CONSULTANTS: TOP FIVE ISSUES YOU SHOULD CONSIDER NOW
The past few months have changed many lives completely and as a medical professional, you may have seen the worst of times. As well as being at the forefront of the UK’s response, with the challenges and difficulties this brings, you may have seen a steep reduction in your private income with facilities closed and patients in lockdown. This may soon change; your practice will be inundated with a backlog of cases and there could be little time to address important matters. We are here to help you to face financial concerns, with a clear list of the issues you should consider now. We provide financial advice to hundreds of medical families and the support to navigate their complex income streams and pension plans. We could help you too.
1. ARE YOU AWARE OF THE MOST RECENT PENSION TAX CHANGES? You may be aware that the standard upper limit of tax-relievable pension contributions you can make each year is £40K – known as the annual allowance. However, there is a tapered allowance for higher earners which reduces this limit on a sliding scale to as low as £4K per year. Contributions above the limit applicable to you may force a tax charge of up to 45 per cent. From April 2020, anyone with a ‘threshold’ income of £200K or more (that is the total income from all sources) and an adjusted income of £240K or more (this includes pension inputs) is subject to a reduced or ‘tapered’ annual allowance and should seek advice. You should also be wary of NHS pay rises received through increments, new management positions or CEA awards which could increase your contributions. However, tax charges can be managed with careful planning.
2. DO YOU KNOW WHAT YOUR LIFETIME ALLOWANCE POSITION IS? The lifetime allowance limits the total amount which can be paid into a pension while benefitting from tax relief. The allowance currently sits at £1,073,100. Any excess pension savings above this rate can incur tax charges of up to 55 per cent on anything taken as a lump sum and 25 per cent on top of your marginal rate of income tax if taken as income. Depending on the applicable NHS pension scheme, the allowance will affect anyone with an annual pension of around £46K or more – including therefore most NHS consultants. It is a significant issue – HMRC revealed that the tax yield from taxpayers breaking the lifetime allowance in 2017-18 reached £185m.
3. ARE YOUR ACCOUNTANT AND FINANCIAL PLANNER WORKING TOGETHER? Your financial set up will be intricate. Your professional advisers should have a shared overview of your position and be jointly working towards your objectives. Ideally, your financial adviser and your accountants should have detailed knowledge of the NHS pension and remuneration scheme. In working together, your advisers should ensure challenges are faced head on and important tax breaks are not missed.
4. IS YOUR PRACTICE STRUCTURE TAX AND PENSION EFFICIENT? Have you fully considered the benefits of trading as a limited company or partnership? The rules have changed in recent years and there may be a better structure for your business. You may not have considered how your practice structure can impact pension contributions or pension tax – particularly for higherrate taxpayers. You could be missing opportunities to maximise your wealth or minimise tax liabilities such as using corporate investments or company pensions for spouses or employees.
5. WHEN DID YOU LAST REVIEW YOUR INVESTMENT PLAN? Your NHS pension is a great foundation but it might not provide sufficient funds to support the lifestyle you choose for you and your loved ones in later life. Do you have a well-considered financial plan which sets out clear steps to achieve financial success and your dream retirement? Will you be able to fulfil the projects you choose and ensure gifts to children can be made? You may have out-of-date investments with expensive charges and poor performance or your risk outlook has changed but you have not received sound advice on updating your plan. You may have tried online investing but have seen weak results and costly mistakes. Now is the time to ensure your investments are fit-for-purpose and still adhere to your goals.
As a busy consultant with a successful private practice, you will want to ensure you have done everything you can to check your personal and professional assets are working towards financial independence in retirement. Keeping abreast of the latest rules and regulations surrounding pensions, tax and investments is challenging, even without the busy day job. Medical Family Finance was founded by former anaesthetist Dr Mark Martin who continues to lead our team of experienced, approachable and friendly advisers.
To see how we could help you or for a free initial consultation, please contact our adviser team via Morgan Bishop on 020 7252 5765 or morgan.bishop@medicalfamilyfinance.co.uk Medical Family Finance Ltd Devon House, First Floor 171-177 Great Portland Street London W1W 5PQ www.medicalfamilyfinance.co.uk Medical Family Finance Ltd. Registered in England and Wales, under no. 08689906. Registered office address - 171-177 Great Portland Street, London, W1W 5PQ. Medical Family Finance Limited is an appointed representative of Quilter Financial Planning Limited and Quilter Mortgage Planning Limited, which are authorised and regulated by the Financial Conduct Authority. Quilter Financial Planning Limited and Quilter Mortgage Planning Limited are entered on the FCA register (http://www.fca.org.uk/register/) under reference 440703 and 440718