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The Medics’ Money podcast helps doctors, dentists and other professionals make better financial decisions. Hosted By Dr Tommy Perkins and Dr Ed Cantelo, who is not only a doctor but also a Chartered Accountant and Tax adviser.
Episodes
Tuesday May 11, 2021
Tuesday May 11, 2021
Listeners questions
Today we answer listeners questions on everything from the problem with Facebook financial advice to whether you need to claim tax rebates each year.
Keep the questions coming and we will answer as many of them as we can.
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Tuesday May 04, 2021
Tuesday May 04, 2021
How do you go about building an app to help doctors make sense of blood tests?
Dr Alex Langridge tells us how he built Buku medicine app
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Dr Alex langridge. Alex Langridge is a Haematology Registrar in the North-East of England and created Buku Haematology in 2017. He writes content alongside Steve O’Brien, and performs the day-to-day maintenance and promotion of the App.
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https://twitter.com/bukuhaematology
Tuesday Apr 27, 2021
Tuesday Apr 27, 2021
Today we talk to two doctors who started their own investment club.
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Tuesday Apr 20, 2021
Tuesday Apr 20, 2021
As accountants and tax advisers, we are often asked the benefits of holding residential rental properties through a limited company. Whilst there are benefits of holding residential rental properties in a corporate structure, the downsides need to be given equal airtime. In this article, we explore some of the advantages and disadvantages of holding residential rental properties in a limited company.
The reason many clients ask for this guidance is because from 6 April 2017, HMRC restricted loan interest relief available for residential landlords holding property personally. These restrictions have not been extended to properties owned via a limited company hence making the corporate route appear attractive.
The restrictions have been phased in over a period of four years, meaning the allowable loan interest between 2017/18 and 2020/21 has been reduced as follows:
- 2017/18 – allowable loan interest – 75%
- 2018/19 – allowable loan interest – 50%
- 2019/20 – allowable loan interest – 25%
- 2020/21 – allowable loan interest – 0%
The element of interest disallowed in these years and, going forward on 100% of the loan interest, will no longer be a direct deduction from the rental profits. However, a tax credit of 20% will be given on the mortgage interest payments. For example, if you have incurred mortgage interest of £10,000 you will receive an allowable deduction of £2,000 from your overall tax liability.
Questions to ask before transferring to a limited company
Each individual’s tax position is different and the therefore a ‘one size fits all approach’ is not best practice. When we are asked to provide guidance on whether to hold properties through a company, we tend to ask the following questions:
- What is your current tax position?
- Are you a basic rate or higher rate taxpayer?
- Does a lower earning spouse jointly own the property?
- If not, should tax planning to equalize assets between spouses be explored first?
- Is the income required for personal expenditure?
- If the income is required and is held within a company, the tax efficiency would be diluted.
- Is the property mortgaged?
- If not, a company structure is unlikely to be worth it.
- Does the property currently stand at capital gain and what is the current value?
- Capital gains tax and stamp duty land tax may become payable as a result of the transfer.
- What are the future plans for the properties if transferred to a company?
- There are likely to be issues if the property held in a company is ear marked to be a future main residence.
Any decision to hold residential rental property through a limited company needs to discussed with a suitable qualified professional as transactions do have some unintended consequences.
The main advantages
- Interest relief is available to set against rental profits.
- The corporation tax rate is currently 19% compared to 20%, 40% or 45% if held in personal names.
- Timing of company dividends for tax efficiency.
- Family members can be involved, reducing the tax burden.
- Tax efficient if funds are left within the company.
The main disadvantages
- Potential higher borrowing cost and personal guarantees may be required.
- Potential stamp duty and capital gains tax liabilities for transferring to a limited company.
- Increased accountancy fees.
- If an individual needs the rental income for personal expenditure the majority of the tax efficiencies will be lost.
- Annual Tax on Enveloped Dwellings (ATED) - ATED is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000.
An ATED return would need to be completed if the property:
- is a dwelling
- is in the UK
- was valued at more than
- £1 million (for returns from 2015 to 2016 onwards)
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-
- £2 million (for returns from 2013 to 2014 onwards)
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-
-
- £500,000 (for returns from 2016 to 2017 onwards)
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- is owned completely or partly by a:
- company
- partnership where any of the partners is a company
- collective investment scheme - for example a unit trust or an open-ended investment vehicle.
Returns must be submitted on or after 1 April in any chargeable period. There are reliefs and exemptions from the potential tax charge which may mean the liability is mitigated. The rules are complex and we would recommend professional advice is taken.
One point that many advisers and landlords do not always consider is future legislative changes. We cannot rule out further changes to the legislation given that residential landlords have been hit hard by the current pandemic.
In short, careful consideration needs to be applied in all cases.
Want to stay up to date with the latest financial information for doctors?
