The average GP practice could lose £15,000 through the new rise in National Insurance Contributions, senior accountants have warned.
Increases in National Insurance Contributions, as well as the minimum wage increase from £8.91 to £9.50 – cemented by yesterday’s Autumn Budget – will lead to above-inflation, unfunded pay increases for practice staff, warned Deborah Wood, chairman of the Association of Independent Specialist Medical Accountants.
In addition to confirming the national insurance hike – set to come into force from next April – the Budget also rubberstamped plans to reform income tax basis periods, following a consultation earlier this year.
‘For practices that do not currently have a 31 March accounting year end, this could lead to sizeable cashflow issues when the new rules come into force, as tax bills normally payable on retirement will be advanced,’ Ms Wood warned.
‘Many practices will need to decide whether to amend their accounting year end to match the 31 March year end.’
Meanwhile, there was not enough new funding in the Budget to address the GP workforce crisis, said Ms Wood.
‘Much has been made of the additional £5.9bn for the NHS, but little of this money will come into primary care. Nor was any financial support offered to address the workforce crisis currently hitting general practice and the wider NHS.’
The BMA also criticised the Budget, repeating their calls for the Government should have reformed pension taxation to avoid doctors facing large tax bills.
Dr Vishal Sharma, chair of the BMA pensions committee, said: ‘It’s all very well announcing almost six billion pounds worth of capital investment for the NHS, but without plans to increase staffing or, crucially, to ensure that we retain the doctors we have, the impact on the huge backlog of patients needing care will be minimal.
‘As a result of tiered contribution rates in the NHS pension scheme, doctors and other higher earners in the NHS do not benefit from higher rate tax relief, yet they are still subject to both the annual and lifetime allowance, which seek to limit this non-existent tax relief.
‘The only way that these tax bills can be mitigated is by working less or retiring early. Indeed, the current level of the lifetime annual allowance remains a powerful driver of early retirements, at a time when we need to maximise workforce capacity in the NHS to address the backlog of patients requiring treatment following the Covid-19 pandemic.’
The Budget should have also reformed or scrapped the annual taper threshold – which limits how much tax relief high earners can claim on their pension savings – because it ‘adds unwelcome complexity to GPs and doctors’ pension calculations’, said Alec Collie, head of GP division at financial services firm Wesleyan Group.
‘The Government has not taken into consideration the additional work that our health professionals took on to deliver the very successful vaccine roll out.
‘It’s critical this is looked at urgently as we enter the busy winter period as every hand will be needed on deck – any risk of professionals being personally financially penalised for continuing to go above and beyond for their patients and provide the much need booster jab is simply unacceptable,’ he said.
Yesterday’s Budget statement promised an extra £5.9bn for the NHS, which was to be used to fund digital technology and tackling the care backlog, but the BMA and others warned that these measures would make little difference without additional staff.
Extra NHS funding announced in budget:
- £2.3bn over the next three years to transform diagnostic services with at least 100 community diagnostic centres across England;
- £2.1bn over the next three years to support innovative use of digital technology so hospitals and other care organisations are as connected and efficient as possible;
- £1.5bn over the next three years for new surgical hubs, increased bed capacity and equipment to help elective services recover, including surgeries and other medical procedures.