news Spring 2021
+ Budget 2021: More doctors will trigger pension tax charge The Chancellor’s Budget announcement that the lifetime allowance (LTA) will be frozen at the current rate until 2026 means that more doctors will be caught in this punitive tax net. The lifetime limit on pension tax relief stands at £1,073,100. If you exceed this LTA you face a tax charge of 25 per cent if you take the money out as regular income, or 55 per cent if you take it out as a lump sum. Freezing this rate for the next five years will bring many more doctors into the realm of paying tax on their pension savings. The key concern is that more of the workforce will be forced to reduce sessions or retire early in order to avoid generating tax charges. The Treasury said the move would raise £990m by 2026 because savers will stop contributing to pensions from their incomes and thus not claim tax relief, and more people will exceed the LTA and pay further tax. Medical Family Finance News Spring 2021
Many commentators assume this is seen as a means of recovering money spent during the pandemic without raising taxes for the majority of people. For doctors, however, tied into making pension contributions over several decades, the result will be particularly detrimental. Three years ago, the government said the LTA would rise each year to keep pace with inflation – as set by CPI (Consumer Price Index). The LTA was only due to increase by 0.5 per cent this tax year (to £1,078,000) because of the low inflation figures set in September. The freeze will therefore only have a small impact this year. More damage will be caused by the lack of future increases. As an example, if CPI inflation returned to around 2.5 per cent, the LTA would have risen to just under £1.2m by 2025/26 meaning fewer doctors reaching that figure.
+ Budget 2021: continued Corporation tax increase The Chancellor said it was ‘fair and necessary’ for businesses to contribute to the UK’s post-pandemic recovery. From April 2023 the rate of corporation tax paid on company profits will increase to 25 per cent. The corporation tax rate has been 19 per cent for all limited companies since April 2016. Prior to this, the rate varied depending on the company’s profits. Mr Sunak defended the decision, stating that the UK’s corporation tax rate will remain the lowest in the G7 and will only apply to businesses with more than £50,000 profit. Smaller businesses will retain the former rate of 19 per cent. Personal tax thresholds for both basic and higher-rate tax payers will rise next year but will then be frozen until 2026.
Other freezes The Chancellor also announced inheritance tax and capital gains tax allowance will both remain at current levels until 2026. There are currently two tax-free allowances for inheritance. As well as a tax-free allowance – the ‘nil-rate band’ – of £325,000, if an individual is giving away property to a direct descendant (ie children or grandchildren) there is an additional allowance called ‘the residence nil-rate band’. This is currently £175,000 and was due to rise with inflation in April 2021. The current rate of CGT allowance will remain at £12,300 for individuals and some types of trust, and £6,150 for most trusts for the next five years.
+ Budget 2021: NHS pay rise Mr Sunak chose not to officially announce the proposed pay rise of one per cent to NHS staff in his official Budget speech. Instead, the detail was in the ‘small print’ released later that day.
Prime Minister Boris Johnson has defended the plans following warnings that NHS staff would leave after risking their lives to save the country in the last year. He said the government is giving workers “as much as we can” in the “tough times” of the Covid pandemic.
The proposal is now being considered by an independent panel, the Review Body on Doctors’ and Dentists’ Remuneration (DDRB), to be concluded in May.
Labour ministers have commented that in 2019, the government pledged to give NHS workers a 2.1 per cent pay rise but Mr Johnson has said this was never a ‘promise’.
+ Budget 2021: Property news The temporary stamp duty holiday has been extended by three months. If you are buying a property up to the value of £500,000 you will not pay any stamp duty if the purchase is completed by 30 June 2021. Following this period, the nil rate threshold will be set at £250,000 until the end of September, before returning to the usual threshold of £125,000 on 1 October 2021. Recent research shows that roughly one in five sales that were agreed in the same month the stamp duty holiday was first announced in July 2019 have still not been completed. This extension will help those trying to get their sale completed before the previous deadline of 31 March.
The Chancellor also announced a new mortgage guarantee scheme with a 95 per cent loan to value (LTV) to help buyers with small deposits get on the property ladder. From April, home buyers will be able to purchase homes priced up to £600,000 with a deposit of just 5 per cent, guaranteed by the Treasury. These types of low-deposit mortgages were largely withdrawn by lenders during the pandemic. To discuss property matters in more detail, please contact our head of mortgages, Ade Abiose on ade.abiose@medicalfamilyfinance.co.uk or 020 7252 5765.
+ Client survey Many thanks to everyone who participated in our recent client survey. We were thrilled to receive such positive feedback as we strive to maintain our high levels of client service. We will also work on any suggested areas for improvement. Medical Family Finance News Spring 2021
93% said ‘My adviser took the time to understand my circumstances and my financial needs’ 89% said ‘My adviser was easy to contact and available to help me with queries when required.’ 97% said ‘My adviser treated me in a friendly, courteous and helpful manner.’ 93% said ‘I would recommend my adviser to a friend.’
+ MFF introduction: Joseph Awaritefe, Chartered Financial Planner about the people you meet. Everyone has different aspects to their lives from their families, hobbies, future plans and life experiences. I enjoy sharing that with them. What do you love most about working for MFF? It’s a sensitive subject at the moment but it would be the office environment. We have a great team of people and we enjoy working together. We look forward to being back in the office together again. Working from home has removed commuting which was my least favourite aspect about working. Luckily we already had IT systems in place to make working from home a smooth process. My clients have adapted well to video calls and in fact, many prefer to hold the meetings remotely so there is no need to travel to London. The slight downside of working from home is easy access to the fridge.
