Rachel Reeves’ 2024 Autumn Budget: How Halloween Budget Impacts NHS Doctors and Healthcare Workers 🎃

Rachel Reeves, the UK Chancellor of the Exchequer, has announced Labour’s 2024 Autumn Budget, introducing significant financial changes. The budget includes a record £40 billion tax increase, the largest since 1993 when Conservative Chancellor Norman Lamont in John Major’s govt raised £38.5 billion.

From a major tax increase to substantial NHS funding, let’s dive into how this budget could impact doctors, NHS workers, and healthcare professionals. If you’re in the NHS, a GP partner or in Private Medical Practice, you’ll want to understand these updates for your financial planning.

📊 1. Employer National Insurance (NI) Changes: Increase to 15% & Threshold Lowered

In one of the most impactful changes for employers like GP partners and private practice owners, Employer NI rates will rise from 13.8% to 15%, a 1.2% increase. Additionally, the threshold for Employer NI has been lowered from £9,100 to £5,000. This means higher costs for healthcare practices and independent GP surgeries, which could affect NHS take-home pay for medics who double as employers.

To support small businesses, employment allowance will increase from £5,000 to £10,500. This allowance increase aims to offset some of the costs for smaller practices and healthcare providers but may not cover larger practices fully.

📈 2. Capital Gains Tax (CGT) Increase: Lower Rate Now at 18% for 2024 📈

Another big change is the increase in Capital Gains Tax (CGT), which rises from 10% to 18% at the lower rate and from 20% to 24% at the higher rate. However, CGT on residential property remains unchanged, with lower rates at 18% and higher rates at 24%.

If you’re a doctor with investments outside an ISA, this could mean a higher tax bill when you sell shares or property.

• What can you do? Consider moving your investments into a Stocks and Shares ISA if you haven’t maxed out your £20,000 allowance for the year. A Self-Invested Personal Pension (SIPP) could also help as it offers tax efficiency and growth without CGT or dividend tax.
• Where to open Stock and Shares ISA and SIPP Accounts: For a solid platform to manage these tax-efficient accounts, check out InvestEngine—offers tax-free ISA investing with zero platform fees and an easy, automated way to invest in a Self-invested personal pension (SIPP) with some of the lowest fees available. They currently offer a welcome bonus of up to £50 for new users using our special link (T&Cs apply), making it a great way to maximize your returns. Get it here

🎓 3. VAT on Private School Fees Starting January 2025

Starting January 2025, private school fees will face a 20% VAT increase under Labour’s new budget. Additionally, private schools will lose their business rate relief in April 2025. This change is likely to impact many families, including healthcare professionals who make sacrifices to provide their children with private education.

For example, one Moneywise Doctor community member shared that he and his wife—both NHS consultants—drive older cars and budget tightly just to afford private school fees, not because they are wealthy, but because they want the best opportunities for their children. With the upcoming changes, families who include private education in their financial planning may need to reassess their budgets.

Interestingly, each child in private school saves the government an estimated £6,000 per year in public schooling costs, so this VAT may cause some families to consider alternatives. Oxford Economics found that private schools saved the taxpayer £3.5 billion last year because children were not taking up state school places.

💰 4. Pension Changes and Inheritance Tax (IHT) Freeze Extension

📉 5. No Further Freeze on Income Tax Thresholds 🎉

A bit of good news: there won’t be another freeze on income tax thresholds, so from 2028/29, thresholds will be adjusted for inflation. After years of “fiscal drag” pulling more NHS workers into higher tax bands, this adjustment could provide some relief.

• Example Impact: Since the 2021 freeze, around 4.4 million people have entered higher tax bands. This update will help reduce the extra tax burden for many NHS staff, helping more people plan for their financial futures with certainty.

🛠️ 6. Investments in NHS Spending and Infrastructure

Some more great news – The Autumn Budget includes £22.6 billion in NHS day-to-day spending and £3.1 billion in NHS capital spending. This increased funding is allocated to address staff shortages and improve healthcare infrastructure.

Why this matters: This funding could mean better resources for NHS staff, though it won’t fully alleviate the pressures of rising NI rates and CGT.

📚 Pro Tip: Use Tax-Efficient Accounts and Max Out Allowances 📝

Contrary to what many expected, Labour’s new budget has left the ISA allowance untouched. This means the £20,000 individual ISA allowance and the £9,000 Junior ISA allowance remain the same, providing a substantial tax-free growth opportunity for investments.

To make the most of these allowances in the face of other tax increases, consider maximising contributions to both ISAs and Self-Invested Personal Pensions (SIPPs) as much as your budget allows. Here’s how to maximize tax efficiency:

• Individual ISA: Utilise the full £20,000 ISA allowance per individual to protect your investments from Capital Gains Tax (CGT) and dividend tax.
• Family ISA Contributions: Each individual has a £20,000 annual ISA limit, and you can open Junior ISAs for children under 18 (the annual limit is £9,000). The Individual ISA allowance includes Cash ISA, Stock and Shares ISA, and Lifetime ISA – all combined. In a family of four, you could get up to £58,000 annual ISA allowance, all tax-free, by maxing out all ISAs.
• Max Out Your SIPP: A Self-Invested Personal Pension (SIPP) allows up to £60,000 in annual contributions. If you haven’t yet opened a SIPP, consider looking at the options. For a detailed comparison, see our SIPP Comparison Guide, where we review platforms like InvestEngine (which offers low fees of 0.15% and a £50 sign-up bonus with our Moneywise Doctor community link).

🆕 Bonus for Moneywise Doctor Community: NHS Salary Calculator 🔍

Knowing your exact NHS take-home pay and tax impact can be challenging. With this new NHS Salary Calculator, you can now easily calculate your take-home pay, taxes, and even evaluate pension contributions. Just try it out and let us know what you think—it’s our secret for now, but feedback from NHS doctors and healthcare professionals will help us improve it before our public launch. 🕵️‍♀️

[Try the NHS Salary Calculator Here]

🚨 Final Thoughts: Planning Following for Labour’s Halloween Budget

While Rachel Reeves’ 2024 Autumn Budget has introduced sweeping changes, a few tax strategies could help NHS doctors and healthcare professionals adapt:

1. Maximise Tax-Free Accounts: Use ISAs, SIPPs, and other tax-advantaged accounts to avoid high CGT and income taxes.
2. Consider Gifting Strategies: With pension inheritance tax starting in 2027, gifting during your lifetime could minimize IHT.
3. Review Financial Plans Regularly: As these changes unfold, consider speaking to a Moneywise Doctor-approved Independent Financial Adviser for tailored advice.

Stay tuned for our ongoing coverage of these budget changes and what they mean for your financial well-being.

📩 Want to Learn More?

Don’t miss our weekly insights into tax planning, NHS pensions, and smart investing strategies for doctors and healthcare professionals. Join our mailing list or read our in-depth guides on ISAs, pension planning, and side income options tailored for healthcare professionals.

P.S. Just a quick reminder: This is not financial advice; for personalised financial advice, consider consulting your Financial Adviser or use a Moneywise Doctor-approved Independent Financial Adviser.