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Tax Thresholds for Doctors

Calculating taxes

How much income tax you pay depends on a few things: how much of your income is above your personal allowance, how much of it falls within each tax band, and if the income you make is tax-free or not. Understanding exactly how much income tax you pay and how much money you’ll actually take home each month is crucial.


This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 


Here’s an overview of the various income thresholds and what tax liabilities you might need to worry about this upcoming tax year.


Income Tax Rates and Bands

If you’re a medic using PAYE then you’ll be able to see how much tax is being taken, but you might not know the exact rates you’re paying.

 No matter which tax band you ultimately end up in, everyone that earns less than £125,000 gets a £12,500 personal allowance of income that isn’t taxed. After that, the basic rate of tax, a 20% tax rate, applies up to £50,000. The higher rate spans from £50,001 to £150,000 and your income in that band is taxed at 40%. Finally, the additional rate, 45% tax rate, applies to any income over £150,000.

There are a number of income thresholds that will impact your effective tax rate such as:

  • The first £1,000 of self-employed income (There is an automatic £1,000 trading allowance that can alternatively be used instead of claiming specific expenses.)
  • The first £1,000 of property rental income – like the trading allowance, if expenses are less than £1,000, the allowance can be claimed instead.
  • The first £2,000 of dividends are taxable at 0%
  • The first £1,000 of savings income for a basic rate taxpayer, or £500 for a higher rate taxpayer is taxable at 0% (if you are a 45% taxpayer then all savings are taxed)

Other ways to reduce tax

Besides the above, there are other deductions you can employ to help lower the amount of tax you pay – National Insurance Contributions, Student Loan repayments, superannuation contributions, and tier rates are just a few ways to reduce taxable income or extend the basic rate band.

There are a variety of tax relief schemes you could take advantage of as well. Pension contributions, charity donations, maintenance payments, relief for business expenses (whether it is your own company or if you’re employed and using your own money for business purposes) will all provide you tax relief. Some apply automatically, but others you will need to apply for, so it might pay to seek out an expert.


How much could you save?

Professional advice is always advisable, but especially if you think you might be close to any of the limits. If anything can be done to bring down your taxable income or if you want your tax liability explained, a specialist accountant and IFA can help.

If you’re ready to save as much money as possible then schedule some time to meet with us today. In conjunction with a specialist accountant, we can help ensure you only pay the tax you should be paying and keep more money in your pocket. Contact us today.


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