The headlines
The Chancellor’s Budget announcement today delivered some good prospects for doctors and dentists despite the news that economic growth predictions have been downgraded significantly on previous estimates. Nevertheless, on the plus side, there will be an increase in the personal tax allowance and higher rate tax limit, an increase in the annual ISA subscription, plus a new Lifetime ISA, and reductions for SDLT on commercial property, business rates and corporation tax.
Revised growth predictions for the UK
Whilst the British economy has been expanding for the last twelve quarters, and at the fastest rate for the G7 this year, in light of a sluggish global economy, the Chancellor today had to deliver the news that the Office for Budget Responsibility (OBR) has downgraded the predictions of UK growth for the next few years.
Previous predictions for GDP growth and now revised figures are:
- 2016 – 2.4% – revised to 2%
- 2017 – 2.5% – revised to 2.2%
- 2018 – 2.4% – revised to 2.1%
Osborne communicated that if savings are made now then he believes the surplus can be achieved faster than his original estimates. His message is that he is choosing to put stability first, making more cuts now to stay on track.
Previous deficit predictions and now revised figures are:
- 2016 – £49.9b – revised to £55.5b
- 2017 – £24.8b – revised to £38.8b
- 2018 – surplus
Key (A-Z) headlines affecting doctors and dentists
Business rates
Business rates has been a topic of discussion for many years now. Small business owners occupying property valued at £12,000 or less will pay no business rates from April 2017. This is double from the current limit which is set at £6,000.
Properties with a rateable value between £12,000 and £15,000 will have a tapered relief system, resulting overall in more than 600,000 businesses paying zero rates.
Capital Gains Tax
There will be an overall cut in Capital Gains Tax (CGT) which is paid on the gains made on the sale of assets.
The higher rate of CGT will be cut from 28% to 20% from April 2016, along with the basic rate being cut from 18% to 10%.
However, residential property will fall liable for an 8% surcharge, meaning that effectively the same rate of tax will apply.
CGT is not charged on the sale of a principal, private residence, i.e. your home, so this really applies to second homes and buy-to-let investments, something that has been under scrutiny in recent months.
Class 2 & Class 4 NI
Class 2 NI is currently payable by self-employed people earning over £5,965 per year. From 2018 this NI will be scrapped and only Class 4 will apply. This will also be given an overhaul to make the system more robust and allow self-employed workers to build State Pension credit, which is currently what the Class 2 NI does.
Corporation Tax
Corporation tax (CT) is promised another chop by 2020. Currently the UK charges the lowest CT in the G20, at 20%. Promises to cut this to 17% by 2020 will be favourable for many doctors and dentists, and is estimated to benefit 1million businesses.
Higher rate tax threshold
The higher rate tax threshold is set to be £43,000 in 2016 but will increase further to £45,000 in April 2017, helping those who draw dividends from their limited companies or who pay income tax through self-assessment.
ISA’s and savings
The ISA allowance will be increased from £15,240 to £20,000 from April 2017. For doctors and dentists who regularly use ISA savings as a tax efficient way to save money for retirement, and a rainy day, this will appeal as it will be possible to invest more each year.
In addition, the government are introducing a new “Lifetime ISA’, where a maximum of £4,000 can be saved each year, which is topped up by a 25% government contribution.
This money can be used as part of a retirement plan, and withdrawn after age 60, or withdrawn to go towards your first home.
Personal allowance
The personal allowance will increase to £11,500 in April 2017, up from £11,000 in 2016.
Stamp duty rates for commercial property
In a similar way that the Stamp Duty Land Tax (SDLT) on residential property purchases was “reformed”, now is the time for commercial property.
From 17 April 2016, new rates will apply on a banding system, so SDLT is applied to the value of the property within the tax band. This is expected to save stamp duty for all purchases buying properties under £1.05 million.
The new rates and bands are:
- £0 – £150,000 – 0% SDLT
- £150.001 – £250,000 – 2% SDLT
- £250,000+ – 5% SDLT
Dental & Medical Financial Services will be publishing our Full Budget Summary in the coming days and further details about key topics that affect doctors and dentists will follow in the coming weeks.
Tel: 01403 780 770