By: 12 May 2017
MONEY MATTERS: Why the Budget heralds more financial challenges

Simon Bruce on the key issues you should consider following the Budget

In his first Budget, the chancellor Philip Hammond announced tax rises for the self-employed only to cancel his plans one week later. The increases in national insurance contributions were dubbed a ‘tax on ambition’ and quickly quashed.

However, doctors running their practice as a limited company will still pay more tax as plans to dramatically reduce the new dividend tax allowance were announced, just one year after it was created.

From April 2018, the new dividend allowance will take a 60 per cent cut from £5,000 to £2,000, affecting company owners who pay themselves in the form of dividends as well as investors who hold shares outside of ISAs or pensions.

There is no doubt that senior doctors are facing significant challenges to their personal finances. One of the most pressing issues to tackle is the reduction to your annual allowance tax-free pension savings limit. This was cut to just £40,000 per annum in April 2014. Many senior doctors can find they breach this rate just by being in the NHS pension scheme for another year, before a CEA or contractual pay increment are considered.

In addition, those who are deemed to have a total income of £150,000 face an annual allowance which is reduced further by £1 for every £2 over this. Note that total income is not just salary, it includes dividends, NHS pension contributions and other income from rental properties etc.

For most senior doctors this means an annual allowance of just £10,000. The result is that excesses above the annual allowance are considered in the same way as income and taxed at your highest marginal rate.

You should also be considering the much-reduced lifetime allowance savings limit and organising the structure of your business to be as tax-efficient as possible. Are you confident in your position?


Simon Bruce is Managing Director of Cavendish Medical – specialist financial planners for senior medical professionals in the NHS or private practice. For a second opinion on your finances, please contact us on 020 7636 7006.

The content of this article is for information only and must not be considered as financial advice. Cavendish Medical always recommends that you seek independent financial advice before making any financial decisions.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The value of investments and the income from them can fluctuate and investors may get back less than the amount invested.