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Tuesday Apr 13, 2021
Tuesday Apr 13, 2021
Dr James Somauroo tells us about his journey from Junior doctor to healthech guru.
We talk about
"Quitting" medicine
How to switch career
How can the latest health tech run on NHS computers
The sleeping habits of new puppies
Clubhouse
Windows 95 - under rated OS
Biggest financial mistakes
Want to stay up to date with the latest financial information for doctors?
Join 24,000 doctors receiving free financial CPD via email by downloading our free ebook here
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Tuesday Apr 06, 2021
Tuesday Apr 06, 2021
What are the essential checks that all doctors need to perform on their March payslip to help spot pension errors?
What are the common errors that occur with pension records?
What is the effect of dropping PAs on income and retirement?
How much will your pension pay in retirement?
Tom Skinner also tells us about his own podcast which is well worth a listen
https://barnabycecil.com/podcast
Contact Tom here
https://www.medicsmoney.co.uk/accountant/barnaby-cecil-financial-planning-limited/
Want to stay up to date with the latest financial information for doctors?
Join 24,000 doctors receiving free financial CPD via email by downloading our free ebook here
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Tuesday Mar 30, 2021
Tuesday Mar 30, 2021
HOW MUCH!!! do Australian doctors get paid?
Dr Carl Kennedy - an Australian paediatric cardio thoracic anaesthetist from "Ramsay Street" currently working in the UK.
Whats the difference between working in the UK and Australia?
Who gets paid more, UK doctors or Australian doctors? SPOILER the difference in pay is absolutely staggering.
Would Dr Kennedy rather be a patient in the UK or Oz?
What challenges do IMG face when coming to the UK?
Will Dr Kennedy be staying in the UK or returning to Australia?
Want to stay up to date with the latest financial information for doctors?
Join 24,000 doctors receiving free financial CPD via email by downloading our free ebook here
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Tuesday Mar 23, 2021
Tuesday Mar 23, 2021
NHS Pension age discrimination case - What doctors need to KNOW and need to DO.
Want to stay up to date with the latest financial information for doctors?
Join 24,000 doctors receiving free financial CPD via email by downloading our free ebook here
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Contact Rachael Hall IFA here
https://www.medicsmoney.co.uk/accountant/sandringham-medical/
Contact Andy Pow Accountant here
https://www.medicsmoney.co.uk/accountant/mazars-llp/
Tuesday Mar 16, 2021
Tuesday Mar 16, 2021
All the latest news on what the governments recent budget means for doctors.
Resources mentioned in the episode include
https://www.medicsmoney.co.uk/tax-thresholds-doctors/
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Budget Podcast
So we thought we would give a brief summary of the recent Budget given by Rishi Sunak recently on the 3rdMarch.
Governments require parliament’s approval to spend money, as well as to raise revenue in the form of taxes and the budget is usually one of the centre pieces of the Governments legislative programme. The measures announced become the Finance Act for the year.
It is deemed that a Government has to be able to pass its Budget because if they do not it is seen as a vote of no confidence and the Government will then have to call an election.
It is also important to pass the budget or at least a pared down version because both income tax and corporation tax are temporary measures and have to be reapproved each year. In election years there are often two Finance Acts – one pre election to make sure we lucky taxpayers get to keep on paying income tax and one afterwards with most of the other stuff.
A Chancellor delivering his or her budget is the only person who is allowed to drink alcohol in the chamber of the House of Commons and you wouldn’t really blame Rishi if he had a glass of something strong next to him.
It was an unenviable budget to have to give given that the UK has seen the biggest fall in GDP for over 300 years exceeding those seen even in wartime. The country is set to borrow a peacetime record of £355 billion this year.
The challenge Sunak faced was building a recovery and raise money while at the same time trying to meet the Conservatives’ election promises not to raise the main rates of income tax, VAT and national insurance.
Personal Tax
Let’s start with Personal Tax which basically remains what some have called a “frozen landscape.”
As mentioned above, the Chancellor’s room for manoeuvre was limited. Income tax rates have remained exactly the same at 20,40 and 45%.
What he did do to raise revenue was freeze the personal allowance, the tax free amount that the vast majority of us get each year. In the current tax year that we are in – the 2020 to 2021 tax year that ends on the 5th April 2021 the personal allowance is £12,500. There will be a small increase for the next tax year, that is 2021 to 2022, with the personal allowance going up on 6 April 2021 to £12,570. It was thought that the Chancellor would axe this increase but apparently the increase has already been coded into payroll systems so would have required expensive changes if he had done so.
From April 2022 the personal allowance will remain at this level £12,570 until the 2025-2026 tax year.
For those of you who have listened to our tax code blog – and if you haven’t please do check it out after this – you will know that the most common tax code for taxpayers as of 5 April 2021 will be 1257L. Don’t forget that this will only be the case if the taxpayer is not claiming a deduction for their professional expenses and I’m sure that everyone listening has done so. If you haven’t please check out our podcast or blog on claiming back tax on your professional expenses.
