This Autumn Statement was anticipated to be poignant with the General Election on our doorstep. For doctors and dentists though the changes announced provide a mixed bag of thoughts.
Autumn Statement 2014 – key points
Anyone in the process of buying a house (below the value of £937,000) should find a welcomed financial saving to the transaction from the reduction and restructuring of Stamp Duty Land Tax (SDLT).
In addition, changes to the transfer of ISA allowances for spouses and civil partners upon death means thousands of people won’t be losing out on tax breaks from ISA savings, as before.
And these very small increases will make a little difference to the financial future of UK dentists and medical professionals:
- Personal tax allowance – increased to £10,600 for 15/16
- ISA allowance – increased to £15,240 for 15/16
- State pension – increased by 2.5%
Unfortunately though, for many healthcare professionals, the change to the rate of Capital Gains Tax (CGT) means that tax breaks previously enjoyed by many doctors and dentists upon Incorporation of their business is no longer a viable option. So sole traders and partnerships that were perhaps considering Incorporation in 2015 will need to rethink their financial planning.
Dental & Medical Financial Services can assist you with maximising your income and return on investments.
A closer look: Stamp Duty Land Tax (SDLT)
SDLT was previously charged on the total value of the property, which was a raw deal for many people buying “mid-priced” properties. Here, SDLT increased from £2,500 (1%) on a £250,000 property to £7,500 (3%) on a property priced at £250,001-£500,000.
The new rules, which have immediate affect from 4 December 2014, mean that tax is calculated based only the proportion of the purchase price that falls in the relevant bracket. See the table below.
Proportion of purchase price (£) | Rate (%) |
0-125,000 | Nil |
125,001-250,000 | 2% |
250,001-925,000 | 5% |
925,001-1,500,000 | 10% |
1,500,001 + | 12% |
SDLT is now nil for properties up to the value of £125,000 above which this new tiered approach is in place, estimated to reduce the amount of SDLT for 98% of homebuyers.
What is your property investment budget? How do the changes in SDLT affect doctors and dentists?
Whilst doctors and dentists alike are often in the fortunate position to have disposable income for high value property investments, it is only those investing in properties over £937,000 who will pay more SDLT than before.
Changes are expected to help first time buyers onto the property ladder and give the economy a well-needed boost from property investment.
A closer look: ISA’s
Thousands of ISA savers had been losing out on ISA related tax breaks when their spouse died, even when savings had been made jointly.
The new regulations announced in the Autumn Statement are now set for the surviving spouse or civil partner to inherit the tax-free status of the ISA upon death. This takes immediate effect.
Further more, there will be an additional allowance given to the surviving spouse equal to the balance of the ISA savings account. This comes into force from April 2015, along with an increase in the overall ISA allowance to £15, 240 (a modest increase of £240 per year).
These changes are considered a fairer approach and aimed to continue investment into savings and ISA’s for the future.
Read more about ISA’s and savings for 2015
A closer look: Changes to new Incorporations
Until the recent announcement in the Autumn Statement this week, doctors and dentists who had been trading as sole traders and partnerships were able to legitimately sell their business “goodwill” when they set up a new limited company.
This was at an effective rate of 10% to cover the Capital Gains Tax (CGT) on the transaction. The rate of CGT has now increased to 28% with immediate effect, sadly eliminating this tax planning opportunity.
Further tax advantages were also available under certain conditions for the new limited company to claim tax relief on the purchase of the goodwill. So it really was a win:win all round however, these have also been stripped away with immediate effect for all new incorporations.
The solution? It’s a hard one to swallow if you find yourself in this position however there are alternatives.
Read more about alternative financial planning for 2015
Dental & Medical Financial Services are specialist advisors to the dental and medical sectors. We can help you with your financial planning for 2015 ensuring you maximise your profit from investments and save tax where possible too.