Joseph has a degree in business management and economics and has worked with us for four years. Why did you become a financial planner? I knew I wanted to be a planner and found a position as a personal banker so I could study in my spare time. I studied every evening and at weekends to pass my exams. I could have stayed with the firm to become a financial planner with them but I wanted to offer full, holistic financial advice and found Medical Family Finance. My mum has worked in accounting her whole life so her skill with numbers must have passed to me – maths was always my strongest subject at school. Although, there was a time when I wanted to be a pilot… You recently qualified as chartered. Why was this important to you? I believe it is a symbol of technical competence and demonstrates a commitment to my craft and the professional standards that come with it. I started studying for this in October 2017 and finished in October 2020. It's around three to four months of studying for each exam and there are normally two exams per year. It is a very big commitment.
During the pandemic, I have started an educational Instagram page to help millennials with different aspects of financial advice. I include educational posts and humorous videos to get younger people thinking about finance. What could the finance industry do better? I think there are barriers that prevent some people from seeking financial advice. The industry should work harder to promote the benefits of financial advice for people with all levels of income and from all socio-economic backgrounds. Do you have any business mentors? I like entrepreneurs who have beat the odds like Richard Branson or Phil Knight, who started Nike. If you have a chance, read ‘Shoe Dog’, it’s a great read. Robert Kiyosaki has a book called ‘Rich Dad, Poor Dad’ which teaches the basic principles of money. Steve Jobs’ Stanford University speech is something I think all young adults should hear – if you have children, ask them to watch it. Finally, Gary Vaynerchuk as he often talks about the way to be successful in today’s social media age. Did you ever have a career plan B? If I could do any job, I would be an astronomer. I am fascinated by all things space. I would love to peer into the skies or analyse data from one of the gigantic telescopes in Hawaii or Chile.
Later this year I will start studying to attain Fellowship which is the highest qualification afforded by the CII (Chartered Insurance Institute).
+ Office opening update
What is the best part of your role? I like listening to people and learning about their lives. It may start as a business relationship but you get to learn so much more
We intend to reopen our Great Portland Street office in early April if government guidelines allow. We cannot wait to start fully working in our new individual ‘pods’ and to welcome you when it is safe to do so.
+ Director’s message: Dr Mark Martin waiting lists for more than a year, compared with just over 1,500 a year ago.) The Department of Health’s official response to the Doctors' and Dentists' Remuneration recommendations for pay increases recognised that ‘this year has posed unprecedented challenges to our NHS’ but warned that they needed to guarantee the ‘best value for taxpayers’. The very same taxpayers, presumably, who would be grateful for a fully functioning health service staffed with the very best consultants. The report goes on to quote that offering a higher pay rise would require ‘re-prioritisation’. As one doctor commented, ‘that sounds like Whitehall-speak for the Treasury wouldn't give us any more money’.
Back in 2012, a workforce assessment by the Department of Health warned that by the end of the decade there would be a surplus of 20,000 doctors forced to seek employment overseas. It is hard to fathom how official predictions could be so wide of the mark.
One issue with dealing with these constant changes is that it makes long-term financial planning difficult. Pension saving should be dependable and predictable with a clear end goal in sight. These policy about-turns come with alarming regularity. The lifetime allowance has increased, decreased, been frozen, linked to inflation and now frozen again. It seems that pension tax relief is an easy target whenever the government needs a financial boost.
There are currently 10,000 consultant vacancies. After the toughest of challenges with the pandemic, the announcement of a one per cent pay rise plus a freeze on lifetime allowance rates will surely drive that figure higher.
We now wait to see how the workforce and the unions react. Please remember to lean on your adviser if you have your own decisions to consider. We are here to help and to ensure you have the information you need to choose the right path ahead.
Many clients tell me that these latest regulatory changes feel particularly unfair following a traumatic year of working overtime, cancelling annual leave, working double shifts – not to mention the obvious impact on their mental health. The feel-good factor of clapping for our NHS has long been forgotten. Those doctors forced to use bin liners for temporary PPE will surely be first in line to reduce sessions or retire early to avoid extra tax charges. We will see more senior, experienced staff pushed to leave the profession when we are not even out of the woods with the pandemic nor have we tackled the backlog of non-Covid work. (Over 224,000 people have been on NHS
+ Fairness and equality Last year we applied to the National Centre for Diversity to gain our Investors in Diversity award. To receive this accreditation, we need to prove that equality and diversity are at the heart of our organisation. In order to audit our progress, the Centre would like to ask you if we have treated you fairly and whether we champion an inclusive business culture. We will shortly be sending a survey and would appreciate if you could spend a few minutes providing some feedback on these issues. Many thanks in advance for helping us to reach our end goal.
Key dates to remember: The deadline for Scheme Pays 2018/19 is 31 March 2021. The deadline for Scheme Pays 2019/20 is 31 July 2021. To apply for the government to pay the Annual Allowance charges for 2019/20 you must apply for Scheme Pays before the deadline.
Medical Family Finance 020 7252 5765 Medical Family Finance News Spring 2021
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