUDGET 2023 - Pension tax relief

There was also good news in the Budget for those saving in a personal pension. The current pension lifetime allowance (LTA) charge is being abolished from 6 April 2023. The LTA has caused some high earners, particularly doctors, to retire early as tax charges apply on crystallisation of pension funds if the LTA (currently £1,073,100) is exceeded. 

Individuals may be able to receive 25% of their pension savings as a tax-free lump sum when they become entitled to their pension benefits. This is currently capped at 25% of the LTA and going forwards, for most individuals, will remain capped at £268,275.

Another pension limit increased by the Chancellor in the Budget was the pension Annual Allowance (AA) which increases from £40,000 to £60,000 from 6 April 2023. The AA applies to the combined pension input by the individual and, in the case of employees, their employer. Pension contributions in excess of the AA result in a tax charge on the individual, although they may take advantage of unused AA amounts from the 3 previous tax years.

For those with high incomes, the AA is tapered. From 6 April 2023, where a taxpayer’s adjusted income exceeds £260,000 (increasing from £240,000), the AA is tapered by £1 for every £2 in excess of £260,000, down to a minimum of £10,000 (increasing from £4,000).

The Money Purchase Annual Allowance (MPAA) replaces the AA when an individual starts to flexibly access a defined contribution pension scheme. The MPAA will increase from £4,000 to £10,000 on 6 April 2023.

Note that an individual’s pension contributions can be very tax efficient depending on their level of income.

The taxation rules for pensions are complex as there have been numerous changes in recent years so please talk to us about your pension contribution strategy.

Combined with the many mini-budgets and statements made towards the end of 2022, this Budget brings change; good, bad, and often to be determined with time. What is clear is that 2023 remains a year of opportunity and we are here to work alongside you and help you grow!

For further details please see our more detailed Budget Summary released last week and please talk to us if you need guidance on any of the changes announced last week.  

It is not uncommon for an employed doctor to have a number of simultaneous employment roles (perhaps teaching/different job roles within the NHS etc).

Of course, any income Tax and National Insurance deductions will be calculated on each employment, before the employee is ultimately paid.

However, multiple employments can sometimes cause complications to an individual’s National Insurance position and (in some instances) potentially lead to National Insurance contributions being overpaid.

Each employment will be taxed and income tax will be calculated accordingly based on an individual’s overall income. An individual with overall income less that £100,000 is entitled to a tax-free personal allowance (currently £12,570 per tax year) and this will be taken into consideration.

For National Insurance purposes, the basis is somewhat different and rather than assessing contributions on overall annual earnings, the contributions are instead determined on thresholds for each employment (with a different employer).

For the 2023/24 tax year, the relevant employee National Insurance Contributions are outlined below:-

Class 1 National Insurance	Weekly	Annual	Rate
Lower earnings limit (LEL)	Up to £123	Up to £6,396	0%
Between Lower earnings limit (LEL) and Primary threshold (PT)	Between £123 to £242	Between £6,396 to £12,570	0%
Between Primary threshold (PT) to Upper earnings limit (UEL)	Between £242 to £967	Between £12,570 to £50,270	12%
Over Upper earnings limit (UEL)	Over £967	Over £50,270	2%

Generally, the level of earnings at which Class 1 National Insurance entitles an employee to qualify for certain state benefits (such as state pension) is defined by the lower earnings limit (LEL) which is £123 per week or £6,519 per annum. Any earnings between the Lower Earnings limit (LEL) and the Primary threshold (PT) ranges of £123 per week (£6,396 per annum) and £242 per week (£12,570 per annum) will be entitled to National Insurance credits to build qualifying entitlement towards state benefits.

National Insurance Contributions (NIC) at the standard rate of 12% will be payable on individual employments when earnings exceed £242 per week (£12,570 per annum) up to £967 per week (£50,270 per annum)

The upper earnings limit or “ceiling” where National Insurance is paid is £967 per week (£50,270 per annum)

You will note that the thresholds in place could potentially mean that someone with say 2 employments could potentially earn twice as much as an individual with only one employment before having to pay National Insurance. The thresholds may also lead to an individual overpaying NIC if: -

• An individual has more than one job and Class 1 National Insurance contributions are paid across all employments.
• If an individual is employed and self-employed and therefore are paying Class 1 National Insurance Contributions for employment and also making Class 2 and Class 4 National Insurance Contributions for self-employment.
• An individual’s earnings have exceeded the upper earnings limit of £50,270 and they have not applied for any National Insurance deferment (see below)
• An individual is over the state pension age and continues in employment

Unfortunately, there is no mechanism to prevent overpaying National Insurance Contributions.

Once the tax year has passed, you shall need to review whether any of the above circumstances apply to you. You can check your National Insurance Contributions via your online personal tax account.

If entitled to a refund, you may then be able to claim a National Insurance refund by using the online National insurance claim refund tool, accessible via the following link:-

Claim a National Insurance refund - GOV.UK (www.gov.uk)

HM Revenue & Customs may also review the individual’s National Insurance record when reconciling an individual’s tax affairs for a tax year. If HMRC believe an individual has overpaid National Insurance, they may contact the individual to request details of earnings for each employment to assess the overall position.

If you are registered for Self-Assessment and are required to submit a Self-Assessment Tax Return, any overpayment will be taken into consideration (if details are available) when calculating the overall Self-Assessment tax position.

Deferment of National Insurance

If an individual has more than one employment, they may be able to defer (delay) paying Class 1 National Insurance. This limits National insurance contributions to 2% once the upper earnings limit has been exceeded.

To request a deferment, an individual must have met all of the following: -

• They pay Class 1 National Insurance with more than one employer
• They earn more than £967 per week (£50,270 per annum) from one employment over the tax year.
• They earn £1,209 or more per week from 2 employments over the tax year.

If this is the case, a reduced rate of 2% on weekly earnings between £242 and £967 in one of an individual’s employments can be paid rather than the standard 12% rate.

To defer, HM Revenue & Customs must be notified by 14 February during the tax year. HM Revenue & Customs can again be notified via the personal tax account providing details of estimated annual earnings for the year of application. HMRC will then review National Insurance records to confirm if sufficient National Insurance has been paid at the end of the tax year and will notify the individual if contributions need to be brought up to date.

If you have any queries or wish to discuss, then please feel free to speak to us. 

Making tax digital (MTD) for income tax self-assessment (ITSA) was originally scheduled to start in 2018 and was then put back to 2023 and then 2024. It was announced just before Christmas that the new system of submitting digital information quarterly to HMRC has been delayed yet again! The start date will now depend upon the gross business receipts of the individual.

Self-employed individuals (which will include consultants, GPs, locum doctors) and landlords with annual gross receipts above £50,000 will need to follow the rules for MTD for ITSA from 6 April 2026. Those with annual gross receipts between £30,000 and £50,000 will be mandated into the regime from 6 April 2027.

Whether MTD for ITSA will apply to those with gross receipts under £30,000 is under review but it would appear that the government have finally increased the starting threshold from £10,000, which they have resisted up until now.

Despite the delay in the mandatory start date for MTD for ITSA, businesses should nevertheless consider whether or not it would be beneficial to keep their business records digitally anyway.

The date when partnerships will be required to join MTD for ITSA has not been set.