Ep 34 What does the budget mean for doctors?
All the latest news on what the governments recent budget means for doctors. Resources mentioned in the episode include https://www.medicsmoney.co.uk/tax-thresholds-doctors/ Want to stay up to date with the latest financial information for doctors? Join 24,000 doctors receiving free financial CPD via email by downloading our free ebook here https://www.medicsmoney.co.uk/ebook/ Follow us on Twitter https://twitter.com/medicsmoney Like us on Facebook https://www.facebook.com/medicsmoney Budget Podcast So we thought we would give a brief summary of the recent Budget given by Rishi Sunak recently on the 3rdMarch. Governments require parliament’s approval to spend money, as well as to raise revenue in the form of taxes and the budget is usually one of the centre pieces of the Governments legislative programme. The measures announced become the Finance Act for the year. It is deemed that a Government has to be able to pass its Budget because if they do not it is seen as a vote of no confidence and the Government will then have to call an election. It is also important to pass the budget or at least a pared down version because both income tax and corporation tax are temporary measures and have to be reapproved each year. In election years there are often two Finance Acts – one pre election to make sure we lucky taxpayers get to keep on paying income tax and one afterwards with most of the other stuff. A Chancellor delivering his or her budget is the only person who is allowed to drink alcohol in the chamber of the House of Commons and you wouldn’t really blame Rishi if he had a glass of something strong next to him. It was an unenviable budget to have to give given that the UK has seen the biggest fall in GDP for over 300 years exceeding those seen even in wartime. The country is set to borrow a peacetime record of £355 billion this year. The challenge Sunak faced was building a recovery and raise money while at the same time trying to meet the Conservatives’ election promises not to raise the main rates of income tax, VAT and national insurance. Personal Tax Let’s start with Personal Tax which basically remains what some have called a “frozen landscape.” As mentioned above, the Chancellor’s room for manoeuvre was limited. Income tax rates have remained exactly the same at 20,40 and 45%. What he did do to raise revenue was freeze the personal allowance, the tax free amount that the vast majority of us get each year. In the current tax year that we are in – the 2020 to 2021 tax year that ends on the 5th April 2021 the personal allowance is £12,500. There will be a small increase for the next tax year, that is 2021 to 2022, with the personal allowance going up on 6 April 2021 to £12,570. It was thought that the Chancellor would axe this increase but apparently the increase has already been coded into payroll systems so would have required expensive changes if he had done so. From April 2022 the personal allowance will remain at this level £12,570 until the 2025-2026 tax year. For those of you who have listened to our tax code blog – and if you haven’t please do check it out after this – you will know that the most common tax code for taxpayers as of 5 April 2021 will be 1257L. Don’t forget that this will only be the case if the taxpayer is not claiming a deduction for their professional expenses and I’m sure that everyone listening has done so. If you haven’t please check out our podcast or blog on claiming back tax on your professional expenses. As well as the personal allowance, the rate at which people start paying the higher rate of income tax that is 40% will increase to £50,270 and then also be frozen. The threshold at which an individual starts paying the additional higher rate of 45% remains at £150,000 and has not been increased at all. This will raise revenue by what is called fiscal drag – as people get payrises in the future, more people will start earning over the personal allowance and start paying tax a