Brace yourselves for a massive tax demand
By Ian Cameron
GPs are being warned to brace themselves for average tax
bills of £45,000 in January, with some top-earning partners
looking at £65,000 payouts.
The unprecedentedly high bills follow the massive boost to most practices' profits from high quality and outcomes framework achievement.
But medical accountants cautioned that GPs could face having to take out overdrafts or bridging loans or remortgage if they had not kept enough
GPs have to pay balancing tax arrears for the past year, at 41 per cent, plus half of the year's total income tax bill on account for the upcoming financial year. Superannuation payments for 2004/5 are also due to be paid in January.
Rosemary Smith, GP liaison manager for accountants Sandison Easson based in Wilmslow, Cheshire, said her top-earning client was facing a bill of £65,000.
She added: '£45,000 is very much routine this January. We all have GP clients who don't save. It wasn't the end of the world in the past but it's frightening now as the figures are so dramatic and it could be your home.'
She said she had told practices to put aside 70 per cent of their increased income to cover tax bills as well as higher superannuation costs.
Arthur Dixon, senior manager, private clients at Deloitte & Touche in Newcastle-upon-Tyne, said many tax bills were almost double last year's level.
He said: 'If they have not put enough aside they would either have to save as much as they can by restricting their drawings or using reserves from elsewhere.'
GPs said they had expected a significant rise in bills but a doubling of last year's tax take would 'hurt'.
Dr Prit Buttar, a GP in Abingdon, Oxfordshire, said he had been warned January's demand would be bigger. 'If you look at the percentage rise in profits, drawings have not risen as fast. We have been making provision for what we were warned was going to be a big bill.'