As well as the personal allowance, the rate at which people start paying the higher rate of income tax that is 40% will increase to £50,270 and then also be frozen. The threshold at which an individual starts paying the additional higher rate of 45% remains at £150,000 and has not been increased at all.
This will raise revenue by what is called fiscal drag – as people get payrises in the future, more people will start earning over the personal allowance and start paying tax and more people will move into the higher rate tax bracket.
There had been suggestions that tax rates on the self-employed might increase, which would include many GP locums for example, but in the event no announcement was made.
What was announced recently is a 1% pay rise for NHS staff including some doctors. In the podcast we talk about why inflation means this 1% rise is almost certainly another pay cut. We talk about how some doctors pay has fallen by 30% over the last 10 years in real terms.
National Insurance
Moving onto National Insurance, again much of this remains the same. We have a long detailed podcast on National Insurance so I won’t go into it too much.
As the NIC Class 1 upper earnings limit and the Class 4 upper profits limit are aligned with the income tax higher rate threshold, they too increase next year to an annualised level of £50,270 and will be caught up in the freeze.
Hopefully people will recall that Class 1 National Insurance is paid by employees via PAYE and Class 4 National Insurance is charged on the profits of self employed individuals.
Pensions
The lifetime allowance is unchanged at £1,073,100 and will remain at this level until 5 April 2026. As people should know where pension funds have been built up and the capital value exceeds this lifetime allowance, a tax charge will be levied on the excess called a “lifetime allowance charge”. This has proven to be quite controversial - by freezing the life time allowance this does make it more likely that people will exceed the allowance and face a tax charge. The BMA have been particularly vocal regarding this calling it an “unfair tax on doctors” and reporting that 72% of 8,000 respondents agreed that freezing the Lifetime Allowance would make them more likely to consider retiring early.
It is argued that the NHS pension scheme is not flexible enough to allow doctors to vary and manage their contributions making it harder to keep working without facing a potentially large pension tax bill as a result.
For completeness I should say that the annual allowance limit is unchanged at £40,000.
On the podcast we discuss in more detail how taxation policy affects behaviour. Sooner or later the high rate of tax at the margins will alter doctors behaviour and this will be a disaster for the NHS.
How much money will you take home for doing a locum shift or waiting list initiative? Probably a lot less than you think because you will be paying tax at your marginal rate. Read more about marginal rates of tax here
https://www.medicsmoney.co.uk/tax-thresholds-doctors/
Capital Taxes
The Chancellor also took the opportunity to freeze other allowances including the annual allowance for Capital Gains Tax and the Inheritance Threshold which you are the tax free allowances for those taxes.
Corporation Tax
Corporation Tax was one of the few taxes that the Chancellor had room to alter and indeed he did.
Currently the UK has a corporation tax rate of 19% on profits for all companies. The Chancellor announced that the rate of Corporation Tax will increase from 1 April 2023 to 25%.
However the existing rate of 19% will continue to apply to small companies, that is those with profits of up to £50,000. A tapered rate will apply to those with profits between £50,000 and £250,000.
We get asked all the time by doctors as to whether or not they should set up and trade using a company and I would strongly encourage those people to listen to our recent podcast on this but of course this change in the corporation tax rate may now make setting up a company less attractive
Investments
Finally, just to say a little bit investments.
The ISA annual subscription limit has been held at £20,000. The Junior ISA annual subscription limit and the Child Trust Funds annual subscription limit both remain at £9,000.
We also released a podcast on tax reducers which are government approved schemes that reduce an individual’s tax liability if the individual invests in them. So we talked about the Enterprise Investment Scheme and the Venture Capital Trust Scheme among things. These have not been changed by this budget.
What I really wanted to say about these is that we mentioned the Social Investment Tax Relief scheme which provides tax benefits to those who invest in qualifying social enterprises. This was due to expire on 5 April 2021 as we reported in our podcast but it has been granted a reprieve and has been extended for a further two years to April 2023.
So there we have it, a brief overview of some of the more important parts of the March 2021 budget that will affect doctors and other healthcare professionals.
Tuesday Mar 09, 2021
Tuesday Mar 09, 2021
On todays episode we are joined by Dr Zahid Bashir who shares his top financial tips that allowed him to build a successful career as a doctor in pharma. Zahid shares his top financial tips that allowed him as an IMG with just £500 in his pocket to build a comfortable life for him and his family.
We talk about all the basics, spending less than you earn, saving, paying down debt and investment strategies. We also talk about Medics Money free ebook that can help you to improve your own finances. Download it here
https://www.medicsmoney.co.uk/ebook/
Want to stay up to date with the latest financial information for doctors?
Join 24,000 doctors receiving free financial CPD via email by downloading our free ebook here
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Contact Dr Bashir on LinkedIn here