Boris Johnson made his announcement yesterday of the additional National Insurance levy to be paid to help the NHS and fund Social Care and in addition added 1.25% to the rate of dividend tax payable.
Leaks from Whitehall centred around the intended increase in National Insurance that will take effect from April 2022 and how it broke the Government manifesto promise of no tax nor national insurance increases during the term of this Government.
The exact details of how the increment will be applied between employers, employees and self-employed is yet to be published.
What was below the radar was the intended increase in the rate of dividend tax, again from April 2022. The previous 7.5% for basic rate tax payers will increase to 8.75% , with higher rate increasing from 32.5% to 33.75% and upper rate increasing from 38.1% to 39.35%.
Hopefully, the additional monies generated will alleviate the backlog of consultations and operations and go a long way to improving your working environment. Similarly, for social care any additional money is badly needed.
Although much was publicised about breaking the manifesto promise everyone was acutely aware that money was needed to be found to help the NHS and Social Care to recover from the pandemic.
On 27 October 2021 Rishi Sunak will give his half yearly budget update and no doubt further leaks will surface prior to any announcement.
The main contents of the Budget, like most ministerial announcements these days, were leaked well in advance of yesterday’s announcement by the Chancellor, Rishi Sunak. He continues with his well-publicised aim to keep to the government manifesto promises and set the UK back on track to reduce its indebtedness arising from the pandemic.
Below is a summary of the main points that we understand will impact you.
The Coronavirus Job Retention Scheme - Extended
The Furlough Scheme has been extended until 30 September 2021 and the level of grant available to employers under the scheme will remain the same until 30 June 2021.
From July 2021, the Government contribution will reduce to 70% dropping down to 60% in August 2021.
To be eligible for the grant employers must continue to pay their furloughed employees at least 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.
Income Tax Thresholds
The personal allowance will increase to £12,570 and remain frozen at this level through to the end of 2026. The basic rate tax threshold will increase to £37,700 and will also remain frozen at this level through to 2026.
Different rates and allowances apply to Scotland and can be found here
On the 28th January the Department of Health and Social Care published their consultation on the proposed amendments to the NHS Pension Scheme.
The full detail can be found here
The proposed amendments include an important and positive step forward in relation to final pay control charges with some new exemptions and key allowances for non-GP Partners such as Practice Manager and Nurse Partners.
On the 4 February 2021 the government announced its response to the consultation in respect of public pensions. This is important as it includes your NHS Pension and sets out how the government proposes to remedy the discrimination found by the courts by transferring certain scheme members to the ‘reformed’ 2015 NHS Pension Scheme from the ‘legacy’ scheme, the 1995/2008 NHS Pension Scheme.
The response and proposed remedy are extensive but below we provide a summary of the key points.
- Dependent on age many of you will have transferred over to the ‘reformed’, 2015 NHS Pension Scheme, on 1 April 2015 or later under transitional arrangements. You will now be transferred back to the ‘legacy’ scheme, if you were in the 1995 scheme you will revert to the 1995 pension scheme rules and members of the 2008 scheme will revert to the 2008 NHS scheme rules.
- In the run up to retirement and intended from 2023, two Annual Benefit Statements will be produced showing the above to assist you in deciding when to retire.
Many practices are dependent on their year end accounts to determine how well the year has been and as a platform to project forward for planning purposes. The accounts are no doubt essential as they provide the basis for tax compliance, banking facilities and determination of partners drawings amongst others.
However, they are historical in nature, detailing past financial events.
Some practices look towards management accounts to assist and like the annual accounts they too are historical but to a lesser extent.
What many practices fail to identify is the power of the cashflow.
Cashflows can take on different levels of complexity and as such different levels of sophistication and experience of the end user is needed. A large company would have different cashflows for each division or subsidiary and maybe each activity which is then consolidated into one unifying cashflow statement.
Depending upon the ultimate end user of the cashflow, the statement could be prepared as an easy to understand straight forward summary or something incredibly detailed or something in between.
A cashflow can easily be adopted by GP Practices.
Below we will look at the different levels of cashflows that can be adopted to help with GP practice finances.
The Chancellor, Rishi Sunak, has announced that the furlough scheme will be extended to the end of March 2021.
It will be based on 80% of hours not worked by an employee with a cap of £2,500 and with the employers responsible for national insurance and pension contributions for hours not worked.
The Chancellor will review the position in January 2021 to determine whether additional contributions will be made by employers as it had done under the earlier furlough scheme when it was coming to an end in October 2020.
As with the previous furlough scheme, restrictions apply if you are in receipt of government funding and this applies principally to GP practices and Dentists with NHS patients but with some exceptions possibly for staff involved with private patients.
The previously announced job support scheme that was to replace the furlough scheme will no longer be implemented as the furlough scheme has been extended.
The Job Retention bonus of £1,000 per employee for previously furloughed employees who are retained until the end of January 2021 will be deferred until a later date due to furlough being extended.
Additional support for the self-employed which is applicable mainly to self-employed GP locums and any purely private self-employed consultants may also be available.
During the lockdown many of you with limited companies may have resorted to withdrawing funds from your company bank accounts over and above any normal salary and/or dividend payment taken in the past. This may have been withdrawn as a loan as opposed to a salary or dividend payment.
Below is a guide to help explain the consequences of taking a ‘loan’ from your company and what is known as the Director’s Loan Account ("DLA").
Although your company is owned and controlled by you, legally and for tax purposes it is a separate legal entity. This is important and it is because of this separate legal status and the control you exert over it that HMRC has safeguards to ensure that the funds held and owned by the company are afforded safeguards.
The Revenue pays particular attention to the DLA.
A DLA can sometimes be referred to as a Directors Current Account ('DCA'). This directors loan/current account represents monies owing to you or monies owing back to the company from you. If you borrow money from your company (instead of say declaring a dividend) then assuming the company didn't already owe the same amount of money to you, then this would show within your company accounts as a directors loan account.
Financial year end
When it comes to the financial year end an account is drawn up internally within the More...
Following on from our newsletter of 29 July 2020 highlighting barcoding as a quick and efficient method of administering flu clinics Public Health England on 5 August 2020 published updated details of the national flu immunisation programme for 2020/21.
Details of the programme can be found here.
The salient points to note are:
Flu vaccinations, subject to contractual negotiations, will additionally be offered to:
- Household contacts of those on the NHS Shielded Patient List. Specifically, those sharing accommodation on most days over the winter where close contact is unavoidable.
- Children of school Year 7 age in secondary schools (aged 11 on 31 August 2020).
- Health and social care workers. This should be provided by their employer.
- Subject to vaccine supply 50 to 64-year-old group phased over November and December.
An inactivated vaccine may be offered to children whose parents refuse live attenuated influenza vaccine.
One of our partners Ian Tongue is a regular contributor to Independent Practitioner and this month he covers 10 Financial Considerations for Succeeding in Private Practice in light of COVID19.
You can read his full article here
Remember, if you haven't paid your 31 July 2020 tax payment yet, you do not need to make payment until 31 January 2021. HMRC have been sending out the usual 31 July 2020 payment slips but have automatically changed the due date for payment to 31 January 2021.
If you would like to discuss your private practice please feel free to contact us
Cashflow is important for any business and for a GP Practice it can be vital when looking at Drawings Projections or simply planning the day to day finances of the practice.
Float is an online tool that links with Xero and can be used to forecast the cashflow of your practice. It can be pre-populated with your data and has proved invaluable for some of our GP Practices. You can also run multiple scenarios to see the impact of making different business choices on your practice cashflow. In our video below we explain Float in more detail.