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How the budget affects general practice

Accountant Laurence Slavin explains how the budget will affect GPs and their practices.

The spring 2017 budget was, in comparison with other budgets, quite limited. However two headline stories - the planned increases to national insurance contributions for the self employed and the news that GPs are set to work in A&E departments - were of direct relevance to GPs.

The national insurance changes would have impacted on how much GP partners pay. At the moment, the self employed pay class 2 NIC at a set weekly rate (£2.80) if profits are £5,965 or more a year and class 4 NIC at 9% on earnings between £8,060 and £43,000 and 2% thereafter. The plan was for class 2 NIC to be abolished from April 2018 and class 4 to become the only NIC payable at a rate of 10% increasing to 11% in 2019.

However following opposition from Tory backbenchers and claims that the move did not fit with Conservative manifesto pledges, chancellor Philip Hammond revealed the planned changes would no longer go ahead.

In a letter to Conservative MPs, Mr Hammond said: 'There will be no increases in NICs rates in this parliament. We will continue with the abolition of class 2 NICs from April 2018. The cost of the changes I am announcing today will be funded by measures to be announced in the autumn budget.'

There are two other issues from the budget that directly affect GPs and their practices:

  • The use of limited companies in the public sector
  • The introduction of Making Tax Digital and having to submit quarterly accounts

Limited companies

'Off-payroll working in the public sector' is the clumsy title for HMRC’s attack on individuals who try to disguise their employment status by having an intermediary – a limited company.

In fact, the reductions on the tax benefits of having a limited company make it significantly less attractive, but HMRC is particularly upset about the use of such activities in the public sector and so this measure moves the responsibility to determine a person’s employment status for tax from the individual (for example, a GP locum) to the public sector employer (the GP practice).

So it becomes more critical that an individual is properly appraised and their ability to not be employed is examined. Helpfully, HMRC has issued an online tool here that can be used to confirm the status of each person using a company and it would be wise to use this to check the status of any locums you currently use.

Making Tax Digital

Making Tax Digital is the process of moving self-employed taxpayers from their annual tax declaration to a quarterly submission of their accounts.

This will start in April 2018 for businesses with turnover in excess of the VAT limit (£83,000) and April 2019 for other businesses.

April 2018 is not far away at all – and you can imagine the potential increase in accountancy fees for quarterly information if the GP practice does not have a suitable accounting program.

Speak to your accountant as a matter of some urgency to ask about the suitability of your current accounting program. Making Tax Digital has been expected for some time now and accounts should have solutions in place. But, don’t leave this too long before you check.

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