Introduction
The recent budget announcement by Rachel Reeves marked a significant moment for many within the healthcare industry, particularly doctors. While a surfboard distracted me on the 30th of October, my attempt to catch up with an expert led me to invite Mike Harms, an independent financial advisor and seasoned contributor to the Medics’ Money Podcast. It turns out there was a lot beneath the surface, especially concerning pensions and financial planning.
Understanding the Budget’s Impact
The latest budget introduced by Labour brought with it a whirlwind of anticipation, fear, and, as always, speculation. Mike Harms points out that while some changes were expected, others were sheer speculation, which often could lead to fear-driven financial decisions rather than sound planning.
Pensions: A Closer Look
For doctors within the NHS, Mike shared comforting news: there isn’t much change. But he also highlighted a potentially game-changing proposition for those with personal pensions or investments outside of the NHS. From 2027, pensions might be included in the estate for inheritance tax purposes, a major shift from previous policies where they were exempt.
Private Pensions and Legislative Tweaks
For those holding private pensions, this potential change is particularly important. The consultation continues, and no decisive action is imminent until 2027. This is a relief for some, but it also calls for careful planning from here on to adapt to the projected changes. Mike emphasized that pensions remain an excellent vehicle for tax relief and financial planning, despite these impending tweaks. The mantra remains: plan ahead, consider your objectives, and adapt to changes proactively.
The Dreaded Capital Gains Tax (CGT)
Hike In a move that could hit property investors and stockholders, capital gains tax saw an increase from 10 and 20 percent to 18 and 24 percent. This hike, effective immediately post-budget announcement, demands a strategic approach for those engaging in property investments or holding stocks outside tax-saving vehicles like ISAs and pensions. If there’s a clear takeaway: maximize your ISA and pension contributions annually to mitigate CGT impacts and ensure robust financial planning.
Navigating a Freezing Landscape: Tax Thresholds and Fiscal Drag
One persistent issue Mike covered was the freezing of tax thresholds. Notably, despite rising wages, these thresholds are fixed until 2028, pushing more earners into higher tax brackets. With thresholds glued in place, the effective tax burden quietly rises. The implications of these frozen thresholds could especially affect doctors earning over £100,000. Mike advises meticulous financial planning to anticipate and counteract crossing these financial cliffs.
National Insurance Hikes and Their Ripple Effects
A dramatic hike in employer national insurance costs between 14 to 19 billion raises questions about its ripple effect. While it doesn’t directly affect employees, businesses may pass on costs, potentially curbing pay rises or inflating product/service prices.
Conclusion: Taking Proactive Measures
In the wake of these changes, Mike suggests embracing a proactive approach to financial management. Reviewing personal finances, understanding your tax position, and keeping abreast of industry changes can help mitigate the budget’s impact. Ultimately, financial planning is not static. It requires timely actions and informed decisions, regardless of changing legislation. Taking advantage of financial advice, especially within volatile times, could prove indispensable on the road to financial security.
About Mike Harms
For those seeking expert financial advice, Mike Harms is available through Medics Money. From financial planning to mortgages, he offers essential guidance tailored for medical professionals.
