GP tax bills are rising twice as fast as their income as the full impact of the hike in income tax hits the profession, figures from medical accountants reveal.
An analysis by RS Medical Accountancy of 179 GPs' tax returns filed by the end of January shows many are successfully boosting their non-practice earnings to offset falling practice income, with more than half seeing their total income rise by an average of 21% in 2010/11.
But those GPs saw tax increases far outstrip the rise in earnings, with an average rise of 41%, while a secondary category of GPs making up a quarter of the sample experienced an average 7.14% fall in earnings but a 5.94% increase in tax owed.
GPs had to submit tax returns for 2010/11 by 31 January this year, with accountants warning GPs had been hit hard by the introduction of the 50% tax rate for earners over £150,000 and the loss of the £6,750 personal allowance for those earning more than £100,000.
GPs are taxed on their overall earnings, including practice profit shares, extra work such as locum or out-of-hours shifts and non-NHS income. Rosemary Smith, director at RS Medical Accountancy, said many GPs had taken on extra work or boosted their income from other sources to plug falling practice income.
‘It has been a very tough year,' she said. ‘GPs have tried to keep their level of earnings the same and knowing that practice income is going down they have gone out and get extra income. They've done hard work but have been well and truly clobbered by additional tax.'
Accountants at PKF said that profits from NHS income among GPs had fallen by around 2%.
Bob Senior, director of medical services at RSM Tenon accountants and chair of the Association of Independent Specialist Medical Accountants, said that the personal allowance change meant that GPs operating in the £100,000 to £112,000 tax bracket were effectively now paying 60% in tax.
‘If you look at that band there are a lot of GPs caught by that,' he said. ‘That is a really big tax rate.'
Dr Peter Holden, GPC negotiator, said: ‘Most GPs are in the marginal area where you start to and then completely lose all of your personal allowance.'
‘The situation is going to get even worse with the pensions reforms. If your pension pot grows by more than £50,000 a year, you will pay tax on that. That means an awful lot of doctors are going to be driven out early.'
‘I'm not saying we're poor but it has got to the point where they are going to drive almost any doctor over the age of 55 to retire, because what is the point in going to work?'