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How the 2009 budget will affect GPs' personal finances

Justine Roberts of Medical & Financial gives her initial impressions of how the 2009 budget unveiled last week will affect GPs.

Justine Roberts of Medical & Financial gives her initial impressions of how the 2009 budget unveiled last week will affect GPs.

The phrase "the devil's in the detail" always proves true when it comes to budget announcements. There's a lot to digest from last week's budget and the world of finance needs time to go through the finer detail to fully reflect on the impact of the budget on higher rate tax payers.

The immediate things that spring to mind that will affect a doctor's planning is the major change announced to tax relief on pension contributions, with the removal of higher rate tax relief for higher earners for pension contributions on or after 6 April 2011.

Whilst there is slight good news in that Alistair Darling hasn't scrapped higher rate tax relief for high earners completely, as had been rumoured, he has however announced two major changes which will affect many doctors.

For those with an income of over 150,000 higher rate tax relief on pension contributions will be capped, and relief is tapered until only basic rate relief will be offered for those earning over £180,000. These changes do not fully implement until the 2011 tax year, however the revenue, in order to stop people increasing contributions, have stated it will not be possible to "change normal patterns of contributions" leaving limited scope to increase payments. It is uncertain as yet how this rule change will interact with added years and the additional pension payments.

Those earning under £150,000 should seriously consider making the most of their pension contributions and the ability to claim higher rate tax whilst it is still available. Achieving a fund of £100,000 effectively only costs a higher rate tax payer £35,000, so should form an essential part of all GPs' financial planning.

We don't yet know the full effect of this announcement on the NHS pension scheme, or the finer detail, but one thing is certain, it will affect many doctors, and future pension planning will have to be looked at very carefully!

ISA contributions have been increased with effect f 6th October 2009 for those investors over age 50 in the 2009/2010 tax year, to £10,200, of which £5,100 can be invested into cash ISAs. Those under 50 have £7,200 as the maximum contribution with £3,600 being the maximum that can be invested into cash.

We will provide further updates on the changes announced in the budget as soon as we can.

The one thing we know about the announcement on the NHS pension scheme is it will affect many doctors and future pension planning will have to be looked at very carefully. Justine Roberts, Medical & Financial How will the 2009 budget affect GPs?

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