GPC: Take on a partner to reduce your tax bill
By Gareth Iacobucci
New tax rules mean taking on a partner may be more cost-effective than employing sessional GPs, says the latest guidance from the GPC.
The guidance from the committee says recent changes to tax arrangements coupled with the continued squeeze on partner pay was providing an incentive for practices to share their workload and take on more partners.
The document comes after Pulse recently reported similar forecasts from accountants, who said practices should be looking at taking on partners given that the pay gap between the two tranches of the profession is continuing to narrow.
Latest figures from the NHS Information Centre show that the average income before tax for GMS GP partners slumped by 1.2% between 2007/8 to 2008/9, whilst salaried GPs working in GMS practices saw their average income before tax rise by 3.4% in the same period.
In the document - Focus on GP Partners - the GPC said employing a salaried GP currently costs practices £90k per annum on average, but that the true cost could be up to 40% on top of the actual salary when taking into account other factors such as sickness leave and maternity cover.
It said the higher rate of income tax of 50% on total income over £150,000, coupled with the gradual withdrawal of the personal allowance for those whose adjusted net income exceeds £100,000 with no allowance after £112,950, had also made an impact.
The guidance also points out that ‘reimbursements for locum cover from PCTs can be variable and do not necessarily cover the costs', and says taking on partners would benefit practices in terms of continuity, ownership, new skills and ideas, investment, recruitment, and working hours.
It recommends: ‘There are many benefits in both becoming and taking on a new GP partner, such as continuity of care and a sense of ownership of the practice. Coupled with this, the new tax arrangements actually provide an incentive to GP partners to share their workload rather than paying high marginal rates of tax.
‘An alternative to paying such high marginal rates of tax could be for partners to improve their work-life balance by taking on more staff, reducing their income and time commitment to their practices.
‘Taking on a new GP partner is one way in which this could be achieved, and may well prove to be more cost effective than employing a salaried GP.'
GPC: Take on a partner to reduce your tax bill GPC Focus on Taking on new partners Making a profit in testing times
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