How the Autumn Budget could impact GP’s and their practices in 2025

Speculation was rife about what would happen in the first Budget of the new Government. Following the ‘£22 billion black hole’ announcement it was clear the new Government was intent on raising taxes as a means to facilitate future financial stability.

With Labour promising to avoid increases in income tax, National Insurance and VAT for ‘workers’, this left certain other taxes clearly needing a review.

The Budget brought positive news about a proposed investment in the NHS, but many other areas will adversely affect GPs, and in particular GP partners.

Employer National Insurance (NIC)

Significant changes to employer National Insurance Contributions (NIC) from April 2025 were announced.  This tax is paid by employers based on the remuneration of their employees:

1. The rate payable was increased from 13.8% to 15% with effect from April 2025.
2. The income threshold where employers’ NIC applies was reduced from an annual income of £9,100 to £5,000.

These changes increase the number of employees where employers’ NIC is payable, and introduces a higher rate to be applied. As an example, an employee earning £30,000 will generate a rise in employers’ NIC of £866 a year.

The Government gave some relief from this increase to employers by increasing to the employment allowance, which is available to offset employer NICs. Previously this was £5,000 for smaller businesses; from April 2025 it increases to £10,500 and is available to employers’ regardless of size (subject to qualifying conditions).

But, as GPs are now well aware, the employment allowance does not apply to any organisation that has more than 50% of their business in or for the public sector, which of course GP practices do.

National Insurance is a UK-wide cost so all four countries of the UK will be affected.

National Minimum Wage (NMW)

The National Minimum Wage (NMW) is also due to increase in April 2025 from £11.44 to £12.21 an hour. This 6.7% rise applies to employees aged 21 and over.

For employees aged 18 to 20, the increase is £8.60 to £10 an hour, with a view to aligning this with the full adult rate in future years.

Practices employing staff will therefore need to ensure they are compliant with minimum wage legislation and budget for the rise in costs from April – a yearly increase of around £1,600 per 40-hour, full time adult worker.

While both changes apply to all businesses including GP practices, this will be particularly challenging in general practice where the ability to increase income is limited by the contracts available.

The 2025-26 contract reviews will therefore be critical, and it is hoped that funding will flow through the contracts to compensate for some of the costs. Details of the £889m boost to funding are still to be released.

Practices and Primary Care Networks (PCNs) therefore need to look ahead to work out how much additional cost they will face from April 2025 when these changes come into effect. It is likely to be significant.

Pensions

One of the subjects that experts were speculating about in the weeks leading up to the Budget was pensions. Changes to the annual allowance, lifetime allowance and tax-free lump sum were all discussed.

There is some comfort that none of the above were targeted, though unused pension fund assets at death and pension death benefit will be included in the IHT estate from 6 April 2027 (see more below). But this does not mean that the tax issues in this area are all deferred. There are problems that we will continue to see for many high earners in the years ahead.

Beyond the Budget, we must not forget that the NHS Pension Scheme/s are in the process of updating pension records to reflect the McCloud judgment.

As part of this there may be a requirement to review annual allowance tax declarations for the eight years from 2015-16 to 2022-23. Many doctors have been receiving a remedial pension saving statement (RPSS) letter, which will need action.

Capital Gains Tax (CGT)

Changes were predicted to Capital Gains Tax (CGT), including an alignment to income tax rates, or the abolishment of preferential tax rates. In the event, the changes were not as significant as some had speculated.  However, there is no doubt that some GP partners will be affected.

This includes Business Asset Disposal Relief (BADR). This is currently a 10% tax rate payable on the disposal of business assets where conditions have been met.

GP partners would usually see this on exit from a practice along with the sale of their property share. From April 2025, the rate will be increased to 14%. And then from April 2026, it will be increased further to 18%. These increases will affect leaving/retiring partners, so forward planning is key.

The main CGT rates applicable to asset disposals other than residential property (and private equity ‘carried interest’) were previously 10% and 20%, depending on income levels. Effective from 30 October 2024, these rates have been increased to 18% and 24% respectively and will be aligned to those applicable to residential property.

Inheritance tax (IHT)

Inheritance tax (IHT) was another feared area. The changes announced in the Budget will largely affect those outside general practice. Changes to business property reliefs mean those with qualifying assets in excess of £1m will no longer be free of tax and will gain only 50% relief over that limit from April 2026.  In addition, business relief for investments in AIM and similar investments will only attract 50% relief, not 100%.

These changes may well affect some GP partners or others in the medical profession.

As noted above, there was a significant change to the IHT treatment of pensions. Currently, unused pension funds at death and certain death benefits sit outside the IHT estate and are usually free of any tax, unless aged 75 or over at death, in which case income tax is paid when unused pension funds are withdrawn by the beneficiaries.

But from April 2027, unused pension funds and death benefits (not defined benefit/NHS schemes) will be brought within the scope of IHT.

This means they will add to the overall value of the estate, resulting in many more people being subject to IHT. Any GPs building private funds outside the NHS will need to consider the impact of this.

Other points

·       Corporation tax rates will remain the same

·       Income tax thresholds in England and Wales will remain at the same levels until at least 2027-28

·       Stamp Duty Land Tax (SDLT) will increase from 3% to 5% on purchases of second properties.

Looking ahead

The finance function of GP practices has historically been backward looking. But it is now more important than ever for practices to have robust processes to forecast forward, identify what costs will impact them and consider how they can deal with those pressures.

Get it touch with our healthcare specialists

If you have any concerns about how the changes to taxation may impact your GP practice or PCN, please do not hesitate to get in touch.

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A version of this article first appeared in the Winter 2024/25 issue of AISMA Doctor Newsline