How does the budget affect healthcare professionals?

On Wednesday 30^th October, Chancellor Rachel Reeves delivered the Autumn Budget, marking the first Labour budget in 14 years. With promises to grow the economy and create wealth and opportunity for everyone, questions arise about how these changes will affect individuals and businesses.

So, what do we know currently will affect healthcare professionals in particular? Our healthcare Partner, Nick Stevenson, shares his insight.

Employers NIC

The increase in Employers’ National insurance contributions from the current 13.8% to 15% from April 2025 will have a direct impact on GP practices, care homes and any other business operating in the healthcare sector. These businesses are not exempt from paying this tax, as other NHS and public sector entities are, and so the rise will increase wage costs by 1.2% on all employees earning above the lower limit.

Looking at that lower limit, this will be another hit for those businesses as the limit that you start paying Employers NIC will fall from £9,100 currently to £5,000 – that in itself will increase wage costs by £615 for each employee.

Whilst some small businesses will be able to absorb that rise because they can claim the Employment Allowance – GP practices and others that earn more than 50% of their income from public bodies such as the NHS are not entitled to claim this relief.

National living wage

The uplift to the national living wage rates will also have a big impact on businesses in the health sector as large numbers of employees in these businesses tend to be working at this level. Whilst it is good news for employees, the 6.7% extra to £12.21 per hour in general and 16.3% increase to £10 per hour for the 18- to 20-year-olds is a big extra cost for employers to bear. On top of this, it is likely to impact the whole salary structure of businesses, as the pay differentials between different staff grades will need to be maintained.

Pensions

Some relief here, in that there is no mention of any changes to the current position on pensions and so the lifetime allowance is still abolished, and the Annual Allowance remains at £60,000. Thus, higher rate tax relief is still available, and no tax charges provided you stay within this limit. Also, no mention of removing the tax-free element when drawing your pension.

Capital Gains Tax

The increase in rates here will affect some businesses in the healthcare sector when partners and owners are looking to retire or sell their interests. Main rates are rising from 10% to 18% at the basic rate and 20% to 24% at the higher rate however, business asset disposal relief (BADR) remains in place but, with a rise from 10% to 14% in April 25 and then further to 18% in April 2026.

Conclusion

We now await the Spring Spending Review to see what the government has in mind for their 10-year plan for the NHS and the whole health and social care sector. Will some of the above cost impacts be addressed with additional funding being made available?

To fully understand the impact of these changes on your practice or business please contact your local MHA healthcare specialist team in our offices across